What is issuance of shares for consideration other than cash (ISCOC)?

Shares are one of the most important instrument to raise capital at all stages of business. Issue of shares seems to be a simple process and most of the people know about it in its general form only, i.e. shares issued for cash.

However, Shares can also be issued as a mode of payment for acquiring assets/business, know how or any other services without any cash outflow from the business. Such an issue of shares is termed as “Issue of Shares for Consideration Other Than Cash” (ISCOC).

How is ISCOC used across transactions?

Share Swap

ISCOC is an integral component of an M&A deal structuring wherein a company issues it’s own shares as consideration for acquiring other company’s shares.

Acquiring Company or an IP

The promoters of the acquired company/ owner of patent can be paid by way of shares in the acquiring company. This way they will enjoy certain control in the new company.

Services that Company can’t pay for

At times company faces cash crunch but needs certain services which will enlighten company’s success path. Diluting control by way of issuing shares for these services is a way out from this cash crunch.

Advisors, Strategic Investors

Advisors, Mentors and Strategic investors guide the company with an objective to increase the value of the company. They expect consideration in the form of share issued at no cost to them which can be achieved with ISCOC.

We’ve put together Tax and Regulatory aspects of Issuing shares for consideration other the cash here below :

(A) REGULATORY : COMPANIES ACT, 2013

Know more on FEMA, Tax and Valuations for issue of shares for consideration other than cash, Scroll to the next page

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