2015 (5) TMI 127 - HC - Companies Law

Court Allows Dispensing with Meetings for Amalgamation Scheme under Companies Act

The application under Sections 391 and 394 of the Companies Act, 1956 seeking directions to dispense with the requirement of convening meetings for the ... Dispensing with convening of meetings for scheme of amalgamation - Approval of scheme of amalgamation by board resolutions and written shareholder/creditor consents - Share exchange ratio in amalgamation - Absence of pending proceedings under Sections 235 to 251 of the Companies Act, 1956Dispensing with convening of meetings for scheme of amalgamation - Written consents of all equity shareholders - Requirement of convening the meeting of the equity shareholders and creditors of the transferor company dispensed with - HELD THAT: - The transferor company has nine equity shareholders and no secured or unsecured creditors as on 31st July, 2014. All equity shareholders have given their written consents/no objections to the proposed Scheme of Amalgamation which were placed on record and examined by the Court and found in order. In view of unanimous written consent of the sole class of stakeholders and absence of creditors, the Court dispensed with the requirement of convening a meeting of the equity shareholders and creditors of the transferor company to consider and approve the Scheme.Requirement to convene meetings of the transferor company's equity shareholders and creditors is dispensed with.Dispensing with convening of meetings for scheme of amalgamation - Written consents of all equity shareholders and secured creditor - Requirement of convening the meetings of the equity shareholders and the secured creditor of the transferee company dispensed with - HELD THAT: - The transferee company has eight equity shareholders and one secured creditor, and no unsecured creditors as on 31st July, 2014. All equity shareholders and the sole secured creditor provided written consents/no objections to the Scheme, which were placed on record and examined by the Court and found in order. Given unanimous written consents of the relevant classes and absence of unsecured creditors, the Court dispensed with the requirement of convening meetings of the transferee company's equity shareholders and secured creditor to consider and approve the Scheme.Requirement to convene meetings of the transferee company's equity shareholders and secured creditor is dispensed with.Approval of scheme of amalgamation by board resolutions - Share exchange ratio in amalgamation - Absence of pending proceedings under Sections 235 to 251 of the Companies Act, 1956 - Court recorded compliance with board approvals, disclosure of share exchange ratio and absence of adverse statutory proceedings - HELD THAT: - The Boards of Directors of both transferor and transferee companies unanimously approved the proposed Scheme of Amalgamation in meetings held on 15 July, 2014, and copies of the resolutions were placed on record. The Scheme, as filed, specifies the share exchange ratio (one equity share of Rs.10 in the transferee for every four equity shares of Rs.10 in the transferor). The applicants also represented that no proceedings under Sections 235 to 251 of the Companies Act, 1956 are pending against them. These facts were noted by the Court as part of the material supporting dispensation of meetings and sanctioning the procedural relief sought.Board approvals, the stated share exchange ratio, and absence of pending proceedings under Sections 235-251 were recorded and accepted by the Court for the purposes of the application.Final Conclusion: The joint application is allowed; the requirement to convene the meetings of the equity shareholders and creditors of the transferor and the meetings of the equity shareholders and secured creditor of the transferee is dispensed with, and the Court records the approvals and consents placed on record in support of the Scheme of Amalgamation. Issues involved: Application under Sections 391 and 394 of the Companies Act, 1956 seeking directions to dispense with the requirement of convening meetings of equity shareholders, secured and unsecured creditors for the proposed Scheme of Amalgamation.Analysis:1. Background and Jurisdiction: The joint application filed under Sections 391 and 394 of the Companies Act, 1956 seeks directions to dispense with the requirement of convening meetings for the proposed Scheme of Amalgamation between two companies, the transferor, and the transferee. Both companies are located in New Delhi, within the jurisdiction of the Delhi High Court.2. Company Details: The transferor company was incorporated in 2009, while the transferee company was incorporated in 1996 under the Companies Act, 1956. The authorized and paid-up share capital of both companies is specified in the application.3. Scheme of Amalgamation: The application includes the Memorandum and Articles of Association of both companies, audited balance sheets, and the Scheme of Amalgamation. The Scheme aims to create a larger company with increased resources, capital base, and fundraising capacity for business expansion and development, claiming benefits like economies of scale and reduced expenses.4. Share Exchange Ratio: The Scheme outlines the share exchange ratio, stating that the transferee company will issue one equity share for every four held in the transferor company upon the Scheme's implementation.5. Compliance and Resolutions: The application confirms that no pending proceedings under relevant sections of the Companies Act, 1956 exist against the applicant companies. Both the Board of Directors of the transferor and transferee companies have approved the Scheme in separate meetings. Shareholders and creditors of both companies have provided written consents or no objections to the proposed Amalgamation, with records of their approvals submitted and found in order.6. Dispensation of Meetings: Due to the unanimous consents received from all equity shareholders and the sole secured creditor of the transferor and transferee companies, the requirement for convening meetings of these stakeholders to approve the Scheme is dispensed with. There are no unsecured creditors for the transferee company. Consequently, the application is allowed based on the provided details and consents from all relevant parties involved in the Amalgamation process.