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

Two small companies, Kaveri Foods Pvt Ltd and Godavari Spices Pvt Ltd, propose a fast track merger. At the general meeting of Kaveri Foods, members holding 88% of the total number of shares approve the scheme. What is the position under section 233?

The approval is insufficient. Section 233 requires the scheme to be approved at a general meeting by members holding at least ninety per cent of the total number of shares. Support from 88% of shares does not meet that threshold, so the scheme cannot proceed on that basis.

  1. AApproval is sufficient because a simple majority of members present is enough
  2. BApproval is insufficient because members holding at least ninety per cent of the total number of shares must approveCorrect
  3. CApproval is sufficient because 75% in value is the requirement
  4. DApproval is unnecessary because only creditors must approve

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. The 75% figure belongs to the section 230 approach and does not apply here.

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