16 February 2024 Company Valuation >> Business & Commercial Law  

Reebok India Company's attempt to switch from an unlimited liability company to a limited liability one hit a roadblock in the Delhi High Court. The company's application, filed in 2014, was rejected by the Registrar of Companies (RoC) due to its negative net worth and ongoing investigations. Reebok India challenged this decision, but the court ultimately sided with the RoC.

Facts:

• Reebok India Company, previously operating as an unlimited liability company, submitted an application in 2014 to convert its status to a limited liability company.
• The Registrar of Companies (RoC) rejected the application in 2016, citing a negative net worth and pending investigations against the company.
• Challenging this decision, Reebok India Company filed a petition in the Delhi High Court.
• A central point of contention revolved around the applicability of a 2016 Amendment to the Companies (Incorporation) Rules to their pre-amendment application.

Conclusion:

• The Delhi High Court determined that the 2016 Amendment applied to Reebok India's pending application.
• The Court's reasoning hinged on the amendment's objective: to address a previous regulatory gap and enhance creditor protection. They concluded it did not negate any pre-existing right of the company.
• Consequently, as the company failed to meet the more stringent requirements under the amended rules, the Court dismissed their petition.