2016 (4) TMI 269 - HC - Companies Law

Court approves company scheme of arrangement under Companies Act, 1956. Shareholders receive equity shares based on net assets.

The court approves the scheme of arrangement under Sections 391 and 394 of the Companies Act, 1956. The resulting company is directed to take over all ... Approval of the scheme of arrangement - Held that:- In view of the approval accorded to the scheme by the shareholders of the petitioners and creditors (i.e. secured and unsecured) of the demerged company and, given the fact, that the concern raised by the RD has been duly met, as indicated above, in my opinion, there appears to be no impediment in the grant of sanction to the scheme. Consequently, sanction is granted to the scheme in terms of Section 391 and 394 of the Act. The petitioners will, however, comply with all statutory requirements, as mandated in law. Issues:Approval of scheme of arrangement under Sections 391 and 394 of the Companies Act, 1956.Analysis:1. Scheme Details and Incorporation: The petition involves a second motion petition for approval of a scheme of arrangement where a business undertaking of the demerged company will merge with the resulting company. The petitioners are Surya Laboratories Private Limited and Valens Technologies Private Limited. The demerged company was incorporated on 15.11.1988, and the resulting company was incorporated on 31.03.2014, with a subsequent name change to Valens Technologies Private Limited on 22.04.2015.2. Compliance and Resolutions: The petitioners have filed necessary documents like the Memorandum and Articles of Association, audited balancesheet, and Board of Directors' resolutions approving the scheme. The demerger is expected to improve the financial position and business operations of the petitioners.3. Previous Motion and Consent: In a previous motion, the requirement of convening meetings of shareholders and creditors was dispensed with as all relevant parties had given their consent to the scheme. The current petition is the second motion seeking final approval.4. Publication and Responses: Citations were published, and affidavits were filed demonstrating service and lack of objections to the scheme. The Regional Director (RD) sought responses from relevant authorities, and concerns regarding compliance with Section 117(3) of the Companies Act, 2013, were addressed by the petitioners.5. Employee and Shareholder Terms: The scheme outlines that employees of the demerged company will become employees of the resulting company, and shareholders will receive equity shares based on the net assets' value. The new equity shares will rank pari passu with existing shares.6. Sanction and Compliance: Considering shareholder and creditor approval, and addressing RD concerns, the court grants sanction to the scheme under Sections 391 and 394 of the Act. The petitioners must comply with statutory requirements and file a certified copy of the order with the Registrar of Companies within thirty days.7. Liabilities and Undertakings: The resulting company must undertake to take over and defray all liabilities of the transferred undertaking. Any deficiencies or violations will not impede legal actions against concerned persons, directors, or officials. The order does not exempt payment of stamp duty, taxes, or penalties.8. Transfer of Assets and Liabilities: The order directs the transfer of all properties, assets, rights, debts, liabilities, and obligations of the demerged company to the resulting company without further action. It clarifies that the order does not exempt payment of stamp duty, taxes, or penalties.In conclusion, the court approves the scheme of arrangement, emphasizing compliance with statutory requirements, transfer of assets and liabilities, and the resulting company's undertaking to assume all liabilities. The order ensures that any deficiencies or violations will not obstruct legal actions against responsible parties.