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CS Professional · Corporate Restructuring, Valuation and Insolvency · Types of Corporate Restructuring

Bharat Polymers Ltd, an Indian company, plans to merge with Kestrel Plastics Inc., incorporated in a country notified by the Central Government. Under Section 234 of the Companies Act, 2013, which requirement applies to this cross-border merger?

Prior approval of the Reserve Bank of India is required. Section 234(2) lets a foreign company merge into an Indian company, or the reverse, only with RBI's prior approval, subject to other laws. The scheme may pay consideration in cash, Depository Receipts or both.

  1. APrior approval of the Reserve Bank of India is required for the merger of the foreign company into the Indian company or vice versaCorrect
  2. BOnly SEBI approval is needed, and RBI approval is not required
  3. CThe merger is permitted only if consideration is paid wholly in Indian rupees
  4. DThe foreign company must first have a place of business in India

Explanation

Section 234(2) allows a foreign company to merge into an Indian company, or vice versa, with the prior approval of the RBI, subject to other laws. Option B ignores this. Option C is wrong because consideration may be in cash, Depository Receipts or partly each. Option D is wrong because the definition covers bodies corporate incorporated outside India whether or not they have a place of business in India.

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