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

Mehta Steels Ltd (India) merged into Orion Metals FZE, a foreign company with no place of business in India. Orion's counsel argues it is not a 'foreign company' under the Act since it has no Indian presence, so section 234 does not apply. Also, an officer of Mehta was in default of a Companies Act obligation before the merger. Which statement is correct?

Orion is a foreign company because the definition covers any body corporate incorporated outside India, whether or not it has a place of business here. Under section 240, an officer's liability for pre-merger offences of the transferor company continues after the merger.

  1. AOrion is not a foreign company, and the officer's liability ends on merger
  2. BOrion is a foreign company only if it has a place of business in India, but the officer's liability continues
  3. COrion is a foreign company even without a place of business in India, and the officer's liability for pre-merger offences continuesCorrect
  4. DOrion is a foreign company, but the officer's liability ends once the scheme is registered

Explanation

The Explanation to section 234 defines a foreign company as any body corporate incorporated outside India, whether or not it has a place of business in India. Section 240 says the liability of officers in default of the transferor for offences prior to merger continues after the merger.

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