With many wholly owned subsidiary companies merging with their listed holding companies, there were differing views on whether the meetings of the shareholders and the creditors of such listed entities are necessarily required to be conducted or they can be dispensed with. The rationale for this was also in question since the merger was only between wholly owned subsidiaries with their holding companies where there was no dilution in the shareholding of the listed entity nor was there a compromise with the creditors of the holding company.

Relevant Provisions
In terms of the Section 230(1) of the Act, for a compromise or arrangement to be fructified, a meeting of creditors or class of creditors or a meeting of members or class of members is a requirement. There is an exception to this requirement when more than 90% (ninety percent) of the creditors and/or the members file their consent and no-objection affidavit towards the scheme of merger as provided under Section 230(9) of the Act and Rule 5 of Companies (Compromises, Arrangements, and Amalgamation) Rules, 2016.

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Any compromise or an arrangement may affect the shareholding, and the financial position of the companies involved in such compromise or arrangement and as such, the consent of more than three-fourth of the total value of the creditors and members is required in their respective meetings for such compromise or arrangement to go through.