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Directors liable for breach of RBI Regulations irrespective of sanction of amalgamation

22 August, 2014

The Delhi High Court has on 1-8-2014, in a case relating to sanction of amalgamation scheme, held that if it is found that the transferee-company has violated any provision of the Reserve Bank of India Act then the Directors of such company, who are guilty of said breach, shall continue to be liable irrespective of the sanction of the amalgamation scheme. The Regional Director had raised an objection that since the transferee-company was an NBFC, it was required to give an undertaking for all compliances from the Reserve Bank of India and hence the transferee had filed an affidavit that all compliances, applicable as per the RBI Guidelines to the transferee NBFC, shall be complied with.

In respect of another objection of the Regional Director relating to valuation of the shares in the scheme placing reliance on valuation of shares of the transferor and transferee in previous schemes sanctioned under Sections 390-394 of Companies Act, 1956, the court in the case of LRSD Global Holding Private Limited observed that since the transferor-company is being dissolved, and shareholders of the transferor-company would become of the shareholders of the transferee company, having approximately 99.96% shareholding in the transferee-company, and that since the shareholders of both the transferor and the transferee companies have approved the scheme, scheme of amalgamation would not be prejudicial to the interest of the shareholders of the transferor-company.
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