2016 (7) TMI 343 - HC - Companies Law

Approval of Composite Scheme for Business Restructuring and Share Capital Amendment

IN RE : AKSHAR ESTATES PRIVATE LIMITED

The court sanctioned a Composite Scheme of Arrangement involving the demerger and transfer of real estate and portfolio investment undertakings, as well ... Composite Scheme of Arrangement involving Demerger and Transfer of Two Demerged/ Transferor companies to the Resulting Company - Held that:- The present Composite Scheme of Arrangement is in the interest of its shareholders and creditors as well as in the public interest and the same deserves to be sanctioned. The Scheme is hereby sanctioned. Issues Involved:1. Sanction of Composite Scheme of Arrangement involving Demerger and Transfer of Real Estate and Portfolio Investment Undertakings.2. Amalgamation of Residue Undertakings and 28 other Transferor Companies.3. Restructure of Share Capital.4. Compliance with statutory requirements and observations by the Official Liquidator and Regional Director.5. Specific objections and observations by the Regional Director, Ministry of Corporate Affairs.Detailed Analysis:1. Sanction of Composite Scheme of Arrangement involving Demerger and Transfer of Real Estate and Portfolio Investment Undertakings:The petitions were filed to obtain the sanction of the court for a Composite Scheme of Arrangement involving the demerger and transfer of real estate undertakings of two companies to a resulting company, and the demerger and transfer of portfolio investment undertakings of four companies to another resulting company. The scheme also included the amalgamation of residue undertakings of the four demerged companies and 28 other transferor companies with a transferee company.2. Amalgamation of Residue Undertakings and 28 other Transferor Companies:The proposed scheme aimed to streamline the business activities, minimize the number of entities to avoid duplication of costs, and achieve synergic benefits. The Board of Directors of the involved companies approved the scheme, and written consent letters from equity shareholders and unsecured creditors were placed on record, leading to the dispensation of meetings.3. Restructure of Share Capital:The scheme included the restructure of share capital of the four demerged companies by utilizing the Securities Premium Reserve Accounts. The court granted dispensation from the procedure prescribed under Section 101(2) of the Companies Act, 1956, and relevant rules.4. Compliance with statutory requirements and observations by the Official Liquidator and Regional Director:The Official Liquidator confirmed that the affairs of the transferor companies were conducted within their object clauses and not prejudicial to members or public interest. The court directed the transferee company to preserve the books of accounts, papers, and records and comply with all applicable laws.5. Specific objections and observations by the Regional Director, Ministry of Corporate Affairs:The Regional Director made several observations, which were addressed as follows:- Non-disclosure of assets and liabilities: The Divisional Balance Sheets were placed on record, making further directions unnecessary.- Accounting Treatment: The petitioners undertook to make necessary disclosures in their financial statements if there was any deviation from accounting standards.- Share Exchange Ratio: The ratio was deemed equitable as all companies involved were private or closely held, and no public interest was involved.- Investment activity compliance: The resulting company undertook to comply with RBI guidelines upon the scheme's effectiveness.- Discrepancy in the address: The petitioner company initiated the process to update the correct address on the MCA portal.- Approval of Preference Shareholders: Dispensation was granted for the meeting of the sole Preference Shareholder.- Income Tax Department's response: No objections were received from the Income Tax Department within the statutory period, implying no objections to the scheme.Conclusion:The court, after considering all facts, submissions, and affidavits, concluded that the Composite Scheme of Arrangement was in the interest of shareholders, creditors, and the public. The scheme was sanctioned, and the petitions were disposed of accordingly. Costs were quantified for the Central Government Standing Counsel and the Office of the Official Liquidator. The petitioner companies were directed to lodge a copy of the order and scheme with the concerned authorities and comply with the relevant provisions of the Act.