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CS Professional · Corporate Restructuring, Valuation and Insolvency · Documentation - Merger and Amalgamation

A fast-track scheme between Vikram Ltd (holding) and its wholly-owned subsidiary provides for buying out dissenting shareholders and settling dues of dissenting creditors. The draft is silent on who bears any amount unpaid at registration. Applying the Act, what is the effect once the scheme is registered?

Any unpaid amount for buying out dissenting shareholders or settling dissenting creditors becomes a liability of the transferee company on registration. The transferor's dissolution without winding-up does not extinguish it, so drafting should anticipate it.

  1. AUnpaid amounts become the liability of the transferee companyCorrect
  2. BUnpaid amounts lapse because the transferor is dissolved
  3. CUnpaid amounts remain with the dissolved transferor and are recoverable from its directors
  4. DUnpaid amounts are borne by the Central Government

Explanation

Section 233(9)(d) states that where the scheme provides for purchase of shares of dissenting shareholders or settlement of debt due to dissenting creditors, the unpaid portion becomes the liability of the transferee company. Dissolution of the transferor does not extinguish it.

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