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

Mehta Pharma Ltd, a listed company, is the wholly owned parent of Mehta Labs Pvt Ltd. Their accounts are consolidated and placed before shareholders at the general meeting for approval. Mehta Pharma proposes a transaction with Mehta Labs that is not in the ordinary course of business and exceeds the prescribed thresholds. Which statement is correct under Section 188?

The shareholder resolution is not required, but Board consent still is. The proviso exempts holding and wholly owned subsidiary transactions, with consolidated accounts placed before shareholders, only from the first-proviso resolution, not from the Board's consent under Section 188(1).

  1. AShareholder resolution under the first proviso is not required, but Board consent is still requiredCorrect
  2. BBoth Board consent and shareholder resolution are dispensed with
  3. COnly a special resolution of shareholders can be used
  4. DShareholder resolution is required because the company is listed

Explanation

The last proviso removes only the requirement of the shareholder resolution under the first proviso for transactions between a holding company and its wholly owned subsidiary whose accounts are consolidated and placed before shareholders. The Board consent under the main sub-section is not removed, so the Board must still approve.

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