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

Meridian Infra Ltd (India) proposes to merge into Alpine Holdings AG, a foreign company. The scheme offers Meridian's shareholders part cash and part Depository Receipts. Which statement is correct under section 234?

The scheme can proceed on this consideration structure. Section 234(2) permits mergers in either direction with the prior approval of the Reserve Bank of India, and lets the scheme pay shareholders in cash, in Depository Receipts, or partly in each. The outbound direction does not remove the RBI approval requirement.

  1. ADepository Receipts cannot form part of consideration; only cash is permitted
  2. BSection 234(2) allows an Indian company to merge into a foreign company, and the scheme may provide cash, Depository Receipts or both, subject to prior RBI approvalCorrect
  3. CThe scheme needs no RBI approval because the foreign company is the transferee
  4. DSection 234(2) permits only a foreign company to merge into an Indian company, not the reverse

Explanation

Section 234(2) allows a foreign company to merge into an Indian company 'or vice versa', with the prior approval of RBI. The scheme may provide consideration in cash, in Depository Receipts, or partly in each. So the proposed mix is permissible, and the transferee's nationality does not remove the RBI requirement.

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