Legal Question in Business Law in India
How can an existing Pvt. Ltd Company can take over an existing Partnership Firm?
1). Pvt. Ltd has 2 sharehoders (50:50) with equal voting rights and who are the only 2 directors as well.
(2). Partnership Firm has 4 Partners:
a). 2 common of the Pvt. Ltd. (each with 33.33% ownership)
b). 2 additional partners: Partner 1: 23.34% ownership and Partner 2: 10% ownership
(Partner 1 and Partner 2 are related).
1 Answer from Attorneys
The partnership firm can sell the business in exchange of issue of equity of the pvt. ltd company to the partners with a pre-closing condition of dissolution of partnership. The number of equity shares to be issued can be based upon the valuation of the business of the partnership and the pricing of the equity can be basis the valuation of the private limited company. Partners of the firm can negotiate board and other shareholder rights and the existing shareholders can retain specific rights, which can all be included in the business purchase transaction documentation. For more details, you may reach at [email protected]
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