Ddisadvantages - mergers and winding up, Business Law and Ethics

Ddisadvantages - mergers and winding up:

The disadvantages of s.280 are that cash may have to be provided to pay off creditors and dissenting members or alternatively the sale may have to be abandoned. Secondly, the company must go into liquidation which is an irreversible process. But s.280 procedure is obligatory in the situation to which it relates.  It may be preferable to make the desired reconstruction in some other way.  For example the company to which the business is to be transferred might make a take-over bid (using s.210 to achieve 100 per cent success) for the share capital of the company whose business it wishes to acquire. When the latter company is a wholly owned subsidiary there is no procedural difficulty in transferring its business to the holding company. There is no obligatory cash alternative in a s.210 transaction though it is sometimes provided as an extra inducement (paragraph 26 above).

 The advantage of transferring a business from one company to another (with the same shareholders in the end) is that by this means the business may be moved away from a company with a tangled history to a new company which makes a fresh start. As explained (paragraph 6(b) above) this procedure can also be used to effect a merger of two companies each with an existing business.

Posted Date: 1/15/2013 4:36:38 AM | Location : United States







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