2020 (9) TMI 656 - Tri - Companies Law

Sanction of Scheme of Arrangement - sections 230 to 232 of the Companies Act, 2013 - HELD THAT - From the material on record, the Scheme appears to be fair and reasonable and does not violate of any provisions of law and is not contrary to public policy - Since all the requisite statutory compliances have been fulfilled, the CP(CAA) No.965/MB-I/2020 is made absolute in terms of prayer made in the Company Scheme Petition. Hence ordered. The Scheme with an appointed date fixed as 1st April 2020, is hereby sanctioned. It shall be binding on the Petitioners Companies involved in the Scheme and all concerned including their respective Shareholders, Secured Creditors, Unsecured Creditors/Trade Creditors and Employees.

Summary

Issues Involved
1. Sanction of the Scheme of Arrangement under sections 230 to 232 of the Companies Act, 2013.
2. Compliance with statutory requirements and accounting standards.
3. Filing of financial statements and annual returns by the Demerged Company.
4. Approval of the Scheme by requisite majority of members and creditors.
5. Service of notices to concerned authorities under section 230(5) of the Companies Act, 2013.
6. Issuance of shares to non-resident shareholders in compliance with FEMA regulations.

Detailed Analysis

Sanction of the Scheme of Arrangement

The Petitioner sought the Tribunal's sanction under sections 230 to 232 of the Companies Act, 2013, for a Scheme of Arrangement between Nielsen (India) Private Limited (Demerged Company) and Neurofocus Systems & Services Private Limited (now known as Nielsen Media India Private Limited, Resulting Company) and their respective shareholders. The Tribunal noted that no objections were raised against the Scheme and that the necessary approvals from the Board of Directors of both companies were obtained on 12th June 2020. The Appointed Date for the Scheme was fixed as 1st April 2020. The Scheme aimed to demerge the media business from the Demerged Company to the Resulting Company, promising benefits such as concentrated management focus, independent collaboration, better capital access, and value creation for stakeholders.

Compliance with Statutory Requirements and Accounting Standards

The Regional Director's report highlighted the need for compliance with various accounting standards, including AS-14 (IND AS-103) and AS-5 (Ind AS-8). The Petitioner Companies undertook to pass necessary accounting entries to comply with these standards. The Tribunal accepted these undertakings, ensuring that the Scheme adhered to the applicable accounting principles.

Filing of Financial Statements and Annual Returns by the Demerged Company

The Regional Director observed that the Demerged Company had not filed its financial statements since 31/03/2016. However, the Petitioner Companies clarified that the financial statements for the financial year 2018-19 were filed on 31st August 2020. The Tribunal took this compliance on record.

Approval of the Scheme by Requisite Majority of Members and Creditors

The Tribunal had previously dispensed with the requirement to convene meetings of equity shareholders, secured creditors, and unsecured creditors, based on consent affidavits from all equity shareholders and individual notices served to creditors. The Tribunal accepted that the Scheme had the necessary approvals as per section 230(6) of the Companies Act, 2013.

Service of Notices to Concerned Authorities under Section 230(5) of the Companies Act, 2013

The Petitioner Companies confirmed that notices under section 230(5) were served to the concerned Income Tax Authority, Regional Director, and Registrar of Companies. They also undertook that the sanctioning of the Scheme would not deter authorities from addressing any issues arising post-implementation, and that decisions of such authorities would be binding.

Issuance of Shares to Non-Resident Shareholders in Compliance with FEMA Regulations

The Regional Director noted that shares issued to non-resident shareholders must comply with FEMA regulations. The Petitioner Companies assured that the share price would be in accordance with FEMA guidelines, and the Tribunal accepted this assurance.

Conclusion

The Tribunal found the Scheme to be fair, reasonable, and compliant with legal provisions and public policy. The CP(CAA) No.965/MB-I/2020 was made absolute, and the Scheme was sanctioned with an appointed date of 1st April 2020. The Tribunal directed the Petitioner Companies to comply with all statutory requirements, issue necessary publications, and take consequential steps under the Companies Act. The order also allowed any interested party to apply for further directions if necessary.