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CS Professional · Corporate Restructuring, Valuation and Insolvency · Types of Corporate Restructuring

Meridian Textiles Ltd sells its entire dyeing division, including plant, employees and contracts, to Kaveri Fabrics Pvt Ltd for a lump sum of Rs 40 crore. Meridian continues to run its weaving business and no shares of either company change hands. How is this restructuring best described?

This is a slump sale. Meridian transfers its dyeing undertaking as a going concern to Kaveri for a single lump-sum consideration, without separate values for individual assets. There is no issue of shares to shareholders, so it is not a demerger, and no company is merged or bought back.

  1. ADemerger by issue of shares to Meridian's shareholders
  2. BSlump sale of an undertaking as a going concern for a lump sumCorrect
  3. CBuy-back of shares by Meridian
  4. DReverse merger of Meridian into Kaveri

Explanation

A transfer of a whole undertaking as a going concern for a lump sum price, without assigning values to individual assets, is a slump sale. No shares are issued to Meridian's shareholders, so it is not a demerger. No shares are bought back, and Meridian is not merged into Kaveri.

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