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

Explain the procedure of arrangement for corporate restructuring that can be made without application to the court

Strong Ltd. of which you are the company secretary has two business units, cement unit and steel unit.The core competency of Strong Ltd. is in steel business. The Board of directors of the company is considering exiting from its non-core area, i.e., cement business. You are asked to prepare a detailed note outlining the procedures and steps involved therein.

Balance sheet of ABC Ltd. as on 31st March, 2004 reads as follows:

Liabilities	(Rs. in '000)		Assets	(Rs. in '000)
Share capital	2,26,000		Fixed assets
Reserve	30,000		(net block)	6,15,000
Secured loans	5,17,800		Current assets	1,69,800
Current	2,80,000		Investments	1,500
			Profit and loss	2,66,890
			Misc.expenses
			(to the extent not writen off)	610
	10,53,800			10,53,800

Net worth of ABC Ltd. has completely eroded as on 31st March, 2004. What are the steps required to be taken for making a reference to the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 indicating the time limit wherever applicable ?

"A key challenge in merger and acquisition is their effective implementation, as there are chances that mergers and acquisitions may fail because of slow integration." Explain the key factors which are required to be recognised in post merger or acquisition.

"The reconstruction involves the idea of substantially the same persons carrying on substantially the same undertaking or enterprise in the name of a new company." Elucidate the statement in the light of legal provisions and judicial pronouncements.

335

In the scheme of amalgamation, the court is not required to ascertain with mathematical accuracy of the terms and targets set out in the proposed scheme; what is required to be evaluated is the general fairness of the scheme. Discuss in the light of judicial pronouncements.

In case of takeover of a company, whose shares are listed on the stock exchange(s), is regulated by the listing agreement and the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. In view of the aforesaid requirements, discuss the following
  (i) Continual disclosures of shareholding and control;
 (ii) Competitive bid; and
(iii) Withdrawal of the offer once made by the acquirer.

Magnet Ltd., a listed company, has four divisions, each division is engaged in different manufacturing activities. The Board of directors of the company desires to examine as to whether each division could be hived off to four different companies to be incorporated for the purpose. Prepare a note for consideration of the Board stating the legal procedure involved in giving effect to the proposal and also indicate the time frame for implementing the proposal.

"Any arrangement or agreement under which two or more firms cooperate in order to achieve commercial objects is a strategic alliance." Comment and describe briefly the various types of strategic alliances and their advantages.

Describe the needs for financial restructuring and what steps may be taken in case of undercapitalisation and over capitalisation.

The creditors present at a meeting for approving the scheme of reconstruction but remain neutral or abstain from voting will be counted in ascertaining the majority in number or value. Comment.

What is the offer procedure under the buy-back regulations for buy-back from existing shareholders ?

An inquiry under section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985 in respect of Best & West Ltd. was pending before the Board for Industrial and Financial Reconstruction (BIFR). Some creditors of Best & West Ltd. to whom the said company owed more than Rs.500 preferred an application before the appropriate High Court for winding-up of the company on the ground that it is unable to pay its debts. Can the winding-up proceedings continue in the said High Court ? Discuss.

335

BIFR sent a reference to the High Court of Madhya Pradesh at Indore under section 20(2) of the Sick Industrial Companies (Special Provisions) Act, 1985 in respect of a company whose registered office was situated at Kolkata. Can the Indore bench of the Madhya Pradesh High Court take up the reference for consideration ?

"Valuation of company's shares is a highly technical and complex matter." Discuss this statement in the light of various methods of share valuation.

Riddhi Ltd., is in the process of merger with Siddhi Ltd. Mention the forms, reports, returns, documents, etc., which Siddhi Ltd. is required to file at various stages with :
 (i) The High Court; and
(ii) The Registrar of Companies.

Comment on the following with supporting case laws :

In a scheme of amalgamation, the workers of the transferor company are not bound to accept the transfer of their services to the transferee company, but the scheme can not be rejected, if it would not affect the public at large.

A scheme of compromise may be sanctioned between a company licensed under section 25 with a trading or manufacturing company.

The sanction of the court under section 391/394 is required irrespective of the fact that the same has been approved by members, creditors, etc.

It is not necessary to give a separate notice to theincome-tax department under sections 391-394 of the Companies Act, 1956.

Describe briefly the powers of the Securities and Exchange Board of India to impose penalties in case of failure by a company to carry out the obligations under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.