2016 (5) TMI 593 - HC - Companies Law

Scheme of Amalgamation deserves to be sanctioned. The proposed Scheme of Arrangement in the nature of Buy Back of the Equity Shares and consequential Restructure of Capital is hereby sanctioned.

Summary

Issues:
Petition for sanction of Scheme of Arrangement for Buy Back of Equity Shares under Companies Act, 1956.

Analysis:
1. Purpose of the Scheme: The petition was filed by the Petitioner Company for obtaining the Court's sanction for a Scheme of Arrangement involving the Buy Back of Equity Shares from its Shareholders under Section 391 of the Companies Act, 1956. The Company, a wholly-owned subsidiary of a US-based entity, aimed to restructure its share capital to utilize surplus funds, return capital to shareholders, improve earnings per share, and provide a partial exit to shareholders.

2. Shareholders' Consent and Financial Position: The Company had substantial liquid funds exceeding its requirements and had engaged Chartered Accountants to determine the fair value of Equity Shares. The Board of Directors approved the Scheme, and the meeting of Equity Shareholders was dispensed with based on shareholders' consent letters. The Company's financial position was strong, with no Secured Creditors and no adverse impact on Unsecured Creditors anticipated.

3. Publication and Objections: The petition for Scheme sanction was admitted after due advertisement in newspapers, and no objections were received. Notice was served on the Central Government, and observations by the Regional Director were addressed through affidavits filed by Company officials.

4. Compliance with Regulations: The Regional Director's observations regarding compliance with FEMA and RBI guidelines, Buy Back procedure under Companies Act, and valuation of shares were responded to by the Company, citing legal precedents and confirming adherence to applicable laws.

5. Sanction of the Scheme: After considering submissions, affidavits, and legal judgments, the Court found the Scheme to be in the interest of the Company and shareholders, not prejudicial to public interest, and deserving of sanction. The Court granted the prayers in the Company Petition, directed payment of costs to the Central Government Standing Counsel, and instructed filing of the order with the Registrar of Companies.

6. Conclusion: The Court sanctioned the Scheme of Arrangement for Buy Back of Equity Shares, emphasizing compliance with regulations, shareholder interests, and public welfare. The Company was directed to fulfill post-sanction formalities and act in accordance with the approved Scheme.