2005 (11) TMI 254 - HC - Companies Law

Summary

Issues:
Application under sections 391(1) and 393 of the Companies Act, 1956 for dispensing with meetings of equity shareholders and unsecured creditors of transferor and transferee companies, approval of scheme of arrangement, convening separate meetings of preference shareholders and secured creditors, appointment of Chairman, advertisement and notice requirements, remuneration to Chairman, quorum, proxy voting, valuation of shareholders and creditors, reporting of meeting results.

Analysis:
The application sought court direction under sections 391(1) and 393 of the Companies Act, 1956 to dispense with meetings of equity shareholders and unsecured creditors of the transferor and transferee companies for approval of a scheme of arrangement. The applicant-transferor-company was incorporated on 18th June, 1999, with detailed capital structure and objectives outlined in the application. The applicant-transferee-company, incorporated on 22nd June, 2005, had its capital details and objectives provided as well. The scheme involved demerging the Textile Division of the transferor company into the transferee company. The reasons justifying the scheme were explained in the application.

The Board of Directors of both companies had unanimously approved the scheme. Consent from equity shareholders and unsecured creditors of the transferor company, as well as equity shareholders of the transferee company, had been obtained. As a result, the court dispensed with the need for these meetings. However, separate meetings of preference shareholders and secured creditors of the transferor company were to be convened and held as per the specified schedule.

Advertisement and notice requirements were outlined, including the publication in specific newspapers and sending notices to shareholders and creditors. The appointment of a Chairman for the meetings was directed, with specific instructions on remuneration and expenses. Proxy voting was permitted, subject to timely filing of prescribed forms. Valuation of shareholders and creditors was to be based on the company's books, with the Chairman resolving any disputes. The Chairman was required to report the meeting results to the court within seven days, verified by affidavit. The application was disposed of with these directions.