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CS Professional · Corporate Restructuring, Valuation and Insolvency · Fast Track Mergers

Meru Tech Pvt Ltd, a small company, plans a fast track merger with Nilgiri Tech Pvt Ltd. It convenes a creditors' meeting on 21 days' notice with the scheme. Creditors representing 85% in value vote in favour. What is the position under section 233?

The scheme lacks valid creditor approval. Section 233 requires a majority representing nine-tenths in value of the creditors, either at a meeting called on twenty-one days' notice or by written approval. Eighty-five per cent in value falls short of nine-tenths, so the requirement is not met.

  1. AThe scheme is validly approved since a majority in number suffices
  2. BThe scheme is validly approved since 75% in value is enough
  3. CThe scheme is not approved by creditors because nine-tenths in value is required, unless approved in writing by that majorityCorrect
  4. DThe scheme needs no creditor approval in fast track mergers

Explanation

Section 233(1)(d) requires approval by a majority representing nine-tenths in value of creditors or class of creditors, at a meeting on 21 days' notice or otherwise in writing. 85% is below 90%, so approval is lacking. Creditor approval is not dispensed with.

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