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.
Talking product sense with Ridhi
9 min AI interview5 questions
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Assets cannot not be zero when equity is non-zero in a “balance” sheet.
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Around 3100 additional shares need to be issued. 5000 new shares would imply a share upwards of 4.5%.
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Price per share with the 60 L valuation would be closer to 58.
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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.
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.
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.