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

Prior to its fast-track merger into Meru Ltd, the transferor Kaveri Ltd had defaulted in filing annual returns, and its officers in default were liable under the Companies Act, 2013. After the merger, the officers argue liability ended with Kaveri's dissolution. What is the correct position?

The liability of Kaveri's officers in default continues. Section 240 preserves liability for offences committed under the Act before the merger, amalgamation or acquisition, so dissolution of the transferor does not wipe it out or transfer it to the transferee's directors.

  1. ALiability ends because the transferor company is dissolved
  2. BLiability shifts entirely to the directors of Meru Ltd
  3. CLiability of the officers in default continues after the mergerCorrect
  4. DLiability continues only if the Tribunal confirmed the scheme

Explanation

Section 240 states that liability of officers in default of the transferor company for offences under the Act committed prior to merger, amalgamation or acquisition continues after it. The mode of approval or dissolution does not extinguish it, and it does not shift to the transferee's directors.

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