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CS Professional · Corporate Restructuring, Valuation and Insolvency · Fast Track Mergers

Two small companies, Kaveri Foods Ltd and Narmada Spices Ltd, propose a fast track merger. At the general meeting of Kaveri Foods Ltd, members holding 88% of the total number of shares vote in favour of the scheme. What is the position under Section 233?

The scheme is not validly approved. Section 233(1)(b) requires approval at a general meeting by members holding at least ninety per cent of the total number of shares. With only 88% in favour, the threshold is not met, and creditor consent cannot substitute for it.

  1. AThe scheme is validly approved because a simple majority of those present suffices
  2. BThe scheme is not approved at the meeting because members holding at least ninety per cent of the total number of shares must approve itCorrect
  3. CThe scheme is approved if creditors holding nine-tenths in value also agree, whatever the shareholding
  4. DThe scheme is approved because 88% exceeds the three-fourths needed under Section 232

Explanation

Section 233(1)(b) requires approval by members or a class of members at a general meeting holding at least ninety per cent of the total number of shares. 88% falls short, and creditor approval is a separate requirement that cannot cure this gap.

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