CS Final :: Corporate restructing-law & Practice : December 2004

“The provisions of sections 391 and 394 of the Companies Act, 1956 constitute a complete code of the subject of amalgamation.” Discuss the statement detailing the salient features of sections 391 and 394 and explain the powers of the court in sanctioning a scheme of amalgamation in the light of the principles laid down by the Supreme Court in Mihir H. Mafatlal vs. Mafatlal Industries Ltd.

Allen Ltd., a listed company, is considering merger of Ben Ltd. which is also a listed company, with itself through allotment of shares in the proportion of the market value per share. Explain the impact of the above decision on the wealth of the shareholders of both the companies after merger based on P/E ratio and EPS analysis. The following are the financial data of the two companies :

Particulars	Allen Ltd.	Ben Ltd.
Profit after tax (Rs.)	12,00,000	8,00,000
Number of shares	50,000	10,000
Market value (Rs. Per Share)	50	25

What are the provisions for extinguishments of bought back securities under the Companies Act, 1956 as well as the SEBI Regulations ?

What is ‘creeping acquisition’ ? Discuss the provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

ABC & Co. (P) Ltd. and XYZ Ltd. have finalised a scheme of arrangement. The registered offices of both the companies are located in Delhi. A joint-petition is proposed to be filed before the High Court for sanction of the scheme.
Give your brief opinion in the light of the provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959 whether such a joint-petition can be filed.

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Sanjay holds 12,000 equity shares in Healthy Foods Ltd., the nominal and paid-up share capital of which consists of

(i)	40,000 Equity shares of Re.1 each; and
(ii)	10,000, 8% Preference shares (non-participating) of Re.1 each.
It is ascertained that—
(i)	The normal annual profit of such a company is Rs.12,000.
(ii)	The normal rate of transfer to general reserve is 10%.
(iii)	The normal return by way of dividend on the paid up value of equity share capital for the type of business carried on by the company is 15%.
Prepare a share valuation report for Sanjay showing value of his shareholding in Healthy Foods Ltd. based on the above parameters.

Give your advice on the following with supporting judicial decisions, if any :

A scheme of amalgamation of Peer Agro Ltd. with Ambiance Foods Ltd. is filed before the court for sanction. Ambiance Foods Ltd. has authorised share capital of Rs.10 crore and paid up share capital of Rs.8 crore. Peer Agro Ltd. has authorised share capital of Rs.8 crore and paid up capital of Rs.7 crore. The exchange ratio is 1:1. An objection is raised that the transferee company does not have sufficient authorised share capital. Hence, merger cannot be sanctioned.

At a meeting convened on the orders of a High Court to consider the scheme of arrangement proposed by a company, a shareholder sought to move an amendment for changing the swap ratio provided in the scheme of arrangement. The amendment was vetoed by the chairman of the meeting. Is the action of the chairman in refusing to accept the amendment correct ?

Arvind made an open public offer for acquiring 30% shares of Sunkist Growers Ltd. Due to sudden heart attack, he died before opening of the said open public offer. The successors of Arvind and the merchant bankers want to withdraw the offer made by Arvind.

Where a scheme of compromise or arrangement is proposed, the court does not have to compulsorily call for a meeting and the court in its discretion may dismiss the application at that stage itself.

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Jan Priya Ltd. (JPL) is engaged in the business of heavy engineering constructions and infrastructure projects. Since JPL requires large quantity of cement for its projects, it was decided to enter into strategic alliance with any cement manufacturer. In this process, JPL has identified that Amba Cements Ltd. (ACL) is interested to transfer its undertaking as an ongoing concern. JPL wants to acquire the undertaking by issue of shares to the shareholders of ACL.
Prepare a Board note discussing the legal aspects of the proposed acquisition of undertaking under section 395 of the Companies Act, 1956.

What is ‘disinvestment’ ? Discuss the salient features evolved by the Government of India for disinvestments in the public sector undertakings (PSUs).

What is the concept of ‘core competency’ ? What are the factors that help to identify the core competencies in a company ?

Draft a comprehensive resolution of the Board of directors for opening of an escrow account under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

You are the Company Secretary of Mangla Industries Ltd. a closely held company which has three manufacturing divisions as follows :

(i) (ii) (iii) (iv)

Paper manufacturing division; Paper board manufacturing division; and Paper machinery manufacturing division. Paper machinery manufacturing division has run into problems and hence the management desires to sell the division to the promoters of Hi-Tech Industries Ltd. whose core activity is engineering. The management of your company wants to know the different methods available for disposing of the division. Draft a suitable note.

“The word ‘strategy’ is used to describe the direction that the organisation chooses to follow in order to fulfill its mission.” Comment. Also discuss the 5 Ps of strategy enunciated by Henry Mintzberg.

335

Draft a notice to the dissenting shareholders informing them the intention to acquire their shares.

List out various forms, reports, returns, etc., which are required to be filed with the concerned authorities at various stages in the process of merger/amalgamation.

What is ‘buy-back of securities’ ? Discuss the sources and methods of buy-back of securities by a listed company.

“Corporate restructuring is one of the means that can be employed to meet the challenges which confront business.” Discuss this statement and outline the scenario on corporate restructuring in India.