CS Professional · Corporate Restructuring, Valuation and Insolvency · Overview of Business Valuation
Anita, a company secretary, is asked why a company's valuation is needed before a scheme of amalgamation. Which is the most direct purpose?
The most direct purpose is to arrive at a fair share exchange ratio for the merging companies, so that shareholders of each receive equitable consideration. Authorised capital, auditor appointment and registered office decisions do not depend on valuing the business.
- ATo fix a fair share exchange ratio between the merging companiesCorrect
- BTo determine the company's authorised capital
- CTo appoint the statutory auditor
- DTo decide the registered office location
Explanation
Valuation of each company supports a fair share exchange ratio so shareholders of both are treated equitably. Authorised capital, auditor appointment and registered office are unrelated to valuation.
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