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CS Professional · Corporate Restructuring, Valuation and Insolvency · Planning and Strategy

Meridian Pharma Ltd and Ganga Labs Ltd merge. Both companies cease to exist, and a new company, Meridian Ganga Ltd, is incorporated to take over the businesses of both. Shareholders of both receive shares in the new company. How is this combination best described?

It is an amalgamation by formation of a new company, also called consolidation. Both existing companies are dissolved and a newly incorporated company takes over their businesses, issuing shares to both sets of shareholders. In absorption, the transferee already exists and survives.

  1. AAmalgamation by formation of a new companyCorrect
  2. BAmalgamation by absorption
  3. CReverse merger
  4. DTakeover by acquisition of controlling stake

Explanation

When two or more companies unite and all of them are dissolved to form a wholly new company, it is an amalgamation by consolidation (formation of a new company). In absorption, only the transferor disappears and an existing transferee survives. Here neither original company survives, so absorption is wrong.

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