Merger and amalgamation as for indian economy, by explaining a few arrangements of new companies act, 20. Chapter xv section 230 to 240 of companies act, 20the. The terms merger and amalgamation have not been defined in the companies act, 1956 though this voluminous piece of legislation contains more than 50 definitions in section 2 of the act. Fasttrack merger under the 1956 act, all mergers and amalgamations require court approval.
Section relating to merger and amalgamation under companies act, 20 are 230 and. Further it compares the merger provisions of companies act 1956 and. What is the difference among mergers, amalgamation and. Procedure to be followed for merger or amalgamation of two or more small companies or between a holding. Provisions relating to merger, amalgamation and windingup, etc. Section 232 deals with mergers and amalgamation including demergers. Section relating to merger and amalgamation under companies act, 20 are 230 and 232. This entry was posted in regulatory updates and tagged amalgamation, appointed date, mca, merger, nclt, registrar of companies, roc, scheme for merger amalgamation, section 2326 of companies act 20 on august 22, 2019 by novojuris. Merger a merger of companies is typically conducted through a scheme of arrangement under sections 39941 of the indian companies act, 1956, 1. Rules relating to compromises, arrangements, amalgamations. Chapter xv of companies act 20 deals with compromises, arrangements, and. The companies act is the primary legislation governing all companies in india. The companies act was, in many ways, perceived as a reaction to the satyam scam which uncovered several aspects of corporate fraud that inter alia diminished minority shareholder rights. Procedure for merger and amalgamation is different from takeover.
Mergers and acquisitions ministry of corporate affairs. Amalgamation definition under the incometax act, 1961 section 21b merger of two or more companies in such a manner that all assets and liabilities of the amalgamating company immediately before the amalgamation, become the assets and liabilities of the amalgamated company and. Tribunal to be constituted under the companies act, 20, reserve bank of india and the high courts. Merger of a listed company into unlisted company the companies act, 20 requires that in case of merger between a listed transferor company and an unlisted transferee company, the transferee company would continue to be unlisted until it. Tools of restructuring merger amalgamation demerger financial restructuring acquisition of shares deals with section 230 234 deals with section 235 236 under section 237 of companies act, 20 central government may amalgamate two companies in public interest consolidation of businesses entities divest noncore business acquiring. Merger and amalgamation under companies act, 20 by national company law tribunal nclt. Amalgamations, mergers and demergers will be subject to the existing rules if the draft amalgamation agreement, the draft merger agreement or draft demerger project were approved prior to the date of effectiveness of the amendment and the application for registration of the amalgamation, merger or demerger of the companies in the commercial register was filed within 90 days of the. The companies act, 1956 consolidates provisions relating to mergers and acquisitions and other related issues of compromises, arrangements and reconstructions, however other provisions of the companies act get attracted at different times and in each case of merger and acquisition and the procedure remains far from simple. Ministry of corporate affairs mergers and acquisitions. Fast track merger procedure under section 233 of the. However, from the standpoint of business as well as accounting, there are several important differences between these two terms. In commercial parlance, merger essentially means an arrangement.
It provides a composite code for facilitating mergers and amalgamations which obviates the need for making multiple applications under the act. The companies act, 1956 does not define the term merger or amalgamation. As a result thereof, this act became another tool for the government to keep with itself the control over big companies, which wanted to grow faster and become globally. Merger and amalgamation under companies act, 20 by.
Generally, mergers and acquisitions have manifold advantages and have proven its usefulness in numerous complicated situations in the. Merger and amalgamation is a restructuring tool available to indian conglomerates aiming to expand and diversify their businesses for various reasons whether it is to gain competitive advantage, reduce costs or availing of tax benefits. Consider whether the merger would be covered under the competition act and hence, one which requires the permission of the competition commission. This was invoked for the first time by the ministry of corporate affairs mca in 2014. Both the transferor and the transferee company shall make an application in the form of petition to the tribunal in whose jurisdiction registered office of the company is situated under section 230232 of the companies act, 20 for the purpose of sanctioning the scheme of amalgamation. The term merger is not defined under the companies act, 1956 ca 1956, and under income tax act, 1961 ita. All corporate transactions, be it mergers, primarysecondary acquisitions or private equity funding, have to be implemented in accordance with the provisions of the companies act, 20, read with the rules framed thereunder. Merger, acquisition, amalgamation and restructuring of company what does it mean when they say companies merged or company acquired or what does it mean when they say, there was an amalgamation. Under the companies act 20, the idea of merger and amalgamation is completely clarified though under organizations act 1956. Chapter xv section 230 to 240 of companies act, 20 the act contains provisions on compromises, arrangements and amalgamations, that covers compromise or arrangements, mergers and amalgamations, corporate debt restructuring, demergers, fast track mergers for small companies holding subsidiary companies, cross. The 20 act merely requires filing of the order with the roc.
Section 232 of companies act, 20 merger and amalgamation of. Fast track merger is a new insertion in the corporate laws lexicon by section 233 of the companies act, 20. The statutory provisions relating to merger and amalgamation are contained in. For the purpose of this act the terms merger and amalgamation are synonymous. This scheme is known as single window clearance scheme. The provision of this chapter shall also apply to the scheme of mergers and amalgamations between companies registered under the companies act, 20 and companies incorporated in the jurisdictions of such countries as may be notified. Checklist of fast track merger under companies act, 20. Government makes rules relating to merger or amalgamation of a foreign company with an indian company and vice versa 17 april 2017 background in a significant development, the government has notified1 the commencement of section 234 of companies act, 20 the act as april 2017. Prior to december 15, 2016, the relevant provisions under the companies act, 1956 1956 act governed mergers and amalgamations in india. The companies act, 1956 consolidates provisions relating to mergers.
