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

Under a scheme approved for merging Ganga Textiles Ltd with a foreign company, the shareholders of Ganga Textiles are to receive part payment in cash and the rest in Depository Receipts. Which statement is correct under Section 234(2)?

The mixed consideration is valid. Section 234(2) lets the scheme 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. AOnly cash is permitted as consideration
  2. BOnly Depository Receipts are permitted as consideration
  3. CConsideration must be only in equity shares of the Indian company
  4. DConsideration may be in cash, in Depository Receipts, or partly in each, as per the schemeCorrect

Explanation

Section 234(2) states that the scheme terms may provide for payment to shareholders of the merging company in cash, in Depository Receipts, or partly in cash and partly in Depository Receipts. Hence the mixed consideration is permissible.

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