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CS Professional · Corporate Restructuring, Valuation and Insolvency · Acquisition of Company or Business

Alpha Industries Ltd wishes to acquire additional securities of its wholly owned subsidiary, Alpha Components Ltd, taking the aggregate investments above the section 186(2) limit. What is the position under section 186(3)?

The special resolution requirement does not apply. Under the proviso to section 186(3), a holding company acquiring securities of its wholly owned subsidiary is exempt from it, but the second proviso still requires the company to disclose the details of the acquisition in its financial statement.

  1. AA special resolution is still required
  2. BThe special resolution requirement does not apply, but details must be disclosed in the financial statementCorrect
  3. CPrior approval of the Central Government is required
  4. DThe acquisition is prohibited

Explanation

The first proviso to section 186(3) exempts acquisition by a holding company of securities of its wholly owned subsidiary from the special resolution requirement. The second proviso still requires disclosure of details in the financial statement. Option A ignores the exemption.

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