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CS Professional · Corporate Restructuring, Valuation and Insolvency · Cross Border Mergers

Under a cross-border scheme framed with reference to Rule 25A and section 234, Kaveri Tech Ltd (India) is the transferee and Lumen Systems Inc (foreign) is the transferor. The board wants to pay Lumen's shareholders partly in cash and partly in Depository Receipts. What is the position under section 234(2)?

The mixed consideration is permitted. Section 234(2) says the scheme may provide payment to the merging company's shareholders in cash, in Depository Receipts, or partly in cash and partly in Depository Receipts, as the scheme provides.

  1. APermitted, as the terms may provide payment in cash, in Depository Receipts, or partly in eachCorrect
  2. BNot permitted, as consideration must be wholly in cash
  3. CNot permitted, as consideration must be wholly in Depository Receipts
  4. DPermitted only if the Indian company pays in Indian rupees alone

Explanation

Section 234(2) states that the scheme terms may provide for payment to the shareholders of the merging company in cash, in Depository Receipts, or partly in cash and partly in Depository Receipts. A mixed consideration is therefore expressly allowed, so the options that insist on a single form are wrong.

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