The Delhi High Court has upheld the decision of the Registrar of Companies to deny the conversion of Reebok India Company from an ‘Unlimited Liability Company’ to a ‘Limited Liability Company’.
Dismissing Reebok India’s petition, Justice Subramonium Prasad said that the reasons given by the RoC in rejecting the Reebok’s application on the ground that various prosecutions have been filed by the Serious Fraud Investigation Office against it for offences under the Companies Act and the Indian Penal Code cannot said to be so perverse, especially keeping in mind the interest of shareholders and the interest of creditors.
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“The anxiety on the part of the RoC that the creditors and stakeholder should not be left high and dry cannot be said to be completely unjustified,” Justice Prasad said.
“The registrar was also not provided with an NoC or undertaking from all the shareholders to support the conversion application and the petitioner(Reebok) did not even issue a public advertisement inviting objections from various creditors/stakeholders on the issue of conversion,” the HC said.
The Registrar of Companies (RoC) noted that Reebok experienced significant financial losses, with current liabilities surpassing assets by over INR 2100 crore. Additionally, the registrar highlighted that Reebok failed to furnish a no-objection certificate or undertaking from all shareholders to support its conversion application. Furthermore, Reebok did not issue a public advertisement inviting objections from creditors or stakeholders regarding the conversion, as stated in the High Court order.
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