Procedure For Merger and Amalgamation Under Companies Act 2013


Sections 230 to 232 provide set of provisions, which specially deal with the amalgamation of companies and provide procedures through which the proposals of amalgamation, merger, reconstruction, compromise and arrangement may be placed before the Tribunal for sanction.

Sections 230 to 232 are intended to be in the nature of a system of single window clearance so that the parties are not put to avoidable, unnecessary and cumbersome procedure of making separate applications to the Tribunal for various other alterations or changes which might be needed effectively to implement the sanctioned scheme whose overall fairness and feasibility has been judged by the Tribunal.

Procedure For Merger and Amalgamation Under Companies Act 2013

1.   First step in this process is to draft a scheme of compromise or arrangement for restructuring or amalgamation.

2.  Conduct the Board Meeting for considering the proposal of arrangement for restructuring or amalgamation and to approve the Scheme.

3.  An application is to be made to the Tribunal for direction to hold meetings of shareholders/creditors.

4.     the Tribunal may on such application, order a meeting of the creditors or class of creditors or the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal may direct.

5.  when an order has been made by the Tribunal under sub-section (1), merging companies or the companies in respect of which a division is proposed, shall also be required to circulate the following for the meeting so ordered by the Tribunal, namely:—
(a)  the draft of the proposed terms of the scheme drawn up and adopted by the directors of the merging company;
(b)  confirmation that a copy of the draft scheme has been filed with the Registrar;
(c)  a report adopted by the directors of the merging companies explaining effect of compromise on each class of shareholders, key managerial personnel, promotors and non-promoter shareholders laying out in particular the share exchange ratio, specifying any special valuation difficulties;
(d)  the report of the expert with regard to valuation, if any;
(e)  a supplementary accounting statement if the last annual accounts of any of the merging company relate to a financial year ending more than six months before the first meeting of the company summoned for the purposes of approving the scheme.

6.     Hold the meeting of shareholders/creditors as per the Tribunal order and Scheme of compromise or arrangement must be approved by 3/4th in value of creditors, class of creditors, members, class of members.

7.  Another application must be made to the Tribunal sanctioning the scheme of compromise or arrangement.

8.    Tribunal, after satisfying itself that the specified procedure has been complied with, may, by order, sanction the compromise or arrangement

9.  An approved scheme duly sanctioned by the Tribunal is binding on all the shareholders /creditors / company (ies).

10.    Every company in relation to which the order is made shall cause a certified copy of the order to be filed with the Registrar for registration within thirty days of the receipt of certified copy of the order.

11.   The scheme shall clearly indicate an appointed date from which it shall be effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the appointed date.

12.   Every company in relation to which the order is made shall, until the completion of the scheme, file a statement in such form and within such time as may be prescribed with the Registrar every year duly certified by a chartered accountant or a cost accountant or a company secretary in practice indicating whether the scheme is being complied with in accordance with the orders of the Tribunal or not.

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