Compromise, Arrangement, Amalgamation and Winding Up
Compromise, Arrangement, Amalgamation and Winding Up
This domain tests corporate restructuring through NCLT and the modes of winding up.
Core rules
- Sections 230–232 provide for compromise or arrangement, including amalgamation. The company applies to NCLT; NCLT may order meetings of members or creditors. A scheme must be approved by a majority representing 75% in value of those present and voting in each class.
- NCLT sanctions the scheme; it is binding on all members, creditors, the company and liquidator. Section 233 provides a fast-track merger for small companies, holding-subsidiary structures and OPCs, subject to prescribed approvals.
- Winding up may be compulsory by the Tribunal or voluntary (members’ or creditors’). Grounds include inability to pay debts, just and equitable cause, unlawful object, and default in filing financial statements.
Worked example
A scheme of amalgamation is placed before members. At the class meeting, 80% in number vote in favour, but they hold only 70% in value of shares present and voting. The scheme fails the statutory test because 75% in value is required, even though the numerical majority is satisfied.
Traps
The 75% test is by value, not by number. Separate class meetings are required. NCLT sanction is mandatory for Sections 230–232 schemes. Voluntary winding up requires a declaration of solvency. Do not confuse amalgamation with a simple asset sale.