Preparing for a Transaction: Structures and Approvals
The structure is the first substantive decision on a transaction and the most expensive to revisit. It determines the tax outcome for both sides, which liabilities travel with the business, which regulators have to be satisfied, and how long the whole thing takes. This guide covers the options and the approval map that goes with each.
- Share purchase, asset purchase and slump sale compared
- Schemes of arrangement, and the fast-track route as widened in 2025
- Competition clearance and where the thresholds sit
- Exchange control where a party is not resident in India
- What is still a Bill and not yet law
Deal readiness, which is mostly about records
Most of what delays a transaction is not negotiation. It is the seller's inability to produce, quickly and consistently, the things a buyer will inevitably ask for: audited accounts that reconcile to the management accounts, a complete and current statutory register, contracts with the counterparties actually named in them, employee records, tax filings with their assessment status, and a clean position on intellectual property ownership.
A seller who assembles that before a process starts negotiates from a stronger position, because every gap in a data room is converted by a buyer into either a price reduction or an indemnity. A buyer who insists on it early finds the problems while walking away is still cheap.
Four structures, and what actually separates them
| Structure | What transfers | The main consequence |
|---|---|---|
| Share purchase | The company itself, with everything in it, known and unknown | Simplest to execute and the widest liability inheritance. History comes with the shares, which is why the indemnity package matters most here |
| Asset purchase | Named assets and named liabilities only | Cleanest liability position for a buyer and the most administratively demanding: each contract, licence and employee has to be dealt with individually |
| Slump sale | An undertaking as a whole, for a lump sum, without values assigned to individual assets and liabilities | A statutory concept with its own tax computation. Assigning values to individual items destroys the characterisation, though values assigned only for stamp duty are disregarded |
| Scheme of arrangement | Whatever the scheme provides, by order of the tribunal | Court-supervised, so it binds dissenting shareholders and creditors and can move things a contract cannot. Slower, and public |
Slump sale is defined at section 2(103) of the Income-tax Act, 2025, read at source on 1 September 2026.
The definition, and the computation provision under the 2025 Act
The Income-tax Act, 2025 defines a slump sale at section 2(103) as the transfer of one or more undertaking, by any means, for a lump sum consideration without values being assigned to the individual assets and liabilities in such transfer, with the clarification that values assigned solely for stamp duty, registration or similar purposes are disregarded. The phrase by any means is doing real work: it brings in transfers that are not sales in the ordinary sense.
The computation provision is section 77 of the Income-tax Act, 2025, succeeding section 50B of the 1961 Act. Net worth remains the deemed cost of acquisition and of improvement, calculated from prescribed asset values less the book value of liabilities and ignoring any revaluation. Section 77 also deems the prescribed fair market value of the undertaking to be the full value of consideration. Rule 53 of the Income-tax Rules, 2026 succeeds Rule 11UAE and materially retains its two-value method, under which the higher of the asset-based FMV1 and the consideration-based FMV2 is adopted. The renumbering is the change; the valuation architecture is not.
Two practical points follow. The gain is long-term unless the undertaking was held for thirty-six months or less immediately before the transfer, in which case it is short-term, and no indexation is applied to net worth in either case. And the seller must furnish an accountant's report containing and certifying the net worth computation before the specified tax audit date, which makes the computation a deliverable with a deadline rather than a working paper.
| Asset in the undertaking | Value taken into net worth |
|---|---|
| Depreciable assets | Written-down value of the block under section 41(1)(c) |
| Self-generated goodwill not purchased from a previous owner | Nil |
| Assets whose entire expenditure was or is allowable under section 46 | Nil |
| Everything else | Book value |
Section 77(5) of the Income-tax Act, 2025. Confirmed by our subject matter expert on 17 September 2026 against the consolidated Act as amended by the Finance Act, 2026, and the Board's own rules-mapping utility for Rule 53.
Under the 1961 Act the position, for financial year 2025-26, remains section 2(42C) with section 50B and Rule 11UAE. Any transaction straddling 1 April 2026 needs both labelled.
The tribunal route, and the fast-track route that got much wider
A scheme of arrangement under sections 230 to 232 of the Companies Act, 2013 is approved by the National Company Law Tribunal and binds every shareholder and creditor in the classes it covers, including those who voted against. That is its advantage. Its costs are time, public process and the involvement of regulators who are entitled to be heard.
