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

Meridian Pharma Ltd has already made investments and given loans totalling Rs 70 crore to other bodies corporate. Its limit under section 186(2) is Rs 80 crore. The Board proposes to acquire securities of a target company worth Rs 25 crore as part of a business acquisition. What must Meridian do first?

Meridian needs a special resolution in a general meeting before making the investment. The existing Rs 70 crore plus the proposed Rs 25 crore totals Rs 95 crore, above the Rs 80 crore limit, so section 186(3) requires prior authorisation by special resolution and Board approval alone is not enough.

  1. ANothing further, since the Board has approved it
  2. BObtain prior authorisation by a special resolution in a general meeting, because the aggregate would exceed the limitCorrect
  3. CObtain an ordinary resolution in a general meeting
  4. DObtain approval from the Registrar of Companies

Explanation

The aggregate would be Rs 70 crore plus Rs 25 crore, which is Rs 95 crore and exceeds Rs 80 crore. Section 186(3) then requires prior authorisation by a special resolution passed in a general meeting. An ordinary resolution does not meet this requirement.

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