Central
Section 3 of The Tyre Corporation of India Limited (Disinvestment of Ownership) Act, 2007
- (1)For the transfer to, and vesting in, any person, the shares of the company, there shall be given to the Central Government by such person or in case such person is a company, by such company, such consideration, having regard to the optimum valuation of land, assets and liabilities of the company in accordance with a valuation method as specified by the Central Government.
- (2)The manner of payment of consideration for transfer of shares of the company to the transferee shall be such as may be agreed upon between the transferor, the company and the transferee, the person or the company, as the case may be.
Summary
- Any person or company buying the shares must pay a consideration (payment) to the Central Government.
- The amount of payment must take into account the best possible (optimum) valuation of the company's land, assets, and liabilities.
- The method used to value these assets and liabilities is specified by the Central Government.
- The actual way the payment is made (the manner of payment) must be agreed upon by three parties: the transferor (the seller), the company, and the transferee (the buyer).
Practical examples
1When a private buyer named Dev purchased shares in 2009, the government used a specific asset-valuation method to value the land and factories at 50 crore rupees. Dev agreed to pay this amount to the Central Government in three annual installments, as approved by the transferor, the company, and Dev himself.
2A manufacturing company called Ruby Rubber bought shares under this Act in 2011. The Central Government set a valuation method that factored in both the physical property and the existing debt liabilities. Ruby Rubber paid the total consideration in cash on the transfer date, following a tripartite agreement.
FAQ
1. Who receives the payment (consideration) for the transfer of shares?
The payment is given to the Central Government.
2. What factors must be looked at when deciding the payment amount?
The payment must have regard to the optimum valuation of the company's land, assets, and liabilities.
3. Who decides the valuation method used to calculate the payment?
The Central Government specifies the valuation method.
4. Who must agree on the manner in which the payment is made?
The transferor (seller), the company, and the transferee (buyer, whether a person or a company) must agree on the manner of payment.
Test yourself
Q1.According to Section 3, who must receive the payment (consideration) for the transferred shares?
Q2.What three elements of the company must be valued to determine the payment?
Q3.Who specifies the valuation method to be used under Section 3?
Q4.Which parties must agree on the manner of payment for the shares?
Q5.If the buyer of the shares is a company, who must give the payment to the Central Government?