Satyam Computer will acquire 51% stake in Maytas Infra and a 100% stake in Maytas Properties. It will cost the company around USD 1.6 billion. It means that the company is using cash from its accounts for this acquisition.

Legal Experts feel that the deal is more of a shareholders’ issue and not a legal one. The key issue to consider is whether any person selling shares also is on the Board of the acquirer company, in which case it would be a transaction covered by Section 297 of the Company’s Act, which will require central government approval for such a transaction. But otherwise it is pretty much a governance issue. There doesn’t seem to be anything legally that is a problem. Its an ethical challenge that Satyam faces.

There is no need for shareholder approval for purchase of shares. In fact there is case law to say that even if you own the entire capital wholly owned subsidiary, selling that subsidiary does not need shareholder approval. Therefore to buy a company – 51% of another company – you need to see the articles of the company, you need to see the governance matrix of the company. If the board is not prohibited by the shareholders with lesser authority this pretty much something a board could do. Whether it is a right decision or not – can be litigated upon on the grounds of whether it is mismanagement or whether it is operation of the other shareholders – that’s a matter of assailing the merits of the action.

Related News on Satyam Scam:

1. Satyam Maytas Deal - CLSA And Templeton React as ADRs Hit - Satyam Computer will acquire 51% stake in Maytas Infra and...
2. Satyam’s Justification for Maytas Buyout Deal - Satyam’s decision to acquire Maytas Infra and Maytas Properties has...
3. Satyam Buys Stake in Maytas - Satyam Computer a leading IT comapny announced that it will...
4. Satyam To Acquire Maytas Infra And Maytas Properties - IT major Satyam Computer Services Ltd. announced today in its...
5. Satyam Speaks On Value Addition of Maytas Acquisition - Satyam’s acquisition of Maytas has invited strong reactions from the...