Section 233 provides a fast-track alternative that does not require the tribunal, and it is materially wider than most published material describes. Rule 25(1A) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 was substituted in September 2025 to add several new categories to the small-company and holding-with-wholly-owned-subsidiary cases that were there before.
| Category now within the fast-track route | Condition |
|---|---|
| Two or more small companies | As before |
| Holding company and its wholly owned subsidiary | As before |
| Two or more start-up companies | As before |
| Two or more unlisted companies, other than section 8 companies | Aggregate outstanding loans, debentures and deposits not exceeding 200 crore rupees, and no default in repayment |
| A holding company, listed or unlisted, with its subsidiary | The transferor company must be unlisted |
| Fellow subsidiaries, including step-down subsidiaries, of the same holding company | The transferor company must be unlisted |
| A foreign holding company merging into its Indian wholly owned subsidiary | As provided |
The borrowing and default test has to be met at two points: within 30 days before objections are invited, and again at the declaration of solvency.
The widening was made by the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025, notified as G.S.R. 603(E) dated 4 September 2025 and effective on its publication in the Official Gazette on 8 September 2025. The instrument expanded Rule 25(1A) rather than substituting the whole sub-rule, and no subsequent notified amendment to it had been identified as at 17 September 2026. Commentary giving the commencement as 4 September is quoting the date on the notification rather than the date it took effect.
Separately, and importantly: the Corporate Laws (Amendment) Bill, 2026 is not law. It was introduced in the Lok Sabha on 23 March 2026, referred to a Joint Parliamentary Committee the same day, and reported on by that committee on 3 August 2026. It had not received assent as at 17 September 2026. It would, if enacted, reduce the approval threshold for a scheme from ninety per cent to seventy-five per cent of members and creditors, and allow a higher buy-back percentage for prescribed classes of company. It has been widely written up since March 2026 as though settled, and anything describing those as the current position is describing a proposal.
Whether the deal is notifiable, which is a threshold question and not a judgement call
A combination above the thresholds in section 5 of the Competition Act, 2002 must be notified to the Competition Commission of India and cannot be given effect to until cleared. Notification is by Form I in the ordinary case and Form II where the overlap is significant. The filing fees are 30 lakh rupees for Form I and 90 lakh rupees for Form II.
A small-target exemption takes many mid-market deals outside the regime altogether. Under the Competition (Minimum Value of Assets or Turnover) Rules, 2024, a transaction is exempt where the enterprise being acquired has assets in India of not more than 450 crore rupees, or turnover in India of not more than 1,250 crore rupees. The exemption does not disapply the deal value threshold described below, which is a separate gate.
The section 5 figures themselves were raised by 150 per cent by S.O. 1130(E) of 7 March 2024. The tests are alternatives rather than cumulative: crossing any applicable asset or turnover limb brings the transaction within section 5, subject to the exemptions.
| Test | Assets | Turnover |
|---|---|---|
| The enterprises to the transaction, in India | More than 2,500 crore rupees | More than 7,500 crore rupees |
| The enterprises to the transaction, worldwide | More than 1.25 billion United States dollars, including at least 1,250 crore rupees in India | More than 3.75 billion United States dollars, including at least 3,750 crore rupees in India |
| The group after the transaction, in India | More than 10,000 crore rupees | More than 30,000 crore rupees |
| The group after the transaction, worldwide | More than 5 billion United States dollars, including at least 1,250 crore rupees in India | More than 15 billion United States dollars, including at least 3,750 crore rupees in India |
Section 5 of the Competition Act, 2002, as revised by S.O. 1130(E) of 7 March 2024. Confirmed by our subject matter expert on 17 September 2026.
A deal value threshold applies independently of those tests. Notification is required where the value of the transaction exceeds 2,000 crore rupees and the target has substantial business operations in India. Under regulation 4 of the Competition Commission of India (Combinations) Regulations, 2024, substantial business operations exist where any one of three tests is met: business users or end users in India are at least ten per cent of the target's global users; Indian gross merchandise value is at least ten per cent of the global figure and exceeds 500 crore rupees; or Indian turnover is at least ten per cent of global turnover and exceeds 500 crore rupees. For a target providing digital services the 500 crore rupee floor drops away from the second and third tests, so an Indian share of ten per cent can be enough on its own. Transaction value is drawn broadly: it takes in deferred and contingent consideration, interconnected steps, arrangements incidental to the transaction and certain amounts attributable to covenants.
The review clock has two hands. The Commission has thirty calendar days from receipt of a complete notice to form a prima facie opinion, and an outer statutory period of one hundred and fifty calendar days from notification. If either passes without the relevant step being taken, the combination is deemed approved. Both are subject to the prescribed clock-stops for information requests, defective or incomplete notices and remedies, which is why the calendar period and the elapsed period are rarely the same number.
