What is Penalty for incorrect valuation for rights issue?
Nexa Consultancy | Startup & Finance Glossary
If a company issues shares through a rights issue at a price that is not supported by a proper valuation report (from a registered valuer), it can be challenged by the tax authorities under the Angel Tax provisions if the price is deemed to be above fair market value.
Startup Example: A startup does a rights issue to existing shareholders at a very high price without a valuation report. This could attract scrutiny from the income tax department.
Our fundraising advisory includes guidance on valuation.