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CS Executive · Company Law and Practice · Compromise, Arrangement and Amalgamations - Concepts

Rohini Steels Ltd has 10,000 crore of total outstanding debt per its latest audited financial statement, and its shareholders number many. A lender with 300 crore outstanding debt wishes to object to a scheme. Under the proviso to Section 230(4), what is the position?

The lender cannot object. The proviso requires outstanding debt of at least 5% of total outstanding debt, which is 500 crore here. Its 300 crore claim is only 3%, so it falls below the threshold.

  1. AIt may object, as 300 crore is at least 5% of total outstanding debt
  2. BIt may not object, as 300 crore is below 5% of the total outstanding debt, being 500 croreCorrect
  3. CIt may object only if it also holds 10% of the shares
  4. DIt may object only with the Tribunal's special leave, whatever the amount

Explanation

The proviso allows objections only by persons holding at least 10% of shareholding or having outstanding debt of at least 5% of total outstanding debt. 5% of 10,000 crore is 500 crore; 300 crore is lower, so the lender cannot object under this proviso. Option A wrongly computes the threshold as 3%.

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