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CS Professional · Corporate Restructuring, Valuation and Insolvency · Documentation - Merger and Amalgamation

Meridian Textiles Ltd, a transferor company, allotted shares in breach of the Companies Act, 2013, and its officers in default were liable for the offence. Later, a Tribunal-sanctioned amalgamation merged Meridian into Kaveri Industries Ltd, and Meridian was dissolved. What is the effect of Section 240 on the officers' liability?

The liability continues. Section 240 provides that, despite any other law, officers in default of the transferor company remain liable for offences under the Act committed before the merger, so the transferor's dissolution does not wipe out their liability.

  1. AThe liability lapses because the transferor company has ceased to exist
  2. BThe liability continues after the amalgamation despite anything in any other lawCorrect
  3. CThe liability shifts entirely to the directors of Kaveri Industries Ltd
  4. DThe liability continues only if the Tribunal's order expressly saves it

Explanation

Section 240 says that, notwithstanding anything in any other law, the liability of the officers in default of the transferor company for offences under the Act committed before the merger continues after it. Dissolution of the company therefore does not extinguish their liability. It also does not depend on any saving in the Tribunal's order.

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