Skip to content

CS Professional · Corporate Restructuring, Valuation and Insolvency · Process of M&A Transactions

Parent Industries Ltd proposes to transfer a division to its wholly owned subsidiary Sub Co Ltd as part of a restructuring. Sub Co's accounts are consolidated with Parent's and placed before shareholders at the general meeting for approval. The transaction crosses the prescribed threshold requiring shareholder resolution. Which statement is correct under Section 188?

The shareholder resolution requirement does not apply. Section 188 exempts transactions between a holding company and its wholly owned subsidiary whose accounts are consolidated with the holding company and placed before shareholders at the general meeting for approval, and both conditions are satisfied here.

  1. AThe shareholder resolution requirement does not apply to this transactionCorrect
  2. BA special resolution is mandatory in every case
  3. CRelated party members may vote on the resolution
  4. DThe shareholder resolution is needed only if Sub Co is listed

Explanation

One proviso states the requirement of passing the resolution under the first proviso does not apply to transactions between a holding company and its wholly owned subsidiary whose accounts are consolidated with the holding company and placed before shareholders at the general meeting for approval. Both conditions are met here.

Did you get it right without looking?

One question tells you little. A timed set on Process of M&A Transactions shows your real accuracy, how long you take and where you lose marks.

Practise Process of M&A TransactionsFree diagnostic mock

More Process of M&A Transactions questions