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CS Professional · Corporate Restructuring, Valuation and Insolvency · Planning and Strategy

Tara Foods Ltd buys 60% of the equity shares of Rohini Snacks Ltd from the open market and from its promoters. Rohini Snacks continues as a separate legal entity with its own board, and Tara Foods now controls it. What is the most accurate description?

This is an acquisition of control through share purchase. Holding 60% of the shares gives Tara Foods majority voting power, so Rohini Snacks becomes its subsidiary while remaining a separate legal entity. Nothing is dissolved, so it is not an amalgamation.

  1. AAcquisition of control, making Rohini Snacks a subsidiaryCorrect
  2. BAmalgamation, with Rohini Snacks dissolved
  3. CDemerger of Rohini Snacks
  4. DSlump sale of Rohini Snacks' undertaking

Explanation

Acquiring more than half of the voting power gives control and makes Rohini Snacks a subsidiary, while it stays a separate legal entity. No dissolution or scheme of arrangement occurs, so amalgamation is wrong. No undertaking is transferred for a lump sum, so slump sale is wrong.

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