Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / American Auto Ltd, has two divisions: auto manufacture and auto ancillaries
American Auto Ltd, has two divisions: auto manufacture and auto ancillaries. It decides to hive off the auto ancillary division to its OEM supplier Indian Auto Ltd. Indian Auto wishes to pay the purchase consideration in the form of 10% royalty to the American company over the next 20 years. The purchase agreement also provides for a guaranteed 20-year lock-in for payment of royalties by the Indian company. A shareholder of the Indian company alleges that this is a fraud on the company as the value of the assets being acquired is far less than the royalty agreed to be paid. The I-banker advising on the deal states that independent valuation has been conducted and the royalty to be paid is justified by the valuation. Are shareholders within their right to reject the scheme or are they bound by the conclusions of the independent valuation?
(a) Shareholders can veto the scheme (b) Shareholders are bound by the scheme
