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CS Professional · Corporate Restructuring, Valuation and Insolvency · Acquisition of Company or Business

Vihaan Pharma Ltd plans to acquire a target and the Board meets to approve the investment. Of 7 directors, 5 attend; 4 vote in favour and 1 dissents. Vihaan has no term loan from a public financial institution. Under Section 186(5), what is the position?

The resolution is not validly passed. Section 186(5) requires the Board resolution sanctioning an investment to have the consent of all directors present at the meeting. One of the five present dissented, so a simple majority is insufficient, whatever the dissenter's category.

  1. AResolution is valid because a majority of directors present approved it
  2. BResolution is valid because 4 of 7 total directors approved it
  3. CResolution is not validly passed, because consent of all directors present at the meeting is requiredCorrect
  4. DResolution is valid if the dissenting director is an independent director

Explanation

Section 186(5) requires the resolution to be passed at a Board meeting with the consent of all the directors present. One of the five present dissented, so the condition fails. A simple majority, as in options A and B, is not the test.

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