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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Legislative Framework of Corporate Governance in India

Meridian Pharma Ltd., a company registered in India, proposes to merge into Bright Labs Corp., incorporated in a country notified by the Central Government. The scheme offers Meridian's shareholders part cash and part Depository Receipts. Which statement is correct under the Companies Act, 2013?

The merger is allowed, subject to prior Reserve Bank of India approval, and shareholders may be paid in cash, in Depository Receipts, or partly in each. Section 234(2) expressly permits mergers between Indian and foreign companies with such consideration structures.

  1. AThe scheme is permissible with the prior approval of the Reserve Bank of India, and consideration may be cash, Depository Receipts, or partly eachCorrect
  2. BNo approval is needed beyond shareholder consent, and consideration must be only in cash
  3. CSuch a merger is prohibited because the transferee is a foreign company
  4. DConsideration may be in Depository Receipts only, never partly in cash

Explanation

Section 234(2) allows a foreign company to merge into an Indian company or vice versa, with the prior approval of the RBI, and consideration may be cash, Depository Receipts, or partly both. The cash-only and DR-only options contradict this. Prohibition is also wrong because the section expressly permits it.

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