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

Ravi, an officer in default of transferor company Tapti Exports Ltd, committed an offence under the Companies Act, 2013 before Tapti merged into Narmada Global Ltd. Ravi argues that the merger extinguished his liability. Which view is correct under section 240?

Ravi's liability continues. Section 240 says that liability of officers in default of the transferor company for offences under the Companies Act committed before the merger continues afterwards, regardless of any other law, and the scheme need not expressly preserve it.

  1. AHis liability for the offence continues after the mergerCorrect
  2. BHis liability ends because the transferor ceases to exist
  3. CHis liability passes entirely to the officers of the transferee company
  4. DHis liability continues only if the scheme expressly preserves it

Explanation

Section 240 states that, notwithstanding any other law, the liability of officers in default of the transferor company for offences under the Act committed before the merger, amalgamation or acquisition continues after it. No express saving in the scheme is needed, and liability does not shift to transferee officers.

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