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

Bharat Metals Ltd (holding company) merged with its wholly-owned subsidiary Bharat Alloys Ltd under the fast-track route, and the scheme was registered. Before the merger, Bharat Alloys held 5,000 shares of Bharat Metals in a trust created for its own benefit. What is the position on registration of the scheme?

The shares must be cancelled or extinguished. On merger or amalgamation the transferee company cannot hold shares in its own name or through any trust, whether on its own behalf or for a subsidiary or associate company.

  1. AThe shares continue to be held by the trust until sold
  2. BThe shares are transferred to the Central Government
  3. CThe shares must be cancelled or extinguished, as the transferee company cannot hold its own shares in its own name or through any trustCorrect
  4. DThe shares are converted into preference shares of the transferee company

Explanation

Section 233(10) states that a transferee company shall not, on merger or amalgamation, hold any shares in its own name or in the name of any trust, on its own behalf or for any subsidiary or associate, and all such shares are cancelled or extinguished. Continuing the holding contradicts this.

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