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

Sundaram Textiles Ltd, a listed public company, is planning to acquire a smaller rival. Its Board wants an independent assessment of the value of the target's undertaking before finalising the offer price. Under the terms of reference that the Board must specify for the Audit Committee under Section 177(4) of the Companies Act, 2013, which function covers this need?

The relevant function is valuation of undertakings or assets of the company, wherever necessary, which Section 177(4) includes in the Audit Committee's terms of reference. The other options relate to public offer funds, auditor appointment or whistle-blowing, not to valuing a business.

  1. AValuation of undertakings or assets of the company, wherever it is necessaryCorrect
  2. BMonitoring the end use of funds raised through public offers
  3. CRecommending the appointment and remuneration of auditors
  4. DEvaluation of the vigil mechanism for directors and employees

Explanation

Section 177(4)(vi) lists valuation of undertakings or assets of the company, wherever necessary, among the Audit Committee's terms of reference. The other options concern different functions: end use of public offer funds, auditor appointment and the vigil mechanism, none of which deals with valuing an undertaking.

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