Delhi High Court Allows Dispensing with Shareholder Meetings for Companies' Merger Scheme The application under Section 391(1) of the Companies Act, 1956 seeking directions to dispense with the requirement of convening meetings of shareholders ...
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Delhi High Court Allows Dispensing with Shareholder Meetings for Companies' Merger Scheme
The application under Section 391(1) of the Companies Act, 1956 seeking directions to dispense with the requirement of convening meetings of shareholders and creditors to approve the Scheme of Arrangement between three companies has been allowed by the Delhi High Court. The Scheme of Arrangement, aimed at merging the Travel and Real Estate Businesses of the demerged company with two resulting companies, has been approved by the Board of Directors and received consents from all relevant parties. Consequently, the need for formal meetings to approve the Scheme has been waived, and the application has been granted as per the presented terms.
Issues: Application under Section 391(1) of the Companies Act, 1956 seeking directions to dispense with the requirement of convening meetings of equity shareholders, secured and unsecured creditors to approve the Scheme of Arrangement between three companies.
Analysis: The application filed under Section 391(1) of the Companies Act, 1956 pertains to the proposed Scheme of Arrangement between the demerged company and two resulting companies. The demerged company, resulting company no. 1, and resulting company no. 2 are all based in New Delhi, falling under the jurisdiction of the Delhi High Court. The demerged company was incorporated in 1997, while the resulting companies were incorporated in 2014. The authorized share capital and structure of each company have been detailed in the application.
The Scheme of Arrangement aims to merge the Travel Business and Real Estate Business of the demerged company with the resulting companies. The proposed demerger is intended to allow independent expansion opportunities without fully committing the existing organization. It is claimed that this move will strengthen, consolidate, and stabilize the businesses involved, facilitating further growth and expansion. The share exchange ratio is specified in the Scheme, indicating the issuance and allotment of equity shares to the shareholders of the demerged company in a particular ratio for each resulting company.
The Board of Directors of all three companies have approved the Scheme in separate meetings. Additionally, consents or no objections from equity shareholders, secured creditor, and unsecured creditors of each company have been obtained in writing and placed on record. As all necessary consents have been received and found in order, the requirement to convene meetings of shareholders and creditors to approve the Scheme has been dispensed with for all companies involved. The application has been allowed in the terms presented, concluding the judgment.
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