In India until 1994 hardly existed.

Companies Act, 1956

(Section 372),
>To monitor regulate and control the affairs of the company,
>To ensure better mgmt of the company
Section376: condition prohibiting reconstruction/amalgamation of company

Sec390: it define a company & a company liable to be wound up

Sec391; procedure to be followed by the company to obtain power to
compromise/make arrangements with creditors and members
Sec392: defines the power of tribunal to enforce compromise /arrangement it
provide the following
Sec393: the extent of disclosure norms to be observed during the schemes
of arrangement
Sec394: defines the provision of facilitating reconstruction and
amalgamation of companies
Sec395: Power and duties to acquire the shares of shareholders 0f Minority
shareholders
Se396: Special provisions for amalgamation in national interest by the
central government

Features are as follow:

1) permission for merger: when two/more companies are amalgated under
Memorandum
2) Information to the stock exchange
3) Preparation of approval of the draft scheme by BOD of each company:
5) Shareholder and creditors meeting:
6)Sanction by high court: high court will pass order sanctioning the
amalgamation scheme when its fair
8.Filing of the court order with registrar within 30 days
9.A copy such order shall be annexed to every copy of M/A
10.proceed to effect the scheme:
-Transfer of assets and liabilities:
-payment of cash and securities

The guidelines of the Securities and Exchange board of India (Substantial

acquisition of shares and takeover) 1994
A need was certain changes in the regulation had been felt and so a
committee under the chairmanship of Justice P.N Bhagwati

committee:Principle
1.equality and opportunity to all shareholders

2.protection of interest of minority shareholders

3.Fair and truth disclosure by acquirer in offer document

4.No information should be shared by acquirer to other parties

5An offer has to be announced after careful consideration

6.No action will be taken by target company to frustrate an offer without the
approval of the shareholders.

The regulations were amended in 1997 and they finally were

implementation.
,Securities and Exchange Board of India(Substantial Acquisition of Shares
and Takeover)Guidelines, 1997 or TAKEOVER CODE

What is takeover
-transfer of control of a firm from one group of shareholders to another
What is control ?
Having the majority of vote on the board of directors.

SEBI Issue in takeover:1.Friendly takeover:To make sure minority

shareholders get fair price,and transparency in process

2.Hostile :Corporate raider attempts to get control; of the mgmt without the
knowledge and against of the target company
Sebi will look into whole process,to protect minority shareholders,and to
regulate
Negotiated and Open market purchase,compeattive bid,revision of
offer,withdrawal of offer

Legal route for takeover is obtained by SEBI in respect of offer document and
under section 108A and 372 of the company act from the govt.
1.Acquistion of 5%/more shares ofa company
2.every person who make 15% of shares in company shall make yearly
disclosure with in 21 days from the financial year ending
3.Public Announcement of the holding if it increase beyond 15% to the
public
4.acqusition of the control over a company:he ha already 15% but less than
75% if he has to increase the holding he has to increase by public holding
5.appointment of Mercahnt banker
5.timing of the public announcement of offer:

Public announcement
Filing of offerdocument with SEBI
AMailing of lettr of offer to
shareholder to shareholders
Open offer to open fro tender of
shares by shares
Closure of offer
Consideration to be paid
Day 0
Within 14 days of public
announcement
Within 45 days from the date of
public announcement
Within 60 days from public
announcement
Within 105 days if the date of public
aanouncement
Within 30 days from closure

6.public announcememnt of the offer:it should he printed in hindi,English,at

regional level its language,also it should be forward to SEBI at least two day
before its issuance,also the Stock Exchange where share are traded

7.content of the public Announcement:

What is the share capital,
total percentage of shares proposed to be acquired from the public,
mode of payment,t
he highest price and average price paid by the acquirer fro acquisition,
Object and purpose of the acquisition of the shares and
future plans of the acquirer for the target co.,
date of payment ,payment of the offer price(Cash/Stock

Different of Payment:cash,stock,debt
8.Competative BID:any person other then acquirer,if interested in making
an offr,should be make announcement within 21 days from the first offer

Provision of company Act 1956

Features are as follow:
1)permission for merger:when two/more companies are amalgated under
Memorandum of associstion
it should have the permission in its object clause to carry on the business of
the acquired too
It should take the permission of shareholder,BOD company law board
2)Information to the stock exchange:acquiring and acquired companie
should inform the stock exchange wher they are listrd abt the merger
3)Preparation of approvsl of the draft scheme by BOD of each company:
4)21 day notice for the general meeting:it’s statement setting forth the
terms of the compromising/arrangement explaining the effect of
interst,directors,MD
5)Shareholder and creditiors meeting:indivual companies should hold
separate meeting of their shareholder and creditors for approving the
amalgation scheme
6)Sanction by high court:After the approval of shareholder and creditors,high
court will pass order sanctioning the amalgamation scheme when its fair and
reasonable,the date of the court hearing will be published in two
newspaper ,the regional directors of the company law board will be
intimated.
8.Filing of the court order:On the court’s order,both companies should file
certified copy thereof with the registrar within 30 days of order(SEC394(3)
9.A copy such order shall be annexed to every copy of M/A
10.proceed to effect the scheme:
-Transfer of asests and liabilities:
-payment of cash and securities
Implication of Income tax Act,1961
Defination Of Amalgamation:

Accordin gtho section 1(1B) of Income Tax 1961

Merger of two/more companies to form one company
All property (Asset & Liabilities)of the amalgamating company will
become the property of amalgamated company

Shareholder holding not less than 3/4th will become shareholders of the
amalgamated company
Tax Concessions
Under 2(1B)
-Tax Consession to amalgating company
-Tax Concession to shareholders of the amalgamating company
-Tax concession to amalgamated company

Competation Act 2002

To ensure free and fair competition in the market by prohibiting anti-
competitive agreements,
abuse of dominant position and combinations likely to have appreciable
adverse effects on competition within the relevant market in India.

In some sectors (like Atomic Energy, Housing and Real Estate, Retail Trading)
foreign investment is prohibited.
In some sectors (like banking, insurance, telecommunication, mining,
airports), foreign investment is either subject to a cap or subject to prior
approval of the Government of India.
there are industry specific clearances that are relevant for mergers in
specified sectors. Examples of such sectors include banking and insurance,
where merger of companies in banking or insurance sectors would require
approval of the Reserve Bank of India (RBI) and the Insurance Regulatory
and Development Authority of India (IRDA).
Objective of Competition Act, 2002
The Preamble of the Act declares the intention of the Government to press in
service the provisions of the
Act for the achievement of the following objectives: i. To prevent anti-
competition practices;
ii. To promote and sustain competition in markets;
iii.To protect the interests of consumers; and iv.To ensure freedom of trade
for all partici pants in the markets in India

On the whole, the legislation seeks to clear all the hur- dles in promoting
competition among business units of