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Merger and Acquisitions is a vital process but complicated one also. After the order of the tribunal is passed under Section 230-232 of the Companies Act 2013, certain steps should be taken by the transferor or transferee Company or both. In this article, we have discussed the major post merger compliances.
Table of Contents
Merger is a corporate strategy to combine with other company and function as a single legal entity. Usually, companies deciding to merger are equal in size and in terms of scale of operations.
Merger unifies two existing companies into one new company, and there are few kinds of mergers, and there may be many reasons why businesses decide to merge. Mergers are done to extend the size of the business, grow into new markets or gain market share.
Now, let us look at the post merger compliances.
The major compliances that should be undertaken after the merger have been briefly discussed below:
Transferor companies need to intimate the concerned officers regarding the mergers by filing the copy of the order. They should request concerned officers to transfer the file to the officers of the transferee company. Further transferor companies should surrender their PAN cards and also intimate the TDS officers and make application for cancellation of the TAN number and transfer of TDS.
Transferee Company is required to intimate the concerned officer regarding the merger by filing the copy of the order. If the amalgamating company has unabsorbed loss and or cumulated business loss, to get the benefit of the same, the transferee company is required to comply with the conditions prescribed under Section 2(1) (b) and Section 72A of the Income Tax Act 1961.
It may be noted that the transferor company and transferee companies will remain separate entities until the date of order by the NCLT.
Further transferor companies shall apply for the surrender of their registration certificates and also apply for the transfer of the unutilized cenvat credit to the Transferee Company.
The copy of the order to be served in case where the Transferor Company or the Transferee Company or both are NBFC.
4. Treasury under the Stamp Act
A stamp duty of 0.05% in case of transfer of immoveable property/ies from the Transferor Company to the Transferee Company.
The post merger compliances related to accounting aspects include the following:
Post merger compliances is crucial in order to get the desired results after the merger between two companies. You should ensure that the execution of such compliances is carried out within the time and that adequate care is given to such obligations so that the merged entity gets the desired results. As specified at the beginning of this article, companies may merge due to various reasons such as to obtain economies of scale, increase market share, to gain technical understanding and such other reasons. If the process of merger and compliances afterwards is not executed in a planned manner, then the objective of such merger may get defeated.
Read our article:Use of AI in M&A Due Diligence – Its Benefits and Drawbacks
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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