Skip to content

CS Professional · Corporate Restructuring, Valuation and Insolvency · Acquisition of Company or Business

Deccan Power Ltd, a holding company, has already invested heavily in other bodies corporate, and the aggregate of its investments exceeds the section 186 limit. It now proposes to subscribe to further shares of its wholly owned subsidiary, Deccan Solar Ltd. It has no deposit default. Which statement is correct under section 186 as given?

The special resolution requirement under sub-section (3) does not apply, because a holding company is acquiring securities of its wholly owned subsidiary. The company must still disclose the details of the acquisition in its financial statement.

  1. AA special resolution is mandatory, as the limit is already exceeded
  2. BThe sub-section (3) special resolution requirement does not apply to this acquisition, but details must be disclosed in the financial statementCorrect
  3. CThe acquisition is prohibited outright
  4. DPrior approval of the Tribunal is needed

Explanation

The proviso to sub-section (3) exempts an acquisition by a holding company of securities of its wholly owned subsidiary from the special resolution requirement. The second proviso still requires disclosure of details in the financial statement. The option requiring a special resolution ignores the proviso, and nothing in the text requires Tribunal approval.

Did you get it right without looking?

One question tells you little. A timed set on Acquisition of Company or Business shows your real accuracy, how long you take and where you lose marks.

Practise Acquisition of Company or BusinessFree diagnostic mock

More Acquisition of Company or Business questions