Under the companies act 20, the idea of merger and amalgamation is completely clarified though under organizations act 1956, the term merger isnt characterized and furtherm ore under the income tax act, 1961. Section 230 deals with the power to make compromise and arrangement of companies. Mergers and acquisitions are manifestations of an inorganic growth process. Section 237 of the companies act 20 gives power to the central government to order forced amalgamation of two companies if it is satisfied that it is essential in the public interest. Compromises, arrangements, reconstruction, amalgamation and mergers of companies law. Presently, the high court enjoys powers of sanctioning merger or amalgamation matters under section 394 of the companies act, 1956 but once merger sections covered under companies act, 20 gets notified then this power of sanctioning merger or amalgamation will be exercised by national company law tribunal nclt. Monopolies and restrictive trade practices act, 1969. Fast track merger ftm is a new concept introduced under the companies act, 20. Companies compromises, arrangements and amalgamations rules, 2016, effective from 15122016 have also been notified by the mca.
However, the companies act, 20 ca 20 without strictly defining the term explains the concept. However, such requirement has been done away with under the 20 act. The companies act, 20 companies act is one of the landmark legislations enacted in recent years to bring forth transparency, ease of doing business and protecting rights of minority shareholders. Provisions relating to merger, amalgamation and winding up etc. However it deals with schemes of merger acquisition which are stipulated under section 391 to 394. The merger is a combination of two or more entities into one, it is not just the accumulation of assets and liabilities of the distinct entities, but the organization of the entity into one business. Difference between merger and amalgamation difference. Procedure to be followed for a scheme of amalgamation or arrangement under section 230232 of the ca 20. Chapter xv section 230 to 240 of companies act, 20 the act contains provisions on compromises, arrangements and amalgamations, that covers compromise or arrangements, mergers and amalgamations, corporate debt restructuring, demergers, fast track mergers for small companies holding subsidiary companies, cross border mergers, takeovers, amalgamation of companies.
Merger regime under the companies act, 20 introduction merger is a restructuring tool available to indian conglomerates aiming to expand and diversify their businesses for various reasons whether it is to gain competitive advantage, reduce costs or unlock values. An effort was made to identify the areas of concern under the present law. Compromises, arrangements, reconstruction, amalgamation. Both the transferor and the transferee company shall make an application in the form of petition to the tribunal under section 230232 of the companies act, 20 for the puspose of sanctioning the scheme of amalgamation. Changing contours of mergers and acquisitions under. It brings in a whole new set of expected and unexpected changes to the existing regime governing indian company law. It is clarified that with respect to schemes of merger or amalgamation falling within the purview of section 233 of the act, the concerned companies may, at their discretion, opt to undertake such schemes under sections 230 to 232 of thecompanies act, 20, including where the condition prescribed in clause d of subsection 1 of section 233. Government makes rules relating to merger or amalgamation.
It was felt that the act needs to provide specifically that delisting through a scheme of merger under section 3994 of the companies act is. However, demerger is not possible under this section. The companies act does not provide a clear definition but defi. The meaning of the terms merger, amalgamation and acquisition is not uniform in all the statutes. Section 396 of the companies act 1956 the erstwhile act i. Merger and amalgamation of companies effective from 15th december, 2016 1 where an application is made to the 2tribunal under section 230 for the sanctioning of a compromise or an arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the 2tribunal a. Tools of restructuring merger amalgamation demerger financial reconstruction acquisition of shares deals with section 230 234 deals with section 235 236 under section 237 of companies act, 20 central government may amalgamate two companies in public interest.
Categorized under business difference between merger and amalgamation for most people, mergers and amalgamations are one and the same. A merger is a combination of two or more entities into one. Fast track merger under section 233 compliance support. The tribunal, merger, amalgamation or demerger is proposed in the application of compromise and arrangement under section 230 i of the company, or ii of the creditors, or iii of the members of the company iv of the liquidator of company under liquidation, may order the meeting a creditors or class of creditors, or b of the members or. Certificate issued by auditor of the company in relation to accounting treatment. The companies act, 20, new act in its new avatar, mirrors several changes when compared to the law contemplated under the companies act, 1956 old act. Corresponding to sections 230 to 232 of the companies act, 20. It is unique concept because high court approval is not required in this merger, only regional directors powers of central government delegated to regional director vide notification no. Fast track merger procedure under section 233 of the companies act, 20 in order to enhance the value generation, market share and costefficiency of businesses, companies often lead to mergers and acquisitions. Merger and amalgamation under companies act, 20 taxguru. Only public companies who enjoy the relation of holding and wholly owned subsidiary, can take the benefit under this section. Under the mrtp act, the central government had the power to approve mergers, amalgamation and takeovers etc. Companies act, 20 has seen the light of day and replaced the 1956 act with some sweeping changes including those in relation to mergers.
Company merger acquisition amalgamation and restructuring concepts for. In contrast to the companies act, 1956, this is a new provision under ca 20 which deals with out of courttribunal, fast tracked merger or amalgamation of certain companies. Company merger acquisition amalgamation and restructuring. The merger is a mix of at least two substances into one, it isnt only the. The 20 act requires that mergers and amalgamations between two or more small companies or between holding companies and its whollyowned subsidiary or between such companies as may be prescribed does not require court approval. Fast and liberal law is required to help merger and amalgamation bargains in. Section 233 of the companies act, 20 ca 20 dealing with merger or amalgamation of certain companies has also come into force with effect from 15th december, 2016.