Demerger scheme meetings and capital reduction procedure dispensed with on unanimous written consents and no secured creditors

Written consents of all equity shareholders and unsecured creditors may justify dispensing with meetings for a demerger scheme where the class composition is limited and no secured creditors exist. On those facts, convening meetings under the Companies Act, 1956 was treated as unnecessary. The proposed capital restructuring being integral to the composite scheme and not involving any diminution of liability in respect of unpaid share capital, the procedural requirements for reduction of capital were also dispensed with.

---

---

Issues: Whether the meetings of equity shareholders and unsecured creditors of the demerged company were required to be convened under the Companies Act, 1956, and whether the procedural requirements relating to reduction of share capital could be dispensed with in view of the consents on record.

Analysis: The application was supported by written consents of all equity shareholders and unsecured creditors. There were only three equity shareholders and four unsecured creditors, with no secured creditors. In these circumstances, convening meetings under section 391(2) was treated as unnecessary. The proposed capital restructuring formed an integral part of the composite scheme and did not involve diminution of liability in respect of unpaid share capital. As there were no secured creditors and the unsecured creditors had consented in writing, the procedure prescribed for reduction of capital was also dispensed with.

Conclusion: The requirements for convening the shareholders' and unsecured creditors' meetings were dispensed with, and the procedural requirements for the reduction of capital were also dispensed with.

---