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

Ganga Foods Ltd, a wholly-owned subsidiary of an Indian holding company, plans a merger with its Indian parent under the fast-track route. Its promoter asks whether the RBI prior-approval requirement of section 234(2) applies. What is the correct answer?

RBI prior approval is not required. Section 234(2) applies only to mergers between a foreign company and an Indian company. A fast-track merger between an Indian holding company and its Indian wholly-owned subsidiary falls under section 233, which does not require that approval.

  1. AYes, RBI approval is required for every fast-track merger
  2. BYes, but only if the Registrar objects to the scheme
  3. CNo, because the RBI approval requirement applies only where a foreign company merges with an Indian company or vice versaCorrect
  4. DNo, because fast-track mergers are exempt from all central approvals

Explanation

Section 234(2) requires prior RBI approval only where a foreign company merges into an Indian company or the reverse. Both companies here are Indian, so section 233 fast-track provisions apply without that requirement. The last option is wrong because the Central Government still receives the scheme and may refer it to the Tribunal.

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