Metal Ltd. (transferee company) filed a petition under sections 391 to 394 of the Companies Act, 1956 for approval and sanction of the scheme of reconstruction, arrangement and demerger between Metal Ltd. and Brass Ltd.
CS Professional · Corporate Restructuring, Valuation and Insolvency · PYQS · December 2015
Metal Ltd. (transferee company) filed a petition under sections 391 to 394 of the Companies Act, 1956 for approval and sanction of the scheme of reconstruction, arrangement and demerger between Metal Ltd. and Brass Ltd. (transferor company). The Regional Director objected that the authorised share capital of the transferee company is not sufficient to allot new shares to the members of the transferor company and therefore, the transferee company should be directed to increase its authorised share capital after following the procedure prescribed under the Companies Act, 2013. Will the objection hold good? Explain.
Answer & Explanation:
Sanction to scheme of amalgamation cannot be refused on the ground that the transferee company does not have sufficient authorised capital on the appointed date. If the scheme is sanctioned, the transferee company can thereafter increase its authorised capital to give effect to the scheme [Re: Mahavir Weaves Pvt. Ltd. (1985) 83 Comp. Cas 180] and In Re: - Mahavir Marketing Surat (Pvt.) Ltd. In these cases it was held that Sec 391 to 394 is single window clearance system. So if increasing authorised capital is part of scheme, no further separate procedure is required. Hence objection of Regional Director is not hold good.
Topics: Corporate Restructuring
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