2020 (2) TMI 1508 - Tri - Insolvency and Bankruptcy

Approval of Scheme of Merger of wholly owned subsidiary - Sections 230 to 232 of the Companies Act, 2013 - HELD THAT - In view of the fact that all the Equity shareholders of the Applicant Company have given their consent affidavits, the meetings of the Equity Shareholders of the Applicant Company are hereby dispensed with. The Consent Affidavits of all the shareholders of the Applicant Company are annexed as Exhibit A-6 to the Application. Necessary instructions given regarding issuance of various notices - the scheme is approved - application allowed.

Summary

Issues:
Scheme of Merger under Sections 230 to 232 of the Companies Act, 2013; Benefits of amalgamation; Approval of Scheme by Board of Directors; Consent of Equity Shareholders and Unsecured Creditors; Dispensation of meetings for Equity Shareholders and Unsecured Creditors; No reconstruction or arrangement with shareholders or creditors required; Compliance with service of notices upon Regulatory authorities.

Analysis:
The judgment pertains to a Scheme of Merger between a holding company and its wholly owned subsidiary under Sections 230 to 232 of the Companies Act, 2013. The Counsel for the Applicant Company outlined the main objects of both companies, emphasizing the consolidation of businesses in the field of diagnostic reagents and systems. The amalgamation is proposed to streamline management, reduce legal entities, regulatory compliances, and costs. It aims to achieve economies of scale, eliminate duplication, and enhance operational efficiency.

The Board of Directors of the Applicant Company approved the Scheme of Merger with effect from the Appointed Date. All Equity Shareholders provided their consent through Affidavits, leading to the dispensation of Equity Shareholders' meetings. Similarly, Unsecured Creditors' meetings were dispensed with as more than 90% of them consented to the scheme. The Counsel highlighted that no shares would be issued as consideration, ensuring no dilution in shareholding of the Transferee Company.

The Counsel further clarified that the Scheme does not affect the rights of creditors, as assets post-merger would be sufficient to discharge their claims. There is no reorganization in the shareholding pattern, and no compromise with members or creditors, ensuring the scheme is not prejudicial to their interests. Citing precedents, the Counsel argued that no reconstruction or arrangement with shareholders or creditors necessitates their meetings for approval.

The Tribunal directed the Applicant Company to serve notices to relevant authorities, including Income Tax Authority, Central Government, and Registrar of Companies. These authorities were given thirty days to submit representations, failing which it would be presumed they have no objections. The Applicant Company was instructed to file an affidavit proving the dispatch of notices and report compliance with the directions to the Tribunal.