CS Professional · Compliance Management, Audit and Due Diligence · Due Diligence
Kaveri Textiles Ltd., an Indian company, proposes a merger with Orion Fabrics Pte Ltd., a company incorporated outside India with no place of business in India. The scheme offers Orion's shareholders consideration partly in cash and partly in Depository Receipts. During legal due diligence, the Company Secretary checks the cross-border merger provisions of the Companies Act, 2013. Which finding is correct?
A foreign company may merge with an Indian company, or the reverse, with the prior approval of the Reserve Bank of India. Consideration to the merging company's shareholders may be cash, Depository Receipts, or a mix. Having no Indian place of business does not bar the foreign company.
- AThe merger is impossible because a foreign company without an Indian place of business cannot be a party to any scheme
- BThe merger needs the prior approval of the Reserve Bank of India, and the scheme may provide for consideration in cash, Depository Receipts, or partly in eachCorrect
- CThe merger needs only the approval of the Registrar of Companies, and consideration must be wholly in cash
- DThe merger needs no Reserve Bank of India approval if the Indian company is the surviving entity
Explanation
Section 234(2) allows a foreign company to merge into an Indian company or vice versa with prior approval of the Reserve Bank of India. The scheme may provide consideration in cash, Depository Receipts, or partly in each. The Explanation defines a foreign company as any body corporate incorporated outside India whether or not it has a place of business in India, so the option denying eligibility is wrong.
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