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CS Professional · Corporate Restructuring, Valuation and Insolvency · Acquisition of Company or Business

Mehta Textiles Ltd acquires 100% of the equity shares of Rajan Dyes Pvt Ltd from its shareholders by paying cash to them. Rajan Dyes continues as a separate legal entity with the same assets and liabilities. Which description best fits this transaction?

This is an acquisition of a company through a share purchase. Mehta Textiles buys all the shares, so Rajan Dyes survives as a separate legal entity and becomes a wholly owned subsidiary. No undertaking is transferred and no entity is dissolved.

  1. AAcquisition of a company by purchase of its shares, making it a wholly owned subsidiaryCorrect
  2. BAmalgamation in which Rajan Dyes is dissolved without winding up
  3. CSlump sale of Rajan Dyes' undertaking for a lump sum
  4. DDemerger of Rajan Dyes into Mehta Textiles

Explanation

Buying the shares gives control while the target stays a separate legal entity, now a wholly owned subsidiary. Amalgamation and demerger involve a scheme and the target's undertaking moving or the entity ceasing, and a slump sale is a transfer of the undertaking, not of shares. None of these happens here.

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