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

Bharat Textiles Ltd, registered under the Companies Act, 2013, proposes to merge into Alpine Fabrics GmbH, a company incorporated in Germany. Under Section 234, what is the correct position on approval from the Reserve Bank of India?

Prior approval of the Reserve Bank of India is required under Section 234(2) for a merger between a foreign company and an Indian company in either direction. The requirement is not limited to cash deals and cannot be replaced by Tribunal sanction or obtained afterwards.

  1. ANo RBI approval is needed if the Tribunal sanctions the scheme
  2. BRBI approval is needed only if consideration is paid wholly in cash
  3. CA foreign company may merge into an Indian company or vice versa only with the prior approval of the RBICorrect
  4. DRBI approval can be obtained after the scheme is sanctioned

Explanation

Section 234(2) provides that, subject to other laws, a foreign company may, with the prior approval of the RBI, merge into a company registered under the Act or vice versa. The approval must be prior, so post-sanction approval is not what the section contemplates. It is not limited to cash consideration.

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