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

Cedar Retail Ltd was acquired by Harbour Mart Ltd. Before the acquisition, Cedar's officers in default had contravened a provision of the Companies Act, 2013. A student argues that Section 240 does not apply because the transaction was an acquisition and not an amalgamation. Is the student correct?

The student is incorrect. Section 240 expressly refers to merger, amalgamation or acquisition of the transferor company, so the continuing liability of officers in default for earlier offences under the Act also applies to an acquisition, without any shareholding threshold.

  1. AYes, Section 240 applies only to amalgamations
  2. BYes, Section 240 applies only where the transferor is dissolved
  3. CNo, Section 240 expressly covers merger, amalgamation or acquisitionCorrect
  4. DNo, but only if the acquisition is of more than 50% of shares

Explanation

The text of Section 240 refers to the transferor company's merger, amalgamation or acquisition, so acquisition is expressly included. It does not require dissolution or any shareholding threshold. The officers' pre-acquisition liability under the Act therefore continues.

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