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CS Professional · Corporate Restructuring, Valuation and Insolvency · Regulatory Approvals of Scheme

Zenith Ltd has 100 lakh equity shares of equal value. Its offeror, Orion Ltd, already holds 20 lakh of them, and a scheme involves the transfer of the remaining shares to Orion within four months of the offer. Applying Section 235(1), what is the minimum number of shares that must be held by approving shareholders for Orion to be able to give notice to dissenting shareholders?

Orion needs approval from holders of at least 72 lakh shares. Section 235(1) applies the nine-tenths test to the shares whose transfer is involved, excluding shares already held by the transferee. That base is 80 lakh shares, not the full 100 lakh, so nine-tenths is 72 lakh.

  1. A90 lakh shares, being nine-tenths of all shares
  2. B72 lakh shares, being nine-tenths of the shares whose transfer is involvedCorrect
  3. C70 lakh shares, being seven-tenths of all shares
  4. D64 lakh shares, being four-fifths of the shares whose transfer is involved

Explanation

Section 235(1) requires approval by holders of not less than nine-tenths in value of the shares whose transfer is involved, excluding shares already held by the transferee company. Shares involved are 100 - 20 = 80 lakh, and 9/10 of 80 lakh is 72 lakh. Using nine-tenths of 100 lakh (90 lakh) uses the wrong base.

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