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

Kaveri Pharma Ltd (India) is to be merged into Brightfield Inc., a foreign company. The scheme offers Kaveri's shareholders payment partly in cash and partly in Depository Receipts of Brightfield. Under the Companies Act, 2013, how is this scheme consideration viewed?

The mix is permissible. Section 234(2) lets the scheme pay the merging company's shareholders in cash, in Depository Receipts, or partly in cash and partly in Depository Receipts, as the scheme provides. The Act sets no minimum proportion for either form of consideration.

  1. AInvalid, because consideration must be wholly in equity shares
  2. BInvalid, because cash payment is prohibited in cross-border mergers
  3. CValid, as the terms may provide for cash, Depository Receipts, or partly cash and partly Depository ReceiptsCorrect
  4. DValid only if Depository Receipts form at least 75% of the consideration

Explanation

Section 234(2) states that the scheme terms may provide for payment to shareholders of the merging company in cash, in Depository Receipts, or partly in each. No minimum proportion is prescribed, so the 75% option is wrong.

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