2015 (5) TMI 128 - HC - Companies Law

Court grants dispensation of shareholder and creditor meetings for Amalgamation Scheme under Companies Act.

The court allowed the application under Sections 391 and 394 of the Companies Act, 1956, dispensing with the need for shareholder and creditor meetings ... Scheme of Amalgamation - sanction under Sections 391 and 394 of the Companies Act, 1956 - dispensing with convening meetings of equity shareholders and creditors - consent of all shareholders and creditors - board approval of the scheme - absence of secured creditorsDispensing with convening meetings of equity shareholders and unsecured creditors - consent of all shareholders and creditors - board approval of the scheme - Scheme of Amalgamation - Requirement of convening meetings of the equity shareholders and unsecured creditor of the transferor company to consider and approve the Scheme of Amalgamation dispensed with. - HELD THAT: - The Court recorded that the Board of Directors of the transferor company had unanimously approved the proposed Scheme of Amalgamation. The transferor company has seven equity shareholders and one unsecured creditor, each of whom furnished written consents/no objections to the Scheme; those consents were placed on record, examined and found in order. On that basis, and having noted there is no secured creditor of the transferor company as on 31st March, 2014, the Court exercised its power under the Companies Act to dispense with the requirement of convening the meetings of the equity shareholders and the unsecured creditor for the transferor company in relation to the proposed Scheme of Amalgamation. [Paras 11, 12]Dispensed with convening meetings of the transferor company's equity shareholders and unsecured creditor; consents accepted and scheme proceeding on that basis.Dispensing with convening meetings of equity shareholders - consent of all shareholders - absence of secured and unsecured creditors - Scheme of Amalgamation - Requirement of convening the meeting of the equity shareholders of the transferee company to consider and approve the Scheme of Amalgamation dispensed with. - HELD THAT: - The Board of Directors of the transferee company unanimously approved the proposed Scheme. The transferee company has 14 equity shareholders, all of whom have given written consents/no objections to the Scheme; those consents were placed on record, examined and found in order. The Court also noted that as on 31st March, 2014 the transferee company had no secured or unsecured creditors. In view of these facts, the Court dispensed with the convening of a meeting of the transferee company's equity shareholders under the Companies Act for approval of the Scheme. [Paras 11, 13]Dispensed with convening meeting of the transferee company's equity shareholders; consents accepted and scheme proceeding on that basis.Final Conclusion: The joint application under Sections 391 and 394 of the Companies Act, 1956 is allowed: meetings of the equity shareholders and (as applicable) creditors of the transferor and transferee companies are dispensed with insofar as recorded consents/no objections and board approvals were placed on record and found in order; the Scheme of Amalgamation may proceed accordingly. Issues:Application under Sections 391 and 394 of the Companies Act, 1956 seeking dispensation of shareholder and creditor meetings for Scheme of Amalgamation.Analysis:The joint application filed under Sections 391 and 394 of the Companies Act, 1956, along with Rules 6 & 9 of the Companies (Court) Rules, 1959, requested the court to dispense with the requirement of convening meetings of equity shareholders and creditors for the proposed Scheme of Amalgamation between two companies. The transferor and transferee companies, both located in New Delhi, were incorporated in 1995 and 1986, respectively. The share capital details of both companies were provided, along with copies of their Memorandum and Articles of Association, audited balance sheets, and the Scheme of Amalgamation. The Scheme aimed to consolidate shareholding, improve administrative control, and foster growth by pooling resources and increasing efficiency through synergies.The proposed share exchange ratio was detailed in the Scheme, where shareholders of the transferor company would receive one equity share of the transferee company for every 34 equity shares held in the transferor company. The applicants confirmed the absence of pending proceedings under Sections 235 to 251 of the Companies Act, 1956. The Board of Directors of both companies unanimously approved the Scheme, and consents from all equity shareholders and creditors were obtained and deemed in order. Consequently, the court dispensed with the requirement of convening meetings for both companies' shareholders and creditors, as all necessary consents were obtained and no objections were raised. The application was allowed as per the stated terms.