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CMA Final · Corporate and Economic Laws · Compromises, Arrangements and Amalgamations

Zenith Ltd, an Indian company, plans to merge with a foreign company in a notified jurisdiction, with shareholders of the foreign company receiving Depository Receipts. Which statement is correct under Section 234?

The merger is permissible with the prior approval of the Reserve Bank of India, because Section 234(2) allows consideration to be paid in Depository Receipts, in cash, or partly in each. No place of business in India is required.

  1. ANot permissible, as consideration must be cash only
  2. BPermissible, with prior RBI approval, as consideration may be in Depository ReceiptsCorrect
  3. CPermissible without any approval, as the Chapter does not apply
  4. DPermissible only if the foreign company has a place of business in India

Explanation

Section 234(2) allows merger of a foreign company into an Indian company or vice versa with prior RBI approval, and permits payment in Depository Receipts. Cash-only is not required, and place of business is irrelevant.

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