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CS Executive · Company Law and Practice · Compromise, Arrangement and Amalgamations - Concepts

Under a Tribunal-sanctioned scheme, Sigma Ltd (transferor) merges into Omega Ltd (transferee). Omega had held some shares of Sigma through a trust for its subsidiary. Per section 232(3), what is the effect on any shares that the transferee company would hold in its own name or through such a trust as a result of the arrangement?

Such shares are cancelled or extinguished. The proviso to section 232(3)(b) bars a transferee company from holding shares in its own name or through any trust, on its own behalf or for its subsidiaries or associates, as a result of the arrangement, so it cannot keep or resell them.

  1. AThey are held as treasury shares for resale
  2. BThey are held in abeyance until the next AGM
  3. CThey are cancelled or extinguishedCorrect
  4. DThey are transferred to the Central Government

Explanation

The proviso to section 232(3)(b) states that a transferee company shall not, as a result of the arrangement, hold any shares in its own name or in the name of any trust, whether on its behalf or for its subsidiary or associate companies, and any such shares shall be cancelled or extinguished. Treasury holding is therefore not allowed.

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