CS Professional Corporate Restructuring, Valuation and Insolvency Syllabus

Corporate Restructuring, Valuation and Insolvency syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Corporate Restructuring, Valuation and Insolvency in CS Professional, not a summary of it.

1. 1

   Corporate Restructuring

   3 topics

   • Types of Restructuring
   • Legal and Regulatory Framework
   • Process of Restructuring
2. 2

   Valuation

   3 topics

   • Valuation Methods
   • Valuation of Securities
   • Valuation of Intangible Assets

Corporate Restructuring, Valuation and Insolvency flashcards for CS Professional

25 of 50 cards from the Corporate Restructuring, Valuation and Insolvency deck — real questions with worked answers.

1. What is corporate restructuring?

   The process of significantly changing a company's structure (financial, operational, ownership, or organizational) to improve efficiency, profitability, or to adapt to changing conditions — including mergers, demergers, takeovers, and reorganizations.

2. Define a 'merger' (amalgamation).

   The combination of two or more companies into a single entity, where one or more transferor companies are absorbed by a transferee company (or a new company is formed), with assets and liabilities pooled together.

3. What is the difference between a merger and an acquisition?

   In a merger, two companies combine to form one entity (often on relatively equal terms). In an acquisition, one company takes over/purchases another and the target loses its independent existence, becoming part of the acquirer.

4. What is a 'demerger'?

   A form of corporate restructuring where a company splits off one or more of its undertakings/divisions into separate companies, transferring assets and liabilities, usually to unlock value or focus on core business.

5. Distinguish horizontal, vertical and conglomerate mergers.

   Horizontal: merger of firms in the same industry/stage (competitors). Vertical: merger of firms at different stages of the same supply chain (buyer-seller). Conglomerate: merger of firms in unrelated businesses.

6. What is a 'reverse merger'?

   A restructuring where a smaller or unlisted company acquires/merges into a larger or listed company (often the bigger entity becomes the transferor), commonly used by private companies to get listed without an IPO.

7. What is a Leveraged Buyout (LBO)?

   An acquisition of a company funded predominantly with borrowed money (debt), where the assets of the target (and acquirer) are often used as collateral for the loans.

8. What is a Management Buyout (MBO)?

   A form of acquisition where the existing management team of a company purchases the business (or a division) it manages, often using leverage/external financing.

9. Differentiate financial restructuring from operational restructuring.

   Financial restructuring changes the capital/debt-equity structure (e.g., capital reduction, debt restructuring). Operational restructuring changes how the business operates (e.g., downsizing, divestiture, process reorganization) to improve performance.

10. What is 'divestiture' as a restructuring strategy?

    The sale, liquidation, or spin-off of a division, subsidiary, or business unit, used to shed non-core or underperforming assets and raise cash.

11. What is the difference between a spin-off and a split-up?

    Spin-off: a parent creates a new independent company by distributing shares of a subsidiary to existing shareholders, parent continues to exist. Split-up: the parent company is divided into two or more new companies and the original parent ceases to exist.

12. What is a 'sell-off' / slump sale?

    A slump sale is the transfer of one or more undertakings as a whole (going concern) for a lump sum consideration without assigning individual values to assets and liabilities.

13. Under the Companies Act, 2013, which sections primarily govern compromises, arrangements and amalgamations?

    Sections 230 to 240 of the Companies Act, 2013 deal with compromises, arrangements, amalgamations and related matters.

14. Which authority sanctions a scheme of merger/arrangement under the Companies Act, 2013?

    The National Company Law Tribunal (NCLT) sanctions schemes of compromise, arrangement and amalgamation under Sections 230-232.

15. What is 'fast track merger' under Section 233 of the Companies Act, 2013?

    A simplified merger process (without NCLT approval) available between two or more small companies, between a holding company and its wholly-owned subsidiary, or other prescribed classes, approved by the Central Government (Regional Director).

16. What majority is required to approve a scheme of compromise/arrangement at a members' or creditors' meeting under Section 230?

    A majority in number representing three-fourths (75%) in value of the members or creditors (or class thereof) present and voting, in addition to the requisite majority.

17. Under SEBI regulations, which listed entities must comply with which framework for schemes of arrangement?

    Listed companies must comply with SEBI (LODR) Regulations and the SEBI Master Circular on Schemes of Arrangement, requiring NOC/observation letter from stock exchanges before filing with NCLT.

18. What is the role of the Competition Commission of India (CCI) in restructuring?

    The CCI regulates combinations (mergers/acquisitions/amalgamations) under the Competition Act, 2002 to prevent any appreciable adverse effect on competition (AAEC); large combinations require prior CCI approval.

19. What are the key sections of the Income Tax Act relevant to amalgamation tax neutrality?

    Section 2(1B) defines 'amalgamation'; Section 47 exempts certain transfers from capital gains; Section 72A allows carry-forward and set-off of accumulated losses and unabsorbed depreciation of the amalgamating company.

20. What conditions define 'amalgamation' under Section 2(1B) of the Income Tax Act for tax benefits?

    All property and liabilities of the amalgamating company become those of the amalgamated company, and shareholders holding at least 3/4ths in value of shares of the amalgamating company become shareholders of the amalgamated company.

21. What is the 'appointed date' in a scheme of amalgamation?

    The date from which the scheme is deemed effective for transfer of assets and liabilities (the cut-off for the business combination), as fixed in the scheme; it determines accounting and tax treatment.

22. What is the 'effective date' in a scheme of amalgamation?

    The date on which the scheme actually becomes operative — typically when the certified copy of the NCLT order is filed with the Registrar of Companies (the last formality is completed).

23. List the broad steps in the process of a merger/amalgamation under the Companies Act, 2013.

    Draft scheme & board approval → file application with NCLT (Sec 230) → NCLT directs meetings → notices to members/creditors & regulators → hold meetings & obtain 75% approval → file petition for sanction → NCLT hearing & order → file order with ROC (effective date).

24. What is a 'swap ratio' (share exchange ratio) in a merger?

    The ratio in which shares of the transferee company are issued to shareholders of the transferor company in exchange for their existing shares, determined based on the relative valuation of the companies.

25. What is due diligence in the restructuring process?

    A comprehensive appraisal/investigation of a target's financial, legal, tax, operational, and commercial affairs before a transaction, to assess value, risks, and liabilities and inform the deal terms.

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