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

Sagar Pharma Ltd proposes a scheme that includes a takeover offer and a buy-back of its securities. A director asks what section 230 says about the buy-back component. Which statement is correct?

The Tribunal cannot sanction a compromise or arrangement covering a buy-back of securities unless the buy-back is in accordance with section 68. Being part of a scheme gives no exemption, and an auditor's accounting certificate does not substitute for that compliance.

  1. AThe Tribunal cannot sanction the scheme unless the buy-back is in accordance with section 68Correct
  2. BThe buy-back component is exempt from section 68 because it is within a scheme
  3. CThe buy-back needs only the consent of ninety per cent of creditors by affidavit
  4. DThe buy-back is valid if the auditor certifies the accounting treatment

Explanation

Section 230(10) says no compromise or arrangement in respect of any buy-back of securities shall be sanctioned unless the buy-back complies with section 68. The auditor certificate under the proviso to 230(7) concerns accounting standards and does not replace this. The ninety per cent affidavit relates only to dispensing with a creditors' meeting.

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