2015 (12) TMI 1701 - HC - Companies Law

Scheme of Arrangement - dispensation of meetings - requirement of convening the meetings of its equity shareholders, secured and unsecured creditors - Held that - The Board of Directors of the applicant/transferor company and the transferee company in their separate meetings held on 27th August, 2015 and 26th August, 2015 respectively have unanimously approved the proposed Scheme of Arrangement. Copies of the Resolutions passed at the meetings of the Board of Directors of applicant/transferor company and the transferee company have been placed on record. The applicant/transferor company has 02 equity shareholders and 28 unsecured creditors. Both the equity shareholders and 16 out of 28 unsecured creditors, being 57.14% in number and 80% in value, have given their consents/no objections in writing to the proposed Scheme of Arrangement. There consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meetings of the equity shareholders and unsecured creditors of the applicant/transferor company, to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Arrangement is dispensed with. There is no secured creditor of the applicant/transferor company, as on 31st August, 2015.

Summary

Issues:
Application under Sections 391, 392 & 394 of the Companies Act, 1956 seeking dispensation of meetings for Scheme of Arrangement approval.

Analysis:

1. Jurisdiction and Background: The applicant, a transferor company, sought directions under Sections 391, 392 & 394 of the Companies Act, 1956 to dispense with the requirement of convening meetings of equity shareholders and creditors for approving a Scheme of Arrangement with a transferee company. The transferor company was originally incorporated in Maharashtra but later shifted its registered office to Delhi.

2. Capital Structure and Documents: The transferor company had an authorized share capital of Rs. 1,00,00,00,000 divided into 1,00,00,000 equity shares of Rs. 100 each, with an issued and paid-up capital of Rs. 97,85,36,700. The Memorandum and Articles of Association of both companies, along with the audited balance sheet of the transferor company, were submitted.

3. Scheme of Arrangement: The proposed Scheme aimed at creating a larger company with increased resources and capital base for business expansion. It was projected to result in economies of scale, reduced overheads, administrative work, and enhanced resource utilization. The share exchange ratio under the Scheme was detailed as 50 equity shares of Rs. 10 each in the transferee company for every 233 equity shares of Rs. 100 each held in the transferor company.

4. Compliance and Approval: The Board of Directors of both companies unanimously approved the Scheme in separate meetings. The transferor company had 02 equity shareholders and 28 unsecured creditors, with consents from the majority obtained. 57.14% of shareholders and 80% of creditors by value provided written consents, dispensing with the need for formal meetings. No secured creditors were identified as of the relevant date.

5. Decision: Considering the compliance with procedural requirements and approvals obtained, the Court allowed the application, granting dispensation from convening meetings for the approval of the Scheme of Arrangement. The judgment was delivered in favor of the applicant transferor company, facilitating the implementation of the proposed Scheme.