Executing a Merger or Acquisition is tedious and complex in nature, especially if it relates to small companies. To deal with this conundrum, the Ministry of Corporate Affairs introduced fast-track mergers on December 15, 2016, and have been provided under section 233 of Companies Act, 2013 read with Rule 25 of the Companies (Compromises, Arrangements & Amalgamations) Rules, 2016. In this article, we shall discuss fast track mergers and amalgamation.
Concept of Fast Track Mergers and Amalgamation
Section 233 of the Companies Act, 2013 introduced the concept of Fast Track Merger Process, which provides a more straightforward procedure for mergers and amalgamations of certain classes of companies like small companies, holding and subsidiary companies.
As per this process, it allows these companies to undergo merger and amalgamation procedures easily, quickly and within the time duration fixed. The Companies Act, 2013 notifies that it applies to all sorts of compromise and arrangements that include these companies.
When compared with the traditional mergers process, the new Act has made the procedure simple as it doesn’t further involve judicial process as concerned with the National Company Law Tribunal. Moreover, the companies are now required to take an approval from just three regulatory authorities, namely- Regional Directors, the Registrar of Companies & Official Liquidator.
As per Section 233(1) of Companies Act, 2013, the scheme of merger/amalgamation under the said provisions can be entered into between the following:
- two or more small companies;
- holding company & its wholly-owned subsidiary company;
- other class of prescribed companies.
It is worth mentioning here that these class of companies would also be eligible for out of Court/Tribunal process of compromise or arrangement as per Section 233(12) of the Companies Act 2013. Such compromise or arrangement may be:
- Between the company and creditors or any class of them; or
- Between the company and its members or any class of them.
Procedure of Fast Track Mergers & Amalgamation
The procedure can be summarized as below:
- There should be the power to amalgamate with other companies in the MOA of the companies that wish to merge. In case no such power is provided in the MOA, then get the MOA to be amended to insert the provision empowering the company to get it merged with other companies.
- The Transferor and transferee companies should prepare the provisional financial statements as on the date.
- These companies should also prepare the Scheme of Merger.
- The Board Meeting should be convened to approve the Merger Scheme. In that meeting, form CAA 9 should be furnished, which companies should further send it to the Registrar of Companies and Official Liquidator.
- According to Rule 25 Sub-rule (1), file Notice of proposed scheme to the ROC and Official Liquidator to invite their rejections or suggestions, if any, in Form CAA-9.
- If there are any objections or suggestions, ROC will take 30 days to give objections/ suggestion.
- In case of Suggestions/Objections from the official liquidator, he will take 30 days to give such objections/suggestion.
- According to Rule 25 Sub-rule (2), Declaration of Solvency CAA-10 to be filed by the Companies with ROC.
- NOC to be dated once CAA-10 is filed and before EGM for the final approval of Scheme.
- Transferor and transferee companies should convene the Board Meeting to call the EGM.
- According to Rule 25 Sub-rule (3), a notice of the meeting should be accompanied with Declaration of Solvency and Detailed statement, CAA-10.
- The scheme of merger & Objections or suggestions obtained from the ROC & Official liquidator, if any, would be considered in the meeting, and the scheme shall be approved.
- According to Section 233 (4), written consent to be obtained from the creditors in place of convening the creditors’ meeting.
- File Form MGT-14 for the submission of Shareholders resolution.
- Intimation must be sent regarding the approved scheme to all the regulatory authorities.
- According to Rule 25 Sub-rule 4(a), submit Form CAA -11 in Form GNL -1 to the ROC within 7 days after the completion of General Meeting and must contain a detailed statement as required in GNL-1. It must be submitted by the transferee company only for both the companies.
- Submit the Form CAA -11 manually to the official liquidator and Regional Director within 7 days after the completion of General Meeting. It should be submitted only by the transferee company for both companies.
- Regional Director will send the questionnaire to be answered within 7 days by the transferee company.
- Once the submission made by the company is considered, the Regional director may reject or approve the scheme.
- According to Rule 25 Sub Rule (6), Order for approval of the scheme would be obtained in Form CAA-12. The order can be expected within 60 days as the time limit for filing the application with Tribunal for rejection of application is 60 days.
- File INC-28 for the order obtained within a month of receiving the order for the approval of the scheme.
With fast track mergers and amalgamations, companies have been able to undergo merger and amalgamation procedures easily, quickly and within the time duration fixed. Companies are now required to take an approval from Regional Directors, the Registrar of Companies and Official Liquidator.
Read our article:Companies (Compromise Arrangements & Amalgamations) Amendment Rules 2020
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.