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Scheme of arrangement -Demerger

Jayanta Bandyopadhyay (331 Points)

27 September 2024

In 2018, NCLT approved the scheme of Arrangement (Demerger). However, for some reasons, Share certificates in respect of equity shares issued to each of the shareholders pursuant to the Scheme of Arrangement have not yet been issued. Auditors are mentioning in the report. Is it violative of any Laws/AS etc? Please guide.

Regards,

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Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (5686 Points)
Replied 27 September 2024

I understand your concern. Although the NCLT approved the scheme of arrangement (demerger) in 2018, the share certificates for equity shares issued to shareholders haven't been issued yet, and your auditors are raising this issue in their report ¹. This seems to be a violation of the Companies Act 2013, which outlines the procedures for arrangement and amalgamation ². The Companies Act 2013 states that after the NCLT approves the scheme of arrangement, the company must issue share certificates to the shareholders within a reasonable timeframe ³. Not issuing share certificates could be considered a violation of the Companies Act 2013 and accounting standards. I recommend consulting with a legal expert or the NCLT to understand the specific implications and necessary steps to resolve this issue ⁴. Additionally, you may want to review the Companies Act 2013 and accounting standards to ensure compliance and make any necessary adjustments ⁵. It's essential to address this issue to avoid any potential legal or financial repercussions.

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Jayanta Bandyopadhyay (331 Points)
Replied 27 September 2024

Grateful

Actually, to avoid/ defer stamp duty, it is kept in limbo, pending. Basically, a family is vertically split. So demerger came into being. Auditors are avoiding any suggestions. My reading is violation on each front.

Regards

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