How to raise small amount for Private company?
Currently the authorised capital is 10lakhs, 1lakh shares and share price is 10. 50% stake is with me and 50% with my friend. We are building an app and need to hire some interns, pay some bills. My friends dad has agreed to give us 3 lakhs but wants 5%. My understanding was that this would be easy and we can just increase share price from 10 to 60 and issue roughly 5000 shares. But CA says that this will require a valuation report to be submitted to the MCA to justify share price increase on books. Is this true? Company has zero assets and liabilities obviously.
1. Assets cannot not be zero when equity is non-zero in a “balance” sheet.
2. Around 3100 additional shares need to be issued. 5000 new shares would imply a share upwards of 4.5%.
3. Price per share with the 60 L valuation would be closer to 58.
4. Valuation report is required to be submitted to MCA in case of new shares issue under private placement, but not under rights issue. I will let the CA (or yourself) decide which category this event falls under.
Kalan Gabriel
Stealth
6 months ago
Yes. Came to know about these complications and figured out a much simpler solution to get him on board. Apparently it costs a lakh to get a valuation report so not worth going down that route.
Anise Lee
Stealth
7 months ago
CA has zero knowledge of startups and does not seem to have dealt with any. We’re in a non-startup metro city. How do I produce this valuation report? We are building a consumer app that will be free for a very long time. How do I produce a valuation report.
