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CS Professional · Corporate Restructuring, Valuation and Insolvency · Cross Border Mergers

Bharat Polymers Ltd, an Indian company, proposes to merge into Alpine Chemie AG, a company incorporated outside India. The draft scheme says the Alpine shareholders will pay Bharat's shareholders partly in cash and partly in Depository Receipts. Under Section 234 of the Companies Act, 2013, which statement about the consideration is correct?

The scheme may validly provide for payment in cash, in Depository Receipts, or partly in each. Section 234(2) permits this, provided the Reserve Bank of India has given its prior approval to the merger of the foreign and Indian company.

  1. AThe scheme may provide for consideration in cash, in Depository Receipts, or partly in each, subject to prior approval of the Reserve Bank of IndiaCorrect
  2. BConsideration can only be paid in equity shares of the transferee company, and cash is prohibited
  3. CConsideration must be wholly in cash because Depository Receipts are not permitted
  4. DConsideration in Depository Receipts is allowed only if the Tribunal, not the RBI, gives prior approval

Explanation

Section 234(2) allows a foreign company to merge into an Indian company or vice versa with prior RBI approval. The scheme may provide consideration in cash, in Depository Receipts, or partly in cash and partly in Depository Receipts. The options that restrict the mode of payment or substitute the Tribunal for RBI contradict the text.

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