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

Under the Companies Act, 2013, a scheme of merger between an Indian company and a foreign company incorporated in a notified jurisdiction is proposed, where the foreign company is the transferor. Which statement is correct regarding the consideration and approval?

A foreign company may merge into an Indian company, or the reverse, with the prior approval of the Reserve Bank of India. The scheme may provide consideration in cash, in Depository Receipts, or partly in each, so options limiting the form or dropping RBI approval are wrong.

  1. AThe foreign company may merge into the Indian company only with the prior approval of the Reserve Bank of India, and consideration may be paid in cash, Depository Receipts, or partly in eachCorrect
  2. BConsideration must be paid only in equity shares of the Indian company, and no RBI approval is needed
  3. CSuch a merger is prohibited; only an Indian company may merge into a foreign company
  4. DConsideration may be paid only in Depository Receipts, and RBI approval is needed only after the scheme is sanctioned

Explanation

Section 234(2) allows a foreign company, subject to other laws and with prior RBI approval, to merge into an Indian company or vice versa. The scheme may provide for payment in cash, Depository Receipts, or partly in each. The other options restrict the consideration form or misstate the approval.

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