Slump Sale & Going Concern Transfer India: Who Needs It and Who Does Not
Whether Slump Sale & Going Concern Transfer India applies to a given business is the first thing worth settling, and it is where most of the early questions land. The questions below are the ones raised most often in practice; the full scope of the service is on the Slump Sale & Going Concern Transfer India page.
Does GST apply to a slump sale transaction?
If the transfer genuinely qualifies as a transfer of business as a going concern — meaning the transferee continues the same kind of business without a break in continuity — the transaction is exempt from GST under Entry 2 of Notification No. 12/2017-Central Tax (Rate). If the transaction does not meet the going-concern test (for example, it is really a bundle of individual assets without continuity of the business), GST would apply on the supply of those individual assets at applicable rates. Getting the characterisation right, on facts, is essential.
In practice: GST authorities examine substance over form here. We document the facts that support genuine business continuity — retained employees, continued use of existing customer relationships, uninterrupted operations — as part of the transaction file, so the exemption position is defensible on audit.
Do we need shareholder approval to do a slump sale?
If the undertaking being transferred constitutes the whole or substantially the whole of the company's undertaking, Section 180(1)(a) of the Companies Act 2013 requires a public company to obtain shareholder approval by special resolution before the Board can complete the sale, lease, or disposal. Private companies are exempt from Section 180 under the MCA exemption notification of 5 June 2015, although their articles or shareholders' agreement may still require shareholder approval. If the undertaking is a smaller unit that does not meet this 'whole or substantially whole' threshold, Board approval alone may suffice, though good governance practice often still recommends shareholder disclosure for material transactions.
In practice: The Explanation to Section 180(1) gives numerical tests: an 'undertaking' is one in which the company's investment exceeds 20% of its net worth, or which generates 20% of its total income, based on the preceding financial year's audited figures; and 'substantially the whole' means 20% or more of the value of the undertaking. We apply these tests to the actual audited numbers.
Are all licences and registrations of the undertaking transferable to the buyer?
No. Some registrations and licences are tied to the business/premises and can transfer or be re-registered relatively smoothly (for example, certain trade licences with a change-of-ownership intimation); others are entity-specific and must be obtained by the transferee in its own name (the Import Export Code, for example, is linked to the holder's PAN), while food-safety, factory and sector-specific licences need either a fresh application or a formal transfer or modification under the relevant rules, which differ by licence and state. Where a key licence central to the business cannot be transferred and takes significant time to obtain afresh, this materially affects transaction timing and sometimes the decision to structure as a share sale instead.
In practice: We map every registration the undertaking holds during due diligence — before the term sheet is finalised, not after. Discovering post-signing that a critical licence must be applied for afresh is a preventable problem.
Can a foreign company or NRI be a buyer or seller in a slump sale?
Yes, but cross-border slump sales bring FEMA into play. If a non-resident is acquiring an Indian undertaking, or an Indian company is selling an undertaking to a non-resident, how FEMA applies depends on the structure: its pricing and reporting rules attach to particular instruments and assets (for example, equity instruments of an Indian company issued or transferred as part of the deal), so the structure determines which pricing guidelines and reporting obligations (potentially including FIRMS portal filings) apply. Sectoral FDI caps and conditions can also restrict which businesses a non-resident may acquire via this route.
In practice: We assess FEMA applicability at the structuring stage — before the term sheet — because the FEMA-compliant fair value and the income tax Rule 11UAE fair value use different, though sometimes overlapping, methodologies, and, where both apply, both need to be addressed.
Can a slump sale be used to transfer a loss-making undertaking?
Yes, structurally there is no bar on transferring a loss-making undertaking via slump sale — the net worth computation under Section 50B could even be negative if liabilities exceed assets, which would increase the computed capital gain (since gain = consideration minus net worth, a negative net worth increases the gain figure). Separately, carried-forward business losses and unabsorbed depreciation of the transferor generally do not automatically transfer to the transferee in a slump sale (unlike in certain amalgamations that qualify for specific loss carry-forward provisions under Section 72A) — this is an important commercial consideration for both parties. Sections 50B and 72A and Rule 11UAE are provisions of the Income-tax Act 1961 and the Income-tax Rules 1962, which govern income up to FY 2025-26; from tax year 2026-27 the Income-tax Act 2025 applies with renumbered sections and forms — confirm the equivalent provision.
In practice: Buyers sometimes assume tax losses of the acquired undertaking will offset future profits — in a slump sale this is generally not the case, unlike a qualifying amalgamation. We flag this distinction clearly during structuring so expectations are set correctly on both sides.
Does a slump sale require RBI or other regulator approval?
A purely domestic slump sale between two Indian resident entities generally does not require RBI approval. Regulator involvement arises in specific scenarios: cross-border transactions require FEMA compliance (and, in restricted sectors, government route approval under the FDI policy); regulated entities (banks, NBFCs, insurance companies) transferring their business may require sectoral regulator (RBI, IRDAI) approval or at least intimation; and if the transaction forms part of an IBC corporate insolvency resolution process, NCLT/IBBI processes apply instead of a standalone private BTA.
In practice: We check the sector of the undertaking specifically — a slump sale that looks routine on paper can carry an unexpected regulator approval requirement if the business touches banking, insurance, telecom, or another regulated sector.
Where this sits in the wider engagement
Slump Sale & Going Concern Transfer India rarely arrives on its own. The statutory basis and the current requirements are set out on the Slump Sale & Going Concern Transfer India service page, and the related services are grouped under Conversion Closure.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On Slump Sale & Going Concern Transfer India we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.