Define Slump Sale. Discuss the steps involved in carrying out Slump Sale.

Definition of Slump Sale The concept of 'slump sale' was incorporated in the Income Tax Act, 1961 by the Finance Act, 1999 with the inclusion of section 2(42C). The term 'slump sale' is defined as transfer of one or more undertakings as a result of the sale for a lump-sum consideration without values being assigned to the individual assets and liabilities in such sales. Steps Involved in Carrying Out Slump Sale Slump Sale is carried out through following steps: Find Buyer: The seller has to find the potential buyers. Before opting for slump sale there are various issues that needs to be analyzed especially the impact of capital gain tax to the seller and stamp duty to the buyer in the light of business strategies. Sign MoU/Term sheet: Once the buyer company is selected, there is need to sign MoU (Memorandum of Understanding) which helps the buyer company to get access to seller entities information for making due diligence, valuation etc. Make Valuation: Valuation is a process of determining the value of assets and liabilities of business. It is one of the most important aspects of slump sale process, as seller wants maximum valuation for its business whereas buyer wants it at lowest end. Valuation of business is mandatory for listed company. Deal Structuring: A deal should be structured considering agreement between buyer and seller. It should be time, cost and compliance effective. Slump sale agreement: Deal needs to be executed through agreement, capturing all slump sale clauses, effecting objectives predetermined and executed by both parties. The executed agreement needs to be registered as per applicable Stamp Act.