Skip to content

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

Orion Ltd already holds all the shares of Orion Retail Ltd, its wholly owned subsidiary. To integrate operations, Orion subscribes to further shares of Orion Retail, taking aggregate investments far above the Section 186(2) limits. What is the position as to the special resolution requirement?

The special resolution requirement does not apply, because a holding company acquiring securities of its wholly owned subsidiary is exempted under the first proviso to Section 186(3). However, the company must still disclose the details of the acquisition in its financial statement as the second proviso requires.

  1. ARequired, because limits are exceeded
  2. BRequired only if Orion Retail has accumulated losses
  3. CNot applicable under sub-section (3), but details must be disclosed in the financial statementCorrect
  4. DNot applicable, and no disclosure is needed either

Explanation

The first proviso to Section 186(3) excludes acquisition by a holding company of securities of its wholly owned subsidiary from the special resolution requirement. The second proviso still requires disclosure of the details in the financial statement. Option D wrongly drops the disclosure.

Did you get it right without looking?

One question tells you little. A timed set on Acquisition of Company or Business shows your real accuracy, how long you take and where you lose marks.

Practise Acquisition of Company or BusinessFree diagnostic mock

More Acquisition of Company or Business questions