2015 (8) TMI 137 - HC - Companies Law

Scheme of Arrangement - Dispensing convening of meetings of equity shareholders and unsecured creditors to consider and approve, proposed Scheme of Amalgamation under Section 391 of Companies Act, 1956 read with Rule 9 of Companies (Court) Rules, 1959 Held that - board of directors of transferor and transferee companies in their separate meetings unanimously approved proposed Scheme of Amalgamation Equity and preference shareholders and secured creditor of transferor company and transferee company have given their consents/no objections in writing to proposed Scheme of Arrangement and were found to be in order Direction issued upon Transferor company having 03 unsecured and Transferee company having 04 secured and 04 unsecured creditors to hold meeting to seek their approval to proposed Scheme Application stands allowed Decided in favour of applicants.

Summary

Issues:
Application under Section 391 of the Companies Act, 1956 seeking directions to dispense with shareholder and creditor meetings for a Scheme of Arrangement between two companies.

Analysis:
The joint application under Section 391 of the Companies Act, 1956, along with Rule 9 of the Companies (Court) Rules, 1959, was filed by the applicant companies to seek directions from the court regarding dispensing with the requirement of convening meetings of equity and preference shareholders and secured creditors of the transferor company. The purpose was to hold separate meetings for unsecured creditors and secured creditors of the transferee company to consider and approve the proposed Scheme of Arrangement between the two entities. The registered offices of both companies were within the jurisdiction of the Delhi High Court.

The application detailed the incorporation history of both companies, their share capital structures, and provided copies of their Memorandum and Articles of Association, along with audited balance sheets. The Scheme of Arrangement aimed to streamline operations, reduce costs, enhance synergies, achieve economies of scale, and optimize resources. The share exchange ratio was specified, and it was confirmed that no legal proceedings were pending against the applicant companies under relevant sections of the Companies Act.

Both the transferor and transferee companies' Board of Directors had approved the Scheme in separate meetings. Consents from equity shareholders, secured creditors, and preference shareholders were obtained and found to be in order, dispensing with the need for their meetings. However, meetings were scheduled for unsecured creditors of both companies and secured creditors of the transferee company to seek their approval for the Scheme.

The judgment outlined the details for conducting these creditor meetings, including appointment of Chairpersons, meeting dates, quorum requirements, proxy considerations, notice provisions, and publication requirements. The Chairpersons were directed to ensure fair conduct of the meetings, with specified fees and reporting obligations. Ultimately, the court allowed the application in the terms presented, granting the requested directions for the Scheme of Arrangement between the two companies.