Skip to content

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

Under a registered section 233 scheme, Vindhya Steels Ltd (transferee) held 5,000 shares of its transferor, and also held 2,000 of its own shares through a trust on behalf of its subsidiary. The scheme is silent on this. What is the position regarding the transferee's holding of its own shares on the merger?

Shares of the transferee company held in its own name, or through any trust for itself or for its subsidiary or associate, are cancelled or extinguished on the merger. The provision covers trust holdings as well, and there is no option to retain them or sell later.

  1. ASuch shares held in its own name or through any trust for itself or its subsidiary or associate are cancelled or extinguished on the mergerCorrect
  2. BSuch shares are retained but carry no voting rights
  3. CSuch shares must be sold within one year of the merger
  4. DOnly shares held in the transferee's own name are cancelled; shares held through a trust are retained

Explanation

Section 233(10) bars a transferee from holding shares in its own name or in the name of any trust on its behalf or on behalf of any subsidiary or associate, and all such shares are cancelled or extinguished on the merger. Thus trust holdings are also covered, making option D wrong. No sale window or retention without votes is provided.

Did you get it right without looking?

One question tells you little. A timed set on Documentation - Merger and Amalgamation shows your real accuracy, how long you take and where you lose marks.

Practise Documentation - Merger and AmalgamationFree diagnostic mock

More Documentation - Merger and Amalgamation questions