CS Executive · Setting Up of Business, Industrial and Labour Laws · Business Collaborations
Two Indian pharmaceutical companies, Arogya Labs Ltd and Sanjeevani Drugs Ltd, agree to share their distribution networks for a period of three years. Each continues as a separate legal entity, no new company is formed, and no shares are exchanged. How is this arrangement best described?
This is a strategic alliance based on contract. The two companies cooperate on distribution for a fixed period while staying legally independent, forming no new entity and exchanging no shares. Amalgamation, absorption or a subsidiary structure would involve ownership change or combination, which is absent here.
- AA strategic alliance based on contractCorrect
- BAn amalgamation of the two companies
- CA merger by absorption
- DA wholly owned subsidiary arrangement
Explanation
A strategic alliance is a contractual cooperation in which the parties remain independent and pursue common goals. Here there is no new entity and no transfer of ownership. Amalgamation and absorption would involve combining the companies, and a subsidiary requires control through shareholding, so these are wrong.
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