FAST TRACK MERGERS UNDER COMPANIES ACT, 2013 A BOON FOR SIMPLIFIED INTERNAL RESTRUCTURING

New Delhi October 24, 2013

10/25/2013

TYPES OF MERGER (INCLUDES DEMERGER)

TYPES OF MERGER (INCLUDES DEMERGER)

Scheme of Arrangement ( Section 230 ) Merger / Demerger of Companies ( Section 232 ) Fast Track Merger - Merger of Small Companies and Merger between Holding and Wholly - owned

Subsidiary Company (Section 233)

Cross Border Merger Merger between Indian Company and Foreign Company (Section 234) Merger in public Interest by Central Government (Section 237)

HIGHLIGHTS OF M&A UNDER COMPANIES ACT 2013

HIGHLIGHTS OF THE M&A UNDER COMPANIES ACT, 2013

NCLT to assume jurisdiction of the High Court Both Inward & Outward Merger / Demerger between Indian Company and Foreign Company is enabled; Voting through meeting or Postal Ballot as may be directed Minimum Shareholding / Debt Ownership limit prescribed for objecting scheme Treasury Stock Prohibited Exit opportunity to Dissenting Shareholders Disclosures Convening meeting increased Yearly statement to be submitted for implementation of scheme

FAST TRACK MERGER & DEMERGER U/S 233

FAST TRACK MERGER & DEMERGER U/S -233

Section 233 provides permits fast track Merger/ Amalgamation between:

Two Small Companies (Only Small Companies no exemption to Small Public Companies)

A Holding Company and a wholly owned Subsidiary

Companies (All Types of Companies)

Such other classes of companies as may be prescribed.

(Yet not prescribed by MCA)

DEFINITIONS

Definitions

Small Company Section 2(85)

Private Company

Paid Up Cap < Rs. 50 Lakhs > 5 crore

Excludes

Turnover < Rs. 2 Crores > 20 Crores

Holding co

Subsidiary Co

Not for Profit Co.

Definitions Subsidiary Section 2(87)

Holding Co

Control the composition of Board

Ownership of more than 50% of share Capital

On its own

OR

Or together with one or more of its subsidiary

Definitions

Share Capital Section 43

Share Capital

Equity Share Capital

Preference Share Capital

Declaration of Solvency

Declaration Of Solvency

is a written declaration stating that the directors have made an inquiry into the affairs of the company and have formed the opinion that the company is solvent

and will be able to pay its entire liability.

STEPS INVOLVED IN FAST TRACK MERGER

STEPS INVOLVED IN FAST TRACK MERGER

Approval of Board of all the Companies Involved

A notice of proposed Scheme inviting Objections or Suggestions, if any,

From the ROC

Official Liquidators (OL)

persons affected by the scheme within Thirty Days of Approval is issued by the transferor company and the transferee company;

STEPS INVOLVED IN FAST TRACK MERGER

Transferor & Transferee Companies will give General Meeting Notice to Members For approval and considering any objection and suggestion received from ROC / OL. Members holding at least 90 Percents of Total Share Capital of the Company will approve the scheme and ; Creditors

Creditors

having majority representing nine-

tenths in value will approved the scheme;

Transferor & Transferee Company has to File Declaration of Solvency in Form No. 15.12 with ROC before the meetings of Members & Creditors;

STEPS INVOLVED IN FAST TRACK MERGER

The Transferee Company shall, within seven days after the conclusion of the
meeting(s) ;
File in Form No. 15.13 a copy of the approved scheme along with report of the result of each of the meetings with the Central Government / ROC / Official Liquidator (OL)

STEPS INVOLVED IN FAST TRACK MERGER

ROC / Official Liquidator (OL) will communicate objection and suggestions in

writing to the Central Government within a period of Thirty Days;

No

objection

of

If there is any objection by ROC/OL then confirmation order issued by C.G or Tribunal, shall be filed by Transferor and Transferee Companies in Form No. 15.15 with the ROC.

ROC/OL/CG then CG shall issue in Form No. 15.14, a confirmation

If it is not approved by C.G. the same shall be referred to NCLT

order

Submission of Information through Forms

Submission of Information through Forms

DECLARATION OF SOLVENCY
Form No 15.12
Details about Company ATTACHMENTS : Copy of Board Resolution Statements of Assets and Liabilities Auditors Report on the statement of assets and liabilities Annexure of Assets and Liabilities with Book Value and estimated Realisable value

Submission of Information through Forms

NOTICE OF APPROVAL OF THE SCHEME OF MERGER

Form No 15.13
Details about Transferor & Transferee Company

Details about the approval of the scheme from members / creditors of

Transferee & Transferor Company ATTACHMENTS : Copy of the scheme approved by both creditors and members Notice as per 233(1)(a)

Submission of Information through Forms

CONFIRMATION ORDER
Form No 15.14

The Central Govt. shall issue this after approval.

Submission of Information through Forms

CONFIRMATION ORDER FOR SCHEME OF MERGER

Form No 15.15
Details about Transferor / Transferee Company ATTACHMENTS : Certified Copy of the confirmation order along with the approve scheme.

RELAXATION NORM & BENEFIT FOR FAST TRACK MERGER

RELAXATION NORM & BENEFIT FOR FAST TRACK MERGER

No need to file Notice to other statutory authority

like RBI, Income Tax etc.

Less time Consuming Give boost to internal Restructuring

ISSUES INVOLVED

ISSUES INVOLVED

There is no clarity whether Fast Track Merger will be effective prior to NCLT become operational or not.

If CG transfer the Scheme to NCLT then, it will fall under Normal merger and
once again entire processes have to be followed as per NCLT order. Scheme is to be approved by shareholders holding 9/10th value of shares capital . Scheme is to be approved by creditors having majority in no. and holding 90% value.

THANK YOU

Pavan Kumar Vijay (Chairman, ASSOCHAM National Council on M&A) Mob. +91 9810032568 Landline. 011 40622202 E-Mail: pkvijay@indiacp.com