January 02, 2020

NCLT Rejects Sun Pharma Plan To Demerge Subsidiary

[ By Bobby Anthony ]


The Ahmedabad bench of the National Company Law Tribunal (NCLT) has rejected a proposal by Sun Pharmaceutical Industries’ plans to consolidate its subsidiaries, as per which the drug-maker had sought to demerge an overseas unit.

However, after the NCLT’s rejection of its proposal, Sun Pharma can be expected to challenge the Ahmedabad bench’s ruling in higher courts.

The company had approached the NCLT to approve transfer investment of undertakings from Sun Pharma to its Netherlands-based wholly-owned subsidiary.

According to a Sun Pharma spokesperson, the purpose of the demerger proposal is to consolidate the holding structure for Sun Pharma’s overseas, direct or indirect wholly-owned subsidiaries.

Incidentally, it may be noted that Sun Pharma has been consolidating its businesses lately. In December 2018, it completed the demerger of the specified business of Sun Pharma Global FZE (Sun FZE) and its merger into Sun Pharmaceutical Industries.

Significantly, the NCLT’s stand on Sun Pharma’s demerger proposal could also put a question mark on similar restructuring proposals of Indian companies, especially since several of them have sought consolidation to help raise funds for their overseas subsidiaries.

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