Court Approves Companies' Demerger Scheme under Companies Act 1956

The Court approved the scheme of arrangement (Demerger) between two companies, effective from 01.01.2016, under Sections 391 to 394 of the Companies Act, 1956. The scheme was found to be fair, just, and compliant with statutory provisions, not prejudicial to any stakeholder's interests, and in line with public policy. Shareholder meetings were dispensed with as equity shareholders had consented. The Regional Director raised no objections. The order clarified no exemption from stamp duty, taxes, or compliances. The Senior Central Government Standing Counsel was awarded a fee from the Demerged company. Petitions were disposed of as per the judgment terms.

---

---

Issues:
Petitions under Sections 391 to 394 of the Companies Act, 1956 seeking sanction of a Scheme of arrangement (Demerger) involving two companies.

Analysis:
The Company Petitions were filed seeking approval for a Scheme of arrangement (Demerger) between the Demerged company and the Resulting company, effective from 01.01.2016. Both companies had complied with formalities under the Companies Act, 1956 and the Rules. Resolutions approving the scheme were passed by the Board of Directors of both companies. A Chartered Accountant's certificate confirmed the absence of secured creditors for the Demerged company and the Resulting company. The Demerged company had 87 unsecured creditors, with 4 creditors consenting to the scheme. The equity shareholders of both companies also gave their consent to the scheme.

The Court dispensed with the need for shareholder meetings for both companies as their equity shareholders had already consented to the proposed Scheme. The Regional Director, Ministry of Company Affairs, raised no objections to the scheme. The Court found the proposed scheme to be fair, just, sound, and compliant with statutory provisions. It was determined that the scheme was not prejudicial to any stakeholder's interests and did not violate any statutory provisions or public policy.

Consequently, the Court approved the scheme of arrangement (Demerger) between the two companies, effective from 01.01.2016, in accordance with Sections 391 to 394 of the Companies Act, 1956. The order clarified that it did not grant exemption from stamp duty, taxes, charges, permissions, or compliances required by law. The learned Senior Central Government Standing Counsel was awarded a fee from the Demerged company. The petitions were disposed of based on the terms mentioned in the judgment.

---