Sample Format of Amalgamation Agreement

Narendra Kumar

17 Jun, 2019

 Sample Format of Amalgamation Agreement

 An amalgamation agreement is defined as an arrangement whereby the assets or liabilities of two or more companies become vested in, or under the control of one company, which may or may not be one of the original two companies.

It is an arrangement or agreement between two or more companies to amalgamate or strengthen their business activities by establishing a new business having a separate entity.

Amalgamation may take place between two or more small companies, a holding and its wholly-owned subsidiary company or such other class or classes of companies

An amalgamation is effected by the Shareholders of one or both of the amalgamation companies exchanging their shares either voluntarily or as a result of the operation of law, for shares in the other or a third company. The arrangement is frequently effected by means of a takeover offer by one of the companies for the shares of the other, or of a takeover offer by a third company for the shares of both.

 What are the Arties in Amalgamation Agreement?

In an amalgamation agreement, there are two parties namely:-

Amalgamating Companies:

Those two or more companies which agree to combine their business in one or to carry on their business activity jointly.

Amalgamated Company

That resultant company which has formed from the combination of two or more amalgamating companies. It has a separate legal existence from the amalgamating companies.

 What are the Important Elements of Amalgamation Agreement?

1. Definitions

Unless otherwise defined in this agreement, the terms defined in this agreement have the same meaning in this agreement:

“AGREEMENT”, means this Amalgamation agreement amended from time to time.

“ARTICLE” means AOA of the Company, as amended from time to time.

“BOARD” means a group of Directors of the Company as established from time to time.

“REGISTRAR” means the registrar of Companies duly incorporated under the act.

“PARTIES” means the parties to this Agreement; and

“EFFECTIVE DATE” means the effective date of the agreement.

2. Financials of Previous years

 The parties must be concerned about the financial and historical backgrounds of the companies as well the projects that must be targeted for future. Companies must have checked the financial performance of at least last 3 financial years all the amalgamating companies.

Financial statements must disclose the real picture of the company.

3. Technology/Intellectual Property

 Companies must be interested in the extent and quality of the existing technologies of the target companies and the intellectual property of the company; like

• What domestic patents does the company have?
• What steps company has taken to protect its IPR?
• What technologies company is using?
• Has the company granted any exclusive technology to the third party?
• After amalgamation what IPRs and technologies shall be transferred?

4. Share Capital

 The authorized share capital of the transferor, as well as transferee, must be disclosed. Type of shares that transferor and Transferee Company has.

The agreement should also reveal the Subscribed and Paid-up share Capital and number of shares in which the capital is divided and the amount of per share; like

“The Authorised Share Capital of the Transferee/Transferor Company is (Rupees……………..) Consisting of……… equity shares of Rs…… Each aggregating to Rs…… And…….. unclassified shares of Rs…..each aggregating to Rs…………… The issued Capital of the Transferor/Transferee Company is Rs…….. and the subscribed and paid up capital is Rs………”

5. Valuation of Undertaking

 For the purpose of Stamp Duty, the value of the immovable properties of the transferor company shall be evaluated by the Chartered Business Valuator and the goodwill benefits of contracts and securities, debts, stock, fittings and fixture and all other properties of the vendor shall be valued by the parties itself.

6. Consideration

 What will be the consideration of the parties for the purchase and out of the aforesaid consideration what Rs?  Shall be paid in cash and if remaining then the balance of Rs. shall be paid to the vendor by allotment of Equity Shares of Rs.  Each in the capital of the company credited as fully paid-up shares.

7. Vesting of Undertaking

Date when the undertaking shall be vested to the new resultant company and Altogether the assets and liabilities detailed in the books of the Transferor Company shall stand transferred to and vested in the Transferee Company pursuant to the Scheme and shall be recorded by the Transferee Company at their book values as appearing in the books of the Transferor Company.

8. Effective Date

Date when the scheme of amalgamation will come into operation: The Scheme, though operative from the Appointed Date, shall be effective from the Effective Date.

9. Legal Proceedings:

All suits, claims, actions, and proceedings, by or against the Transferor Company pending and/ or arising on or before the Effective Date shall be continued and be enforced by or against the Transferee Company, as effectually as if the same had been pending and/ or arising against the Transferee Company.

1. Employees of the Transferor Company:
   
   All employees of the Transferor Company, who are in service on the date immediately preceding the Effective Date shall become the employees of the Transferee Company on the Effective Date.
2. Costs and Expenses:

All costs, charges, and expenses of the Transferor Company and of the Transferee Company in relation connection with the Scheme shall be respectively borne by the Transferor Company and the Transferee Company.