Companies Act Merger Scheme Approved: Shareholders & Creditors Meetings Dispensed

The joint application under Sections 230-232 of the Companies Act, 2013 for dispensation of meetings of shareholders and creditors for a merger scheme between a public limited transferor company and a private limited transferee company was approved. With consents obtained in writing from shareholders and no secured creditors, the Tribunal ruled that meetings of creditors were unnecessary. The companies were directed to send notices to relevant authorities for objections within 30 days. The scheme of merger was found compliant with accounting standards, and no pending investigations or proceedings existed against the companies. The application was allowed, granting approval for the merger scheme under CA (CAA) No. 12 of 2021.

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Issues:
Application under Section 230-232 of the Companies Act, 2013 for dispensation of meetings of shareholders and creditors for a merger scheme.

Analysis:
The joint application filed by two companies, a transferor and a transferee company, under Sections 230-232 of the Companies Act, 2013, sought dispensation of meetings of shareholders and creditors for a proposed merger scheme. The transferor company, a public limited company, and the transferee company, a private limited company, both based in Madhya Pradesh, aimed to merge to enhance business operations. The transferor company was engaged in various business activities, while the transferee company focused on the manufacturing and trading of lights and components. The scheme of merger was prepared following a resolution by the respective Boards of Directors and was found to be in compliance with accounting standards. No investigations or proceedings were pending against the companies under relevant sections of the Companies Act. The proposed merger did not fall under the purview of any specific sectoral regulator.

The audit report revealed the details of shareholders and creditors, with the transferor company having 7 shareholders and no creditors, and the transferee company having 2 shareholders and a loan from its holding company. The Learned PCA contended that meetings of shareholders and creditors could be dispensed with as consents were obtained in writing. The Tribunal noted the absence of secured creditors, and with shareholders' consents on record, ruled that no meetings of creditors were necessary. The companies were directed to send notices to relevant authorities in compliance with the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016, allowing a 30-day period for objections. The application was allowed, granting approval for the scheme of merger under CA (CAA) No. 12 of 2021.

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