2015 (7) TMI 1250 - HC - Companies Law

Scheme of Arrangement for Reconstruction and Compromise - adherence to meetings of Equity Shareholders, Preference Shareholders and Secured Creditors of applicant company assured.

Summary

Issues:
1. Application filed under Sections 391 to 394 read with Sections 100 to 103 of the Companies Act, 1956 and Section 52 of the Companies Act, 2013 for a Scheme of Arrangement.
2. Directions sought for convening separate meetings of Equity Shareholders, Preference Shareholders, and Secured Creditors.
3. Dispensation of meeting of Unsecured Creditors and procedures under Sections 100 and 101(2) of the Companies Act.
4. Proposed scheme's impact on Secured and Unsecured Creditors.
5. Proposed restructure of share capital and its relation to the Scheme of Arrangement.
6. Approval process for the Scheme of Arrangement.
7. Conduct of separate meetings for different stakeholders.
8. Quorum requirements and voting procedures for the meetings.
9. Reporting requirements to the Court post meetings.

Analysis:
1. The Applicant Company filed an application under relevant sections of the Companies Act for a Scheme of Arrangement involving Reconstruction and Compromise. The application sought directions for separate meetings of Equity Shareholders, Preference Shareholders, and Secured Creditors. The Applicant also requested dispensation of the meeting of Unsecured Creditors and certain procedural requirements under the Companies Act.

2. The proposed scheme aimed at compromising only with Secured Creditors, ensuring the rights of Unsecured Creditors were not adversely affected. A certificate from a Chartered Accountant confirmed substantial improvement in the company's net worth post-scheme implementation, supporting the claim that the Applicant would meet obligations to Unsecured Creditors. Consequently, the meeting of Unsecured Creditors for approving the scheme was deemed unnecessary and dispensed with.

3. The proposed restructure of share capital was integral to the Scheme of Arrangement, involving no diminution of liability or payments to shareholders. Approval by Equity and Preference Shareholders was considered sufficient as a Special Resolution under the Companies Act, with no adverse impact on creditors. Therefore, procedures under relevant sections and rules were dispensed with.

4. Separate meetings were to be convened for Equity Shareholders, Preference Shareholders, and Secured Creditors to consider and approve the proposed Scheme of Arrangement. Notices and relevant documents were to be dispatched to stakeholders in advance, ensuring transparency and compliance with legal requirements.

5. The Chairman of the meetings was designated, with powers to conduct and adjourn meetings, ascertain decisions through polls, and report the meeting outcomes to the Court within a specified timeline. Quorum requirements and voting procedures were outlined, allowing for proxy voting under prescribed conditions.

6. The value of votes for shareholders and creditors was determined based on company records, with the Chairman authorized to resolve disputes. The Chairman was required to submit a verified report to the Court post meetings, concluding the application process.