• Transfer of ownership of machines

Dear lawyers,

There are some machineries and inventory purchased under a proprietor business entity in Tamil Nadu. 
The ownership of these equipments and inventory needs to be transferred to a private limited company. 

What is the best way to do this legally and binding? 

Ideally it is preferable that this transfer of ownership be achieved with minimal monetary transaction involved as both buyer and seller have reached an agreement.
Asked 1 year ago in Business Law from Canada

1.Make a sale deed -

2.Describe all the machineries and inventory in detail in that deed.

3.Clearly indicate who is the buyer and seller and the address of both the buyer and seller.

4.Pay the amount by cheque or DD. include the details of the payment also in the sale deed.

5.Two wittness of this sale.

6.Get the sale deed Notarised and both the parties should sign in the register of the notary.

Girish Bhambhani
Advocate, mumbai
24 Answers

4.0 on 5.0

As per the provisions of the Sale of Goods Act, 1930 read with Section 17 and 18 of the Registration Act, 1908, physical delivery/transfer of a movable property shall constitute a valid transfer if the same is done by obtaining an acknowledgement or receipt to that effect recording and/or acknowledging the transfer of title in such movables. In case the transfer of tangible movable property is by physical delivery, it will not require registration or stamping. However, stamp duty shall become applicable in case an instrument is executed in writing to record a transfer even for tangible movable property.

Similarly, actionable claims or goodwill are intangible movable property chargeable as conveyance, as it has to be transferred by executing a written instrument.

So better you get movable property registered as a title of ownership.

Ganesh Kadam
Advocate, Pune
8142 Answers
68 Consultations

4.9 on 5.0

1. The machines can be sold by making a sale deed wherein the complete details of machines and consideration received in lieu of therein can be mentioned.

2. The details of delivery and possession of machinery can be clearly mentioned in deed.

3. The liability of seller should be specifically mentioned that he is not liable for machines once possession is handed over to buyer.

4. The transiction can be done on a deed typed on stamp paper of 100 Rs. And you can get it notarized it will be valid.

Shubham Jhajharia
Advocate, Ahmedabad
20700 Answers
80 Consultations

5.0 on 5.0

Hi,

I understand from your query that the company needs to purchase certain inventory and machinery from a proprietary firm. In this regard, the options available are either a Business Transfer Agreement or an Asset Purchase Agreement.

BTA is generally used when the business or part of the business is transferred. Therefore, in this case if the inventory and the machines are to be transferred and the same amounts to the business being transferred then BTA makes more sense. The benefit of BTA is that a cumulative value of the assets is arrived at without assigning specific value of assets.

Second option is the Asset Purchase Agreement, where value of individual assets is apportioned.

The above approaches create a mother document for all assets. The implication of stamp duty arises for individual assets when the same are valued. Therefore, the real work starts at the time of stamping.

It would have been better if you could throw light on certain key issues like whether the machinery is attached to earth, nature of machinery i.e. whether any government approval/ intimation is required to transfer ownership (e.g. in case of boilers), any related premises to be transferred, any know how to be transferred etc.

However, notwithstanding the details we still need, BTA or APA are the options for you.

Regards,

Prashant Kumar
Advocate, Bangalore
15 Answers

4.0 on 5.0

1. The proprietary business would be the seller and pvt ltd company, the buyer

2. It's movables, so a tax invoice is sufficient. That would constitute a contract between the parties

3. Sorry but im unable to get your query. Could you kindly elaborate a bit.

4. Are the seller and buyer, different from the proprietary business and pvt ltd company?

Yusuf Rampurawala
Advocate, Mumbai
4641 Answers
28 Consultations

5.0 on 5.0

You need purchase a Rs. 100 Stamp paper and then you need to get drafted the sale purchase deed. I do draft the same, just tell me about the machines and list of inventories with details, registered office of partnership firm and Pvt. Ltd company with partners and directions name and details as well as company's nature of business.

Jaswant Singh
Advocate, Gurugram
582 Answers
2 Consultations

4.8 on 5.0

Where do you live sir?

Where do your company situate?

Jaswant Singh
Advocate, Gurugram
582 Answers
2 Consultations

4.8 on 5.0

You can choose any online lawyer get drafted all deeds and get registered by local lawyer. For further discussion you can call me, my rates are very reasonable.

Ganesh Kadam
Advocate, Pune
8142 Answers
68 Consultations

4.9 on 5.0

I will start drafting of your deed once you agree to pay fee.

Jaswant Singh
Advocate, Gurugram
582 Answers
2 Consultations

4.8 on 5.0

You can contact Lawyer in city wherein your textile manufacturing unit is located

2) prepare list of machinery , specifications , price at which machinery is being sold

3) Lawyer will draft sale deeds , contracts as desired by you

Ajay Sethi
Advocate, Mumbai
68775 Answers
4139 Consultations

5.0 on 5.0

You would have to get an asset purchase agreement drafted mentioning every aspect of the said transfer of movable properties.

