Merger And Amalgamations Under Companies Act, 2013

posted by: corporate

The new Act has been lauded by corporate organizations for its business-friendly corporate regulations, enhanced disclosure norms and providing protection to investors and minorities, among other factors, thereby making Merger & Amalgamation smooth and efficient. The 2013 Act seeks to simplify the overall process of acquisitions, mergers and restructuring, facilitate domestic and cross-border mergers and acquisitions, and thereby, make Indian firms relatively more attractive to PE investors.

MCA vide notification dated 14th Dec, 2016 has issued rules i.e. The Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. These rules will be effective from 15th December, 2016. Consequently, w.e.f. 15.12.2016 all the matters relating to Compromises, Arrangements, and Amalgamations (hereafter read as “CAA”) will be dealt as per provisions of Companies Act, 2013 and The Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016.

An application for Merger & Amalgamation can be file with Tribunal (NCLT). Both the transferor and the transferee company shall make an application in the form of petition to the Tribunal under section 230-232 of the Companies Act, 2013 for the purpose of sanctioning the scheme of amalgamation. Where more than one company is involved in a scheme, such application may, at the discretion of such companies, be filed as a joint-application. It must be ensure that the companies under amalgamation should have the power in the object clause of their Memorandum of Association to undergo amalgamation though the absence may not be an impediment, but this will make matters smooth.

The process of Merger & Amalgamation is provided below:

• Notice to ROC and the Official Liquidators or persons affected by the scheme, inviting objections or suggestions within 30 days.
• Approval by: (a) shareholders holding 90% of the shares; and (b) 9/10^th in value of the creditors/class of creditors, of the respective companies.
• Declaration of solvency to be filed with the ROC.
• Filing of Scheme with the Central Government, ROC and Official Liquidator (“OL”).
• In case of No objection by ROC or OL, Central Government to issue a confirmation.
• In case of Objections raised by the Central Government is of the opinion that the scheme is not in public interest or in the interest of the creditors.
• Application before NCLT within 60 days of receipt of Scheme requesting NCLT to consider the Scheme under Section 232.
• NCLT to issue directions or confirm the Scheme by passing an order, if it is of the opinion that the Scheme should be considered.
• Communication of order confirming Scheme to ROC and registration of Scheme by ROC.