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CS Professional · Corporate Restructuring, Valuation and Insolvency · Process of M&A Transactions

Delta Ltd, the holding company, plans to transfer a plant to its wholly owned subsidiary Delta Components Ltd as part of a restructuring. The subsidiary's accounts are consolidated with Delta's and placed before shareholders at the general meeting for approval. Under Section 188, what is the position on the shareholders' resolution required by the first proviso?

The shareholders' resolution is not applicable. Section 188 exempts transactions between a holding company and its wholly owned subsidiary from the first-proviso resolution requirement when the subsidiary's accounts are consolidated with the holding company and placed before shareholders at the general meeting for approval.

  1. AIt is required, but only by a special resolution
  2. BIt is required, with the holding company's votes excluded
  3. CIt is not applicable to this transactionCorrect
  4. DIt is required only if the subsidiary is listed

Explanation

The proviso inserted in 2015 states that the requirement of passing the resolution under the first proviso does not apply to transactions between a holding company and its wholly owned subsidiary whose accounts are consolidated and placed before shareholders at the general meeting for approval. Board consent under the main sub-section is not addressed by this proviso.

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