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

Before an acquisition, Delta Textiles Ltd, authorised by its articles, plans to consolidate every 10 existing Rs 10 shares into one Rs 100 share. Because of fractional entitlements, the voting percentage of some minority holders will change. What does the Companies Act, 2013 require?

Tribunal approval is required. Consolidation of shares into larger denominations is permitted if the articles authorise it, but if it changes shareholders' voting percentages, it takes effect only after the Tribunal approves on an application made in the prescribed manner.

  1. AOnly an ordinary resolution in general meeting, since the articles authorise it
  2. BOnly a board resolution
  3. CApproval of the Tribunal on an application in the prescribed manner before the consolidation takes effectCorrect
  4. DFiling intimation with the Registrar after the change

Explanation

Section 61(1)(b) allows consolidation into larger shares if authorised by articles, but the proviso says a consolidation and division that changes shareholders' voting percentage does not take effect unless approved by the Tribunal. A general meeting resolution alone is insufficient.

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