Amalgamation of subsidiary company with holding company

Last updated: 29 December 2009

Court :
Court

Brief :
Brief Facts: The petitioner company sought the sanction of the court to a scheme of amalgamation by which a 75% subsidiary was to be merged with it. The scheme was approved by the majority of the equity share holders, all of the secured creditors and unsecured creditors, in the meeting convened for that purpose. The Regional Director and the Registrar of Companies approved the proposed scheme. However, objections were raised by three objectors. It was contended that (i) that the scheme had been moved in undue haste and the valuation report was also prepared in a hurry; (ii) that the valuation report lacked details and due diligence had not been carried out; (iii) that the share exchange ratio determined was unfair to the shareholders; and (iv) that certain proceedings and investigations were pending against the petitioner company and the attempt of propounding the scheme was to frustrate the pending actions. The objectors suggested different methods of valuation which would benefit the shareholders and sought a direction for revaluation.

Citation :
Companies Act, 1956 – Sections 391, 393 and 394 – Amalgamation of subsidiary company with holding company – Objections on the grounds of share exchange ratio, hasty process of amalgamation and pending proceedings and investigations – Two objections filed after the prescribed – Whether tenable – Held, No.