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CS Professional · Corporate Restructuring, Valuation and Insolvency · Process of M&A Transactions

Mehta Holdings Ltd plans to enter a transaction with its wholly owned subsidiary, Mehta Retail Pvt Ltd, ahead of an amalgamation. The subsidiary's accounts are consolidated with Mehta Holdings and placed before shareholders at the general meeting for approval. The transaction is above the prescribed threshold. Is a shareholder resolution under the first proviso to section 188(1) needed?

No shareholder resolution is required. The Act exempts transactions between a holding company and its wholly owned subsidiary from the first-proviso resolution requirement when the subsidiary's accounts are consolidated with the holding company and placed before shareholders at the general meeting for approval.

  1. AYes, an ordinary resolution is always needed
  2. BYes, but only the subsidiary's members vote
  3. CNo, the requirement does not apply to such holding and wholly owned subsidiary transactionsCorrect
  4. DNo, but the Tribunal must approve the transaction

Explanation

A proviso states the requirement of passing the resolution under the first proviso does not apply to transactions between a holding company and its wholly owned subsidiary whose accounts are consolidated and placed before shareholders at the general meeting. Board consent under section 188(1) is still a separate matter.

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