An asset purchase agreement (APA) is an agreement between a buyer and a seller that finalizes terms and conditions related to the purchase and sale of a company's assets and it can help in protecting your interest.

For any other query, feel free to consult.

Siddharth Jain
Advocate, New Delhi
4949 Answers
55 Consultations

5.0 on 5.0

1. you do not need a written contract like a sale deed for purchase of movable properties

2. the proprietor can simply issue you a tax sale invoice to the company

3. this tax invoice will act as a proof that the company had invested the money for purchase of movable items

4. the terms of contract like date of delivery, mode of payment, taxes, etc. can be enlisted on the tax invoice itself

Yusuf Rampurawala
Advocate, Mumbai
4641 Answers
28 Consultations

5.0 on 5.0

Hello,

If the entire business is to be taken over by a company, then a company has to be formed and the private limited company will then take over the asset of the said proprietorship.

Reards

Anilesh Tewari
Advocate, New Delhi
17241 Answers
266 Consultations

5.0 on 5.0

You may contact a CA who might help you in this.

Cheapest way has been told to you by me in the thread.

Regards

Anilesh Tewari
Advocate, New Delhi
17241 Answers
266 Consultations

5.0 on 5.0

An asset transfer agreement can be prepared by you incorporating ever aspect and details of machinery including the consideration.

Since it is company you are transferring own proprietorship firm contact local corparte firm they will help you in compliances too if any .

Shubham Jhajharia
Advocate, Ahmedabad
20700 Answers
80 Consultations

5.0 on 5.0

In an asset sale, you are selling the different assets that the business owns.

Assets may be:

tangible, such as land, buildings, equipment, cash, investments, and inventory,

intangible, such as the goodwill your business has built up during the years of its operation, customer lists, patents, copyrights, and trademarks.

If your business is not incorporated (i.e. a sole proprietorship or partnership), an asset sale is the only selling option since there are no share certificates of ownership to transfer in a sale.

Since there is no distinction between personal and business assets in a sole proprietorship, problems may arise when it comes to transferring tangible assets.

An asset sale can be used to sell any type of business; a share sale can only be used to sell an incorporated business.

In an asset sale, you can choose what you’re selling to a degree. For instance, you may want to keep the name of the business, or another particular asset. In a share sale, the entire business passes to the new owners, including things such as the business name.

In a share sale, the liabilities are sold along with the rest of the business; in an asset sale, only assets are sold, meaning that the original owner may still be responsible for the business’s liabilities.

Transfer or disposal of Business assets under GST with analysis of schedule I and II:

(a) Permanent transfer or disposal of goods;

Schedule-I; ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION;

Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.

Schedule-II; ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES;

where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a Supply of goods by the person;

Combined reading of Schedule I with Schedule II;

(i) Permanent transfer or disposal of business assets where input tax credit has been availed on such assets shall be deemed supply.

(ii) Where goods forming part of the assets of a business are transferred or disposed, whether or not for a consideration, such transfer or disposal is a supply of goods by the person.

(iii) The transfer or disposal can be made to any person including to himself. It may or may not involve a consideration.

Further transactions depend on the conditions mentioned in the agreement, you may draft the conditions accordingly for tax cost effective

T Kalaiselvan
Advocate, Vellore
58597 Answers
742 Consultations

5.0 on 5.0

But as we are scaling up we felt the need to open a pvt ltd company and transfer ownership and regain more control over the operations.

I will need sales deeds, contracts etc drafted by an advocate/lawyer. Wondering how to choose and discuss.

You can choose a lawyer specifically practicing in company law within the business jurisdiction or any lawyer you feel who is expertise in this field from this forum too, by verifying their credentials for drafting the agreement

T Kalaiselvan
Advocate, Vellore
58597 Answers
742 Consultations

5.0 on 5.0

1. If title of the 2nd hand machinery and other inventory is desired to be transferred to the Pvt. ltd. Company, a simple sale transaction can be made to this effect.

2. If the proprietorship firm is planned not to be continued, then the said Pvt. Ltd. Company can take over the said Proprietorship firm with all its assets and liabilities by paying a minimum amount to the proprietor.

Krishna Kishore Ganguly
Advocate, Kolkata
22757 Answers
612 Consultations

5.0 on 5.0

1. You could have converted the said proprietorship firm to Pvt. Ltd. Company wherein the value of the machinery and inventory could have been calculated and considered as the amount paid towards share capital of the said Pvt. ltd. Company.

2. If you have already formed the separate Pvt. Ltd. Company, then show the value of the acquired machinery and inventory as share capital or addition to the share capital of the proprietor of the said machinery and in this case no actual money transaction will have to be made.

Krishna Kishore Ganguly
Advocate, Kolkata
22757 Answers
612 Consultations

5.0 on 5.0

Hi,

It seems that while the machinery are the primary assets to be transferred, there are other assets like the employees etc who also need to be transferred.

In my view, since the transfer is of the unit as a whole, it makes sense to opt for a BTA for the transfer.

Regards,

Prashant Kumar
Advocate, Bangalore
15 Answers

4.0 on 5.0

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