M&A: Taxing trouble for M&A special purpose vehicles

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In a slump sale, companies, entities or assets are sold lock, stock and barrel on a going-concern basis.

Synopsis

Almost all large deals in 2020 and 2021, where private equity or other strategic investors picked up stakes, were structured using a special purpose vehicle (SPV) to securitise assets in a separate company, say industry trackers. The new regulations by CBDT mandate that companies value the transferred assets at a “fair market value.”

Mumbai: A large number of recent merger and acquisition (M&A) deals, where the promoters created either separate companies or subsidiaries for the sole purpose of selling stakes, could invite tax scrutiny due to the new slump sales regulations.

Almost all large deals in 2020 and 2021, where private equity or other strategic investors picked up stakes, were structured using a special purpose vehicle (SPV) to securitise assets in a separate

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