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Demerger

k.c. palai (M.Com) (63 Points)

11 February 2014

Dear Learned Members,

XYZ Ltd. is a company incorporated under the Companies Act, 1956. It has a subsidiary named XYZ Private Limited. Pursuant to a Scheme of Demerger u/s 391 to 394 of the Companies Act, 1956 the operational business of XYZ Ltd would get demerged to XYZ Private Limited. All the procedure and filing has been completed and the Company is awaiting the Order by the Hon’ble High Court. Please note that the Appointed date in this Scheme of Demerger is April 1, 2013.

Hence, I would like to ask the learned members that in case the Scheme is not approved by the Hon’ble High Court before 31st March, 2014 then whether the books of accounts of both XYZ Ltd and XYZ Private Limited can be closed as on 31st March, 2014? If the books of accounts cannot be closed, what is the procedure to be followed?

Thanks & Regards,

K.C. Palai

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P C Agrawal (Registered independent director Past Ch) (8229 Points)
Replied 11 February 2014

Normally the scheme provides that it would become effective on the date of filing the order of High Court with ROC. What is relevant here is the date of Board meeting approving accounts for the year 2013-14 and not the date 31/3/2014. If the scheme becomes effective on or before the date of approving annual accounts in Board meeting, you have to give effect to the scheme in the accounts, otherwise you have to prepare standalong accounts of both companies as usual and give effect to the same in the next financial year and give note for the same.

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