Mergers and Acquisitions

Fast Track Mergers and Acquisitions

In order to expedite the process of Mergers and Acquisitions of 2 or more companies in timely bound manner, Companies Act 2013 has introduced section 233 relating to Mergers and Acquisitions of certain companies. This section comes into force i.e. 15th December 2016. Also, Rule 25 Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016 has been introduced to specify the mechanism for same.

 

Applicability:

Fast-track merge process can be used for the following types of companies:

  • Merger of Two or More Small Companies or
  • Merger between a holding company and its wholly owned subsidiary Company or
  • Such other class or classes of companies as may be prescribed. 

Process of Fast Track Merger 

  • The First Step – is to convene the Board Meeting to approve the scheme of merger/amalgamation.
  • The Second Step – is the filing of Notice of Proposed Scheme.A notice in form CAA-9of the proposed scheme inviting objections or suggestions, if any, shall be sent by the transferor & transferee company to ROC, OL and Concerned person. An aforesaid person shall send their suggestions or objections Within 30 days to the transferor & transferee company.
  • The Third Step – is Filing of Declaration of Solvency. Each of the companies involved in the merger files a declaration of solvency, in form CAA-10with their respective ROC.
  • The Fourth Step – is giving Notice of General Meeting. The notice of the meeting of the members at least 21 clear days before the general meeting shall be sent by transferor & Transferee Company. It should be accompanied by –
  • A statement disclosing the details of the compromise or arrangement, as far as applicable.
  • The declaration of solvency in Form No. CAA.10
  • A copy of the Scheme.
  • The Fifth Step – is Convening of General Meeting. In the EGM, following points shall be considered namely,
  • objections and suggestions received
  • The Scheme should be approved by members present in the meeting, holding at least 90% of a total number of shares in the General Meeting.
  • The Sixth Step – is giving Notice of Creditor’s Meeting. The notice of the meeting of the creditors shall be sent by transferor & transferee company at least 21 clear days meeting & accompanied by:
  • A statement disclosing the details of the compromise or arrangement, as far as applicable.
  • The declaration of solvency in Form No. CAA.10
  • A copy of the Scheme.

Dispensation from the Meeting If 90% in value of creditors agree by way of affidavit then the meeting of creditors can be dispensed.

  • The Seventh Step – is Convening of Creditor’s Meeting. The Scheme should be approved by creditors or class of creditors present at the meeting, representing at least 9/10 of a value of creditors.
  • The Eight Step – isFiling of Scheme with Central Government (RD)/ ROC/ OL. The transferee company shall within 7 days of after the conclusion of the meeting of members or class of members or creditors or class of creditors shall file:
  • A copy of approved scheme from members & creditors, and
  • A report of the result of each of the meetings in Form No.11 to RD.

The method of filing to:

  • RD: Through hand delivery/speed post/Registered Post
  • ROC: In Form GNL-1
  • OL: Through hand delivery/speed post/Registered Post
  • The Ninth Step – is Issue of Order. The Central Government is of the opinion that the scheme is in the public interest or in the interest of creditors, the Central Government shall issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA.12.
  • The Tenth Step – is Filing of Order. A copy of order of RD shall be filed within 30 days of receipt of a copy of an order in form INC-28 to ROC.

 

Effect of Registration Of Scheme

Once the scheme has been registered, it would have following effects:

  • Dissolution of transferor Companies.
  • Transfer of Property or Liabilities: Transfer of property or liabilities of the transferor company to the transferee company.
  • Charge:  The charges, if any, on the property of the transferor company shall be applicable and enforceable as if the charges were on the property of the transferee company.
  • Legal Proceeding: legal proceedings by or against the transferor company pending before any court of law shall be continued by or against the transferee company.

Compliances by Transferee Company

 

Important Condition for Transferee Companies: 

A Transferee company shall not on Merger or Amalgamation, hold any shares in its own name or in the name of any trust either on its behalf or on behalf of any of its subsidiary or associate company and all such shares shall be canceled or extinguished on the merger or amalgamation.

 

Authorized Capital:

The transferee company shall file an application with the Registrar along with the scheme registered, indicating the revised authorized capital and pay the prescribed fees due on revised capital.