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

In a scheme, Indian company Ganga Software Ltd merges into Thames Digital plc (foreign transferee). The scheme proposes that Ganga's shareholders receive Depository Receipts of Thames for 60% of their entitlement and cash for 40%. Assessing under section 234(2), what is the position?

The scheme is permissible. Section 234(2) allows consideration to the merging company's shareholders in cash, in Depository Receipts, or partly in cash and partly in Depository Receipts, as the scheme provides. A split of Depository Receipts and cash therefore fits the provision.

  1. AInvalid, because consideration can only be wholly in cash
  2. BInvalid, because consideration can only be wholly in Depository Receipts
  3. CValid, because the terms may provide for payment in cash, in Depository Receipts, or partly in cash and partly in Depository ReceiptsCorrect
  4. DValid only if the consideration is in equity shares of the foreign company

Explanation

Section 234(2) lets the scheme provide payment to shareholders of the merging company in cash, in Depository Receipts, or partly in each. A 60:40 mix of Depository Receipts and cash fits this. Equity shares are not the specified form, so option D adds a condition not in the text.

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