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Corporate Restructuring through Compromises, Arrangements and Amalgamations


Corporate restructuring through Compromises, arrangements and amalgamations is provided under the Companies Act 2013[1]. In this article we shall discuss various sections relating to it.

Salient Features of Companies Act, 2013 relating to Corporate Restructuring (Section 230- 240)

  • National Company Law Tribunal assumed jurisdiction of High Court.
  • Section 230(1) – Provides that the Compromises or arrangements may be proposed between the company and its Creditors or the Company and its members.
  • Section 230(2) – Application for compromises or arrangements shall be submitted before the NCLT accompanied by an affidavit, disclosing:
  • All material facts relating to the company.
  • Reduction of capital if any included in the compromises or arrangements.
  • Any scheme of corporate debt restructuring consented to by not less than 75% of the secured creditors in value along with creditors responsibility statement, safeguard for the protection of other secured and unsecured creditors, report of the auditor as to the funds’ requirement etc.
  • Section 230(3) – Notice relating to compromises or arrangements and other documents shall be sent to all the members, creditors, debenture holders and also to be placed on the website of the company. The notice shall contain a statement disclosing the effect of the corporate action on all the stakeholders separately.
  • The proviso to Section 230(4) – Persons holding not less than 10% of the shareholdings or persons having outstanding debt amounting to not less than 5% of the total outstanding debt as per the latest audited financial statement, entitled to object the scheme of compromises or arrangements.
  • Section 230(5) – Notice of meeting for approval of the scheme of compromises or arrangements be sent to various regulators including:
  • The Central Government;
  • Income-tax Authorities;
  • Reserve Bank of India (`RBI’);
  • Securities and Exchange Board of India (`SEBI’);
  • The Registrar;
  • Respective Stock Exchange;
  • Respective Stock Exchange;
  • The Competition Commission of India; if necessary; and
  • Other Sectoral regulators which could likely be affected by the scheme.

Representation, if any, by the above authorities will have to be made within a period of 30 days from receipt of a notice

  • Section 230(6) –Approval of scheme by the majority of persons representing three-fourths in value of members or creditors. Such approved scheme, when sanctioned by a tribunal shall be binding on the company, all creditors, and members or on liquidators (in case of a company being wound up).
  • Section 232(1) – It deals with the scheme of compromise and arrangement wherein it has been proposed for the purpose of reconstruction of the company or the merger or amalgamation of two or more companies.
  • Section 233 – Fast track mergers introduced to enable fast-track merger without the approval of NCLT, between:
  • Two or more small companies. A small company is defined under the Act.
  • Holding and its wholly owned subsidiary company.
  • Other class of companies as may be prescribed.
  • Section 233 (10) – provides that the transferee company cannot hold any shares in its own name or in the name of any trust, or on behalf of any of its subsidiary or associate company. It is necessary that all such shares need to be cancelled and extinguished upon the merger.
  • Section 234- Merger or Amalgamation of the company with Foreign Company. It provides that a foreign company can merge into a company with the prior approval of Reserve Bank of India.
  • Section 237- Central government can provide for amalgamation of companies in the public interest. If the central government is satisfied that in the public interest it is necessary that  two or more companies should amalgamate then it can provide for the amalgamation of companies into one.
  • Section 238- Preservation of books and papers of amalgamated companies. This section provides that the books and papers of the company that has been amalgamated with or whose shares has been acquired b another company will not be disposed of without the prior permission of Central government.
  • Section 240- This section deals with the liabilities in respect of offences committed before merger, amalgamation etc. The liability in respect of these offences under this act by the officers in default prior to the company’s merger, amalgamation or acquisition will continue after the merger, amalgamation or acquisition.


Corporate restructuring helps in enhancing economy and improves efficiency. If a company seeks to grow and survive in a competitive environment then it has to restructure itself and focus on competitive advantage.

Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

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