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

Two small companies, Kaveri Tools Ltd and Narmada Dies Ltd, propose a fast track merger. At the general meetings, members holding 85% of the total number of shares in each company vote in favour. Creditors' approval and solvency declarations are in order. What is the position?

Under section 233(1)(b), the members must approve the scheme at a general meeting by holders of at least ninety per cent of the total number of shares. Since only 85% voted in favour, the members' approval requirement is not satisfied and the fast track scheme fails at that stage.

  1. AThe scheme is validly approved because a simple majority of shares suffices
  2. BThe scheme is not approved at the members' stage because members holding at least 90% of the total number of shares must approveCorrect
  3. CThe scheme is approved because 75% in value of shares is the test
  4. DThe scheme needs approval only from creditors, not members

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. 85% falls short, so the members' approval condition is unmet. Creditors' approval does not cure this.

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