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

Veda Textiles Ltd, an Indian company, proposes to merge into its parent, a company incorporated in a jurisdiction notified by the Central Government. The board asks which approval the Companies Act, 2013 specifically requires from the banking regulator for a merger of a foreign company with an Indian company. Which is correct?

The Companies Act, 2013 requires the prior approval of the Reserve Bank of India for a merger between a foreign company and an Indian company. Post-facto intimation or Registrar non-objection cannot substitute for it, because the statute makes RBI approval a precondition to the merger.

  1. APrior approval of the Reserve Bank of IndiaCorrect
  2. BPost-facto intimation to the Reserve Bank of India within 30 days
  3. CApproval of the Securities and Exchange Board of India only
  4. DNo regulator approval is needed if the Registrar has no objection

Explanation

Section 234(2) allows a foreign company to merge into an Indian company, or vice versa, only with the prior approval of the Reserve Bank of India. A post-facto intimation is therefore insufficient, and Registrar silence does not replace RBI approval.

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