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CS Executive · Setting Up of Business, Industrial and Labour Laws · Corporate Entities - Companies

Kaveri Exports Pvt Ltd., an Indian company, plans to merge with Orion Trading Ltd., a company incorporated abroad, with Orion as the transferor. A director asks about the approval route under the Companies Act, 2013 for such a merger between a foreign company and an Indian company. Which statement is correct?

A foreign company may merge into an Indian-registered company, or the reverse, with the prior approval of the Reserve Bank of India. The scheme can pay shareholders in cash, in Depository Receipts, or partly in each. No winding up order or equity-only consideration is required.

  1. ANo approval of any authority is needed because the foreign company is outside India
  2. BPrior approval of the Reserve Bank of India is needed, and consideration may be paid in cash, Depository Receipts, or partly in eachCorrect
  3. CConsideration may be paid only in equity shares of the Indian company
  4. DThe merger is permitted only if Orion first obtains an Indian winding up order

Explanation

Section 234(2) provides that, subject to other laws, a foreign company may with the prior approval of the Reserve Bank of India merge into a company registered under the Act or vice versa. The scheme may provide for consideration in cash, in Depository Receipts, or partly in each. A winding up order is not a requirement, and it does not limit consideration to equity shares.

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