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CS Professional · Corporate Restructuring, Valuation and Insolvency · Documentation - Merger and Amalgamation

Two small companies, Kaveri Foods Ltd and Godavari Snacks Ltd, propose a fast-track merger. Creditors' approval is to be sought at a meeting. Which statement matches the requirement of section 233?

Section 233 requires creditors to approve the scheme by a majority representing nine-tenths in value, at a meeting convened on twenty-one days' notice together with the scheme, or otherwise in writing. Member approval of ninety per cent of shares is a separate requirement and does not replace it.

  1. AApproval by a majority representing nine-tenths in value of creditors, at a meeting convened on twenty-one days' notice with the scheme, or otherwise approved in writingCorrect
  2. BApproval by a majority representing two-thirds in value of creditors at a meeting convened on fourteen days' notice
  3. CApproval by a simple majority of creditors in number, at a meeting on thirty days' notice
  4. DCreditor approval is not required if members approve the scheme by ninety per cent of shares

Explanation

Section 233(1)(d) requires approval by a majority representing nine-tenths in value of creditors or class of creditors, at a meeting convened by a twenty-one day notice along with the scheme, or otherwise approved in writing. The two-thirds and fourteen-day figures and the simple majority in number are not the statutory test. Member approval does not replace creditor approval.

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