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Companies (Compromise Arrangements & Amalgamations) Amendment Rules 2020

Amendment Rules 2020

The MCA/Ministry of Corporate Affairs on February 03, 2020, notifies the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2020. In exercise of the powers granted by sub-sections (1) and (2) of section 469 read with section 230 of Companies Act 2013 the Central Government has made changes in the particular rules. The amendment rules 2020 is made in the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. They will be enforced from the date of their publication in the Official Gazette. In Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, (thereafter referred to as in principal rules), in main Rule 3, the following sub-rules (5) and (6) have been inserted.

Rule 3 is in relation to “Application for order of a meeting”, in which new sub-clause (5) and (6) has been newly inserted, namely:-

Rule 3(5): A member of the company will make an application for an arrangement, keeping in view the purpose of takeover offer in terms related to Section 230(11). Such a member must hold not less than three-fourths of the shares with any other member in the company. The application has been filed for acquiring any part of the remaining shares of the company.

  • Explanation I:  “shares” here means the equity shares of a company carrying voting rights, and also includes any securities, such as depository receipts, that further entitle the holder thereof to exercise voting rights.
  • Explanation II: Nothing in this sub-rule must apply to any of the transfer or transmission of the shares in form of a contract, arrangement or succession, as the case may be, or any transfer that is made in pursuance of any statutory or regulatory purposes or requirements.

Note: The application of arrangement is only made by a person for the purpose of the takeover. He must hold atleast three-fourth shares in the respective company.

Rule 3(6): An application of an arrangement for takeover offer must contain:-

(a) The report of a registered valuer has to disclose full details of the valuation of the shares proposed for takeover. It is to be acquired by the member while taking into account the following important factors:-

  1. The highest price paid by any of the person or a group of persons for acquisition of shares made in last 12 months
  2. The fair price of shares of the company which is to be determined by the registered valuer after taking into account valuation parameters including return on net worth, earning per share, book value of shares, price earning, the industry average, and other such parameters as required for customary valuation of shares of such companies. 

(b) The application of an arrangement must require details of a particular bank account of a member. For this purpose the new account need to be opened separately, wherein a sum of amount must not be less than one-half of total consideration of the takeover offer is to be deposited.

As above, new sub-rule (6) suggests that it is necessary for the application made for an arrangement to have the report obtained by the registered valuer. It is also important to give full details regarding the bank account in which the amount is deposited by the member. The report must contain the full disclosures regarding the valuation of the shares proposed which has to determine by the two factors itself: (1) during last 6 months, the highest price paid by any of the person or group of persons for acquisition of shares. (2) The fair prices of the shares is also determined by the registered valuer after taking in to account the parameters for valuation of shares of the company.

Note: In the Schedule I of section 230, the application fee for comprise arrangement and amalgamation has been substituted to Rs. 5000/.


The application under sub-section (1) of section 230 of the Companies Act can be submitted in prescribed Form no. NCLT-1, along with a notice of admission in prescribed Form No. NCLT-2, with an affidavit in prescribed Form No. NCLT-6. The copy of scheme of arrangement shall include disclosures as per sub-section (2) of section 230 of the Act and also the fees as prescribed in the Schedule of Fees. Such amendment is made in the sub-rule of this main rule when one company is involved in a scheme of arrangement in relation to which an application is made. The principal rules has been published in the Gazette of India, Part II, Section 3, sub-section (i) vide number G.S.R 1134 (E), dated the 14th December, 2016 and amended vide notification number G.S.R. 368(E) dated the 13th April, 2017. Now it is further Amendment Rules 2020.


Soumya Bajpai

Soumya has done LLB (Hons) and has a 2+years experience in writing. Her main interest is in reading judgments, new enactments and amendments taking around in law. She always strives to bring the best to work that she does.

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