Where a party is not resident in India
Where shares move between a resident and a non-resident, the price is constrained before it is negotiated. Under the Reserve Bank's Master Direction on Foreign Investment in India, the price for an unlisted company must be worked out under any internationally accepted pricing methodology on an arm's length basis, certified by a chartered accountant, a merchant banker registered with the Securities and Exchange Board of India, or a practising cost accountant. A transfer from a resident to a non-resident may not be below fair value, and a transfer from a non-resident to a resident may not be above it. There is no assured exit price for the non-resident.
| Filing | When | Deadline |
|---|---|---|
| Form FC-GPR | On issue of equity instruments to a person resident outside India | Not later than 30 days from the date of issue |
| Form FC-TRS | On transfer of equity instruments between a resident and a non-resident | Within 60 days of the transfer or of receipt or remittance of funds, whichever is earlier |
Source: Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, read 1 September 2026.
A late filing is not the catastrophe it is sometimes described as. It is regularised by a late submission fee, and the fee is capped at 100 per cent of the amount involved, not three times the investment. The formula, under A.P. (DIR Series) Circular No. 16 of 30 September 2022, is 7,500 rupees plus 0.025 per cent of the amount involved for each year of delay, subject to that cap and rounded up to the nearest hundred; a return carrying no flow is a flat 7,500 rupees. The three-year outer limit is the part worth watching, because beyond it the route is compounding rather than a fee.
Consideration cannot all be deferred. Rule 9(6) of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 continues to permit no more than twenty-five per cent of the total consideration for a transfer of equity instruments between a resident and a non-resident, in either direction, to be paid on a deferred basis, placed in escrow, or covered by an indemnity given by the seller. The twenty-five per cent is an aggregate ceiling across all three and not three separate allowances, and the period may not exceed eighteen months from the date of the transfer agreement rather than from completion. The total consideration finally paid must still comply with the pricing guidelines. No amendment removing or relaxing the restriction had been identified as at 17 September 2026. Calling an amount a holdback, a retention, an earn-out or a completion accounts adjustment does not take it outside the rule. We return to the point in guide 3, where it decides the completion mechanism.
Valuation and fairness opinions sit on their own pages
Most transactions need a number that somebody signs, and Indian law is specific about who may sign it and when one is required. That is a separate discipline from transaction advisory and we treat it separately, starting with who can sign a valuation report in India and valuation for mergers, acquisitions and business transfers. These pages cover the deal process. For the analysis behind a price, see financial modeling.
Questions about structuring
Is a slump sale always better than an asset sale?
No. It is a different tax computation, not a better one, and its availability depends on the transfer genuinely being of an undertaking for a lump sum without values assigned to individual assets. Structuring a transaction as a slump sale and then assigning values in the agreement is a common and self-defeating error.
How long does a scheme take?
Long enough that it should be on the timetable from the first week. The fast-track route is shorter because it avoids the tribunal, which is why the widened eligibility in 2025 matters commercially rather than only technically.
Do we need competition clearance for a small deal?
Possibly not, because of the small-target exemption. But that turns on current figures and on whether the exemption is still in force, which is one of the open items on this page. It is checked, not assumed.
Where to go next
Transaction Advisory Services
Back to the main page: what we do on a deal, how an engagement is structured, and how to reach us.
Financial and Tax Due Diligence
Quality of earnings, normalised working capital, debt and debt-like items, and the tax exposures a buyer inherits. What a diligence report is, what it is not, and how findings move price and paper.
Buy Side and Sell Side Execution
Running the process: information, term sheet, definitive agreements, warranties and indemnities, conditions precedent, completion mechanics and the integration that starts on day one rather than after it.
Fundraising: Equity, Debt and Capital Markets
Private rounds, the rewritten external commercial borrowing framework, and what changes when the route is public markets, including the tightened small and medium enterprise listing regime.
Restructuring, Distressed Deals and Exits
Resolution outside insolvency under the Reserve Bank's 2025 directions, transactions under an extensively amended Insolvency and Bankruptcy Code, carve-outs, and the exit routes with their current tax treatment.
Send an enquiry
If you are at term sheet stage or earlier, this is the conversation worth having first. Tell us who the parties are, where they are resident, and what is being acquired.
Position as at 17 September 2026. Reviewed every six months.
This page is general information, not professional advice. Transaction law and transaction tax in India both moved substantially between September 2025 and April 2026. The fast-track merger route was widened, the external commercial borrowing framework was rewritten, the Reserve Bank replaced its stressed asset framework, the Insolvency and Bankruptcy Code was amended extensively, and the taxation of a share buyback changed for the second time in eighteen months. Every position on these pages was reviewed by a qualified professional in September 2026 and carries the date it was confirmed. Take professional advice before acting on anything on this page. We are happy to be that adviser, but we do not act on a web page, ours or anyone else's, without one.