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

Veda Pharma Ltd, an Indian company, proposes to merge into Altmark GmbH, a company incorporated in a foreign country. Altmark's shareholders are keen to pay Veda's shareholders partly in cash and partly in Depository Receipts. Under the Companies Act, 2013, which statement is correct about this proposal?

A mixed consideration of cash and Depository Receipts is allowed. Section 234(2) lets a foreign company merge into an Indian company or the reverse, with prior Reserve Bank of India approval, and the scheme may pay in cash, in Depository Receipts, or partly in each.

  1. APayment partly in cash and partly in Depository Receipts is permitted, and the foreign company may merge with an Indian company or vice versa only with prior approval of the Reserve Bank of IndiaCorrect
  2. BOnly cash consideration is permitted; Depository Receipts cannot be offered to shareholders of the merging company
  3. CConsideration must be wholly in Depository Receipts; any cash element is prohibited
  4. DNo approval of the Reserve Bank of India is needed once the Tribunal sanctions the scheme

Explanation

Section 234(2) allows a foreign company to merge into an Indian company or vice versa with prior RBI approval. The scheme may provide consideration in cash, in Depository Receipts, or partly in each. Options saying only cash or only DRs ignore the 'partly' wording, and the Tribunal does not replace RBI approval.

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