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CMA Final · Corporate Financial Reporting · Absorptions, Amalgamations, External Reconstruction

Under the Companies Act, 2013, a foreign company may merge into an Indian company registered under the Act, subject to other laws. Which of the following correctly states a requirement or permission for such a merger under Section 234(2)?

Section 234(2) requires prior approval of the Reserve Bank of India for a merger between a foreign company and an Indian company. The scheme may pay shareholders of the merging company in cash, in Depository Receipts, or partly in cash and partly in Depository Receipts.

  1. APrior approval of the Reserve Bank of India is required, and consideration to shareholders of the merging company may be paid in cash, in Depository Receipts, or partly in eachCorrect
  2. BPrior approval of SEBI is required, and consideration may be paid only in equity shares of the transferee company
  3. CNo regulatory approval is needed if the foreign company has a place of business in India, and consideration must be wholly in cash
  4. DPrior approval of the Registrar of Companies is required, and consideration must be wholly in Depository Receipts

Explanation

Section 234(2) provides that a foreign company may, with the prior approval of the Reserve Bank of India, merge into an Indian company or vice versa. The scheme may provide for payment in cash, in Depository Receipts, or partly in each. The other options name the wrong approving authority or restrict the form of consideration, which the section does not do.

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