MERGERS

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MERGERS, AMALGAMATION AND ACQUISITIONS

MERGERS, AMALGAMATION AND ACQUISITIONS The term "mergers" and "amalgamation" are practically synonymous while acquisitions usually refer to acquisition of undertakings though all these three terms are often used interchangeably in common parlance. However, mergers/amalgamation are referred to amalgamation of companies carried out pursuant to section 3 ! of the "ompanies #ct, $ %& while acquisition are referred to acquisition of undertakings. # typical restructuring transaction such as amalgamation or acquisition has many implications apart from the requirements of the "ompanies #ct, $ %& but some of such implications are referred to herein bellow' (epending upon the type of companies, their assets and individual features, the issue and procedures involved will be different. )ome of the important steps and issues that one needs to keep in mind before and while carrying out the amalgamation are as follows. BUSINESS AND STRATEGIC ISSUES $. ,. *eed and rationale for merger and preparation of cost+benefit ratio including financials. "arefully evaluating implications of amalgamation under various laws including income+ta-, stamp duty, among others "arefully evaluating the need, time frame and costs for various activities and approvals. (eciding on date from which amalgamation is to take effect. (ue diligence of transferor company. .aluation and e-change ratio.

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INDICATIVE CHECKLIST OF SOME IMPORTANT PROCEDURES AND APPROVALS $. ,. /reparation of )cheme and other documents. "heck power in 0emorandum/ #rticles of #ssociation of both companies for amalgamation and, if not, incorporate such powers. "heck also whether transferee company has powers to carry on business of transferor company. #pproval at 1oard 0eetings of both companies including related matters. To intimate the )tock 2-changes where the companies are listed and also to obtain approvals and generally carry out other compliances under the 3isting #greement. 4iling of petitions with "ourt 5based on the location of the registered office of the company, there may be application in different courts or a common high court6.

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MERGERS

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#udit to be carried out by auditor appointed by 7fficial 3iquidator. 0eeting ob9ections, if any, by :egional (irector. "alling and holding of general meetings of shareholders and creditors, as ordered by "ourt. <ssue of advertisements relating to the amalgamations.

$=. 4iling of report by "hairman of individual meetings. $$. 7btaining sanction of "ourt for the amalgamation. $,. /ayment of stamp duty, as applicable. $3. "arry out post+merger formalities including filing of order of amalgamation within 3= days with :egistrar of "ompanies, transfer of employees, among others. $!. <ssue of shares and/or other consideration to the shareholders of the transferor company. $%. /roper accounting of the amalgamation as per #ccounting )tandard $! and generally disclosure in 1oard>s report regarding the amalgamation. ACQUISITIONS #cquisitions of business in substantive terms is similar to an amalgamation e-cept for legal implications and procedures. ?indly, refer to points under "1usiness and )trategic <ssues" for mergers/amalgamations. <n particular, a study of the undertaking and surrounding facts should reveal special features and issues that would need consideration and compliance. INDICATIVE CHECKLIST OF SOME IMPORTANT PROCEDURES AND APPROVALS $. "heck power in 0emorandum/#rticles of #ssociation to carry out acquisitions and to carry on business of seller "ompany. .aluation of the undertaking. 1oard approval for the acquirer company. 1oard and shareholder approvals for the transferor company. (ocumentation for the transfer. "onsideration and payment of applicable stamp duty. /ayment of consideration and formalities therefore, depending upon the type of consideration. /ost acquisition issues including accounting, disclosure, transfer of employees, among others.

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DEMERGERS (emerger happens when a company hives of or separates one or more of its industrial undertaking into another company or to an e-isting company. The company to which the industrial undertaking is transferred is the :esulting company and the company which transfers the industrial undertaking would be the (emerged "ompany. Indicative c ec!"i#t $% #$&e i&'$(tant '($ced)(e# and a''($va"# $. "heck power in 0emorandum/#rticles of #ssociation to demerge or sell or transfer the assets and liabilities of the company. .aluation of the undertaking. 1oard approval for the demerger. 7btain necessary consents/approvals, if any prior to the demerger.

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MERGERS

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/repare )cheme of #rrangement. #pply to the "ourt/*"3T in prescribed forms. 5:efer 4orm *os. 33+!=6. )hareholder>s approval at the general meeting concerned for the purpose. 4ile the approval of the "ourt with the :7" within 3= days. (ocumentation for the transfer.

$=. #llot the securities in the resulting company to the shareholders of the demerged company. SLUMP SALE )lump sale means the transfer of one or more undertakings as a result of a sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sale. INDICATIVE CHECKLIST OF SOME IMPORTANT PROCEDURES AND APPROVALS $. "heck power in 0emorandum/#rticles of #ssociation to sell or transfer the assets and liabilities of the company. .aluation of the business to be sold on slump sale basis.

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