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CS Professional · Corporate Restructuring, Valuation and Insolvency · Planning and Strategy

Sundaram Textiles Ltd transfers its entire spinning division, comprising assets and liabilities, to Kaveri Fibres Ltd for a lump-sum cash price of Rs 40 crore, without assigning values to individual assets. Sundaram continues to run its weaving business. Which form of restructuring is this?

This is a slump sale. An undertaking, the spinning division, is transferred as a going concern for a lump-sum cash price with no values assigned to individual assets, and the seller continues its other business. No shares are issued to shareholders, so it is not a demerger.

  1. ASlump saleCorrect
  2. BDemerger with issue of shares to Sundaram's shareholders
  3. CAmalgamation by absorption
  4. DBuy-back of shares

Explanation

A slump sale is the transfer of one or more undertakings for a lump-sum consideration without values assigned to individual assets and liabilities. Here cash is paid to the company, and the transferor continues in existence. In a demerger, shares of the resulting company would go to the shareholders of the demerged company, which is not the case here.

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