How Does a Company Takeover Work in Real Estate?

By Sandeep Sadh
December 18, 2024

How Does a Company Takeover Work in Real Estate?

Property Owned by a Company:
The property is owned by a special purpose vehicle (SPV) or a company formed solely for the purpose of holding the property. The company's only significant asset is the property.
Buyer Acquires the Company Shares:
Instead of purchasing the property outright, the buyer purchases the shares of the company. This effectively transfers ownership of the property since the company remains the legal owner.
Key Steps in a Company Takeover:
- Due Diligence:
  The buyer conducts thorough due diligence to assess the company’s financials, legal status, and liabilities. This includes verifying that the company has no debts or encumbrances beyond the property itself.
- Share Purchase Agreement (SPA):
  A legal agreement is drafted for the purchase of the company’s shares. This document outlines the terms and conditions of the sale.
- Regulatory Compliance:
  The buyer ensures that all legal and tax-related obligations are fulfilled for the smooth transfer of ownership.
- Transfer of Ownership:
  Once the shares are purchased, the buyer becomes the owner of the company and, indirectly, the property.
Advantages of Company Takeover:
- Savings on Stamp Duty and Registration Costs:
  Since the property’s legal ownership doesn’t change (it remains under the company), the transaction may not attract stamp duty or registration fees, resulting in substantial savings.
- Simplified Transaction:
  The sale is executed as a transfer of company shares, often making it quicker and more efficient compared to a traditional property transaction.
- Tax Benefits:
  Depending on the jurisdiction, the buyer may benefit from lower tax liabilities by acquiring the company rather than the property.
Challenges to Consider:
- Hidden Liabilities: If the company has undisclosed debts or legal issues, the buyer assumes these liabilities along with the property.
- Regulatory Scrutiny: Company takeovers can attract scrutiny from tax authorities to ensure compliance.
- Legal Complexities: The process requires meticulous legal documentation and expert advice.

When is a Company Takeover Used?

Luxury Properties: High-value properties often held by companies for tax and cost efficiency.
Commercial Real Estate: Corporate offices or assets owned by companies.
Foreign Ownership: Non-resident investors sometimes use company structures to hold real estate assets in other countries.

By acquiring the company, the buyer gets control of the property while potentially avoiding high transaction costs and simplifying the process. However, expert legal and financial advice is crucial to ensure the deal is beneficial and risk-free.

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About the author

Sandeep Sadh

About Sandeep Sadh

Sandeep Sadh has been in the real estate business since 1993 in Mumbai. He has expertise in Buying, Selling, Leasing properties in Mumbai and a deep understanding of legal and tax related matters due to his experience.

Summary

Over the years, he has experienced the City's growth. He has been a columnist in the Times of India with numerous articles, which bring about a clear picture of the real estate market in Mumbai. He is a regular on NDTV, CNBC, ET Now Real Estate and Zee News, giving his experienced quotes as and when required.

Builders jack up rates with market handle - The Indian Express
REALTY PLUS ORGANIZES THREE OF ITS FLAGSHIP EVENTS AT HOTEL TAJ SANTACRUZ MUMBAI - Exchange 4 Media/Realty Plus
Need'nt hurry yet to buy that new flat - The Indian Express
More luxury homes than city needs - The Indian Express
Don't wait to buy a home; prices won't drop - Rediff
Make real estate deals more transparent - Money Control
Real estate market could recover by Diwali - The Economic Times
Energy-efficient buildings increase return on your realty investment - The Economic Times
Should you buy property in a religious location? - The Economic Times
Are you paying a higher maintenance bill for housing society? - The Economic Times
Developers Are Rolling Out Offers. Homebuyers, Read The Fine Print Carefully - Bloomberg/Quint
Hot property destinations of 2007 - Rediff
Piramal's big bet - Business Today
Are you buying a 'safe' house? - Magicbricks

Sandeep Sadh has used information and technology since the year 1998 and now what people call it Prop Tech to cater to the needs of Home Buyer, Seller, Investor and Corporates, HNI and NRI looking to Buy/Sell or Lease their properties in the Mumbai Property Market.

Sandeep has a holistic experience of real estate be it Leasing an Apartment for your CEO in the most upmarket buildings, to enter into a long lease for your office in Mumbai in prime buildings or an Investment in good projects with a detailed analysis keeping in mind the Demand and Supply and other micro factors of the project/property.

Sandeep Sadh has developed a few websites like www.mumbaipropertyexchange.com, www.realestatemumbai.com, www.propi.in which augment the real estate consulting business.

Right from Investments in Primary Markets to Selling, leasing and specializing for NRI’s all over the world. He is an expert in NRI Home Buying and Selling and has a good understanding of the Income Tax laws pertaining to Selling a Property and Repatriating funds overseas or reinvesting based on Capital Gains etc.

Experience

Residential Leasing
Commercial Leasing
Residential Home Buying
Commercial Property Buying
Investment Properties with complete Property Management as your Real Estate Family office

While transacting in the above segments, he has complete experience and deep understanding of the paper work, his areas of expertise are :

Drafting of the Leave and License Agreements
MOU for Buying/Selling Properties
Drafting Agreement for Sale
Gift Deeds
Computing of Capital Gains with current ready reckoner values
Drafting of Supporting Power of Attorney.

As an add on Service, Sandeep Sadh has tied up with various Professionals like Lawyers and Chartered Accountants who add value in transacting and specially services for Non Resident Indians.

Application to Income Tax for Lower Tax Deduction Certificate – Through a qualified CA and keeping a grip on the traction so that the remittance back to Non Resident Indians after Selling the property is seamlessly transferred.

You can connect with Sandeep Sadh on ssadh@mumbaipropertyexchange.com

LinkedIn - https://www.linkedin.com/in/sandeepsadhmpe/

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How Does a Company Takeover Work in Real Estate?