Company Law 2 Notes

- There is already a dispute between debtors and creditors and to

solve that there is a compromise.

5.2 Arrangement:

It is not necessary to have a dispute beforehand. You can just have an

arrangement for some other purpose. Once you have a problem, take it to
the tribunal, company proposes a scheme, 75% of each class of
shareholders have to agree on this. If that is there without any issue,
then the tribunal shall grant the scheme. However, the tribunal reserves
the power to reject the scheme even after 75% clearance is there. Every
group of people have to be put in a class of like-minded/interested
people. This meeting is not restricted to shareholders, it includes all
affected/concerned personnel i.e. employees as well. Each class has to
have a meeting and then put it to vote to get the consent of that class.

 Share exchange ratio: Section 232. Material facts need to be

placed in front of all classes, so as to enable them to make an
informed decision. All disclosures to be made during class
meetings. SER: for every 5 shares you hold; you will get 1 share in
the new company. The valuation which was done to arrive at this
ratio, also has to be disclosed.

5.3 Merger:

Section 231, 232 – first approach the tribunal for consent – grant
them parameters – take consent of all affected persons

Divide them into different classes

- Can be done by

(a) Absorption: where a company becomes absorbed in another

company – A will become a part of B

(b) forming a new identity: where 2 companies come together and

form a new entity.

( c) – De merger – split divisions into two companies

*Generally, the courts do not interfere unless there is prima facie

evidence that it is unfair.

5.4 Amalgamation:

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