Skip to content

CA Intermediate · Advanced Accounting · Amalgamation of Companies

Ganga Textiles Ltd (transferee) proposes to absorb Yamuna Fabrics Ltd (transferor). Yamuna has 1,00,000 equity shares of ₹10 each, of which Ganga already holds 20,000 shares. For the amalgamation to qualify as an amalgamation in the nature of merger under AS 14, at least how many equity shares of Yamuna must be held by persons who become equity shareholders of Ganga? (Assume all other merger conditions are met.)

The minimum is 72,000 shares. AS 14 requires holders of 90% of the face value of the transferor's equity shares, excluding those already held by the transferee, to become transferee shareholders. Excluding Ganga's 20,000 shares leaves 80,000, and 90% of that is 72,000.

  1. A90,000 shares
  2. B72,000 sharesCorrect
  3. C80,000 shares
  4. D70,000 shares

Explanation

AS 14 requires holders of at least 90% of the face value of the transferor's equity shares, excluding shares already held by the transferee, to become shareholders of the transferee. Shares outside Ganga's holding are 1,00,000 − 20,000 = 80,000, and 90% of 80,000 = 72,000. Applying 90% to all 1,00,000 shares (90,000) ignores the exclusion of the transferee's own holding.

Did you get it right without looking?

One question tells you little. A timed set on Amalgamation of Companies shows your real accuracy, how long you take and where you lose marks.

Practise Amalgamation of CompaniesFree diagnostic mock

More Amalgamation of Companies questions