Mergers & acquisitions involve a great deal of critical business, legal, financial, & d...
A scheme of the merger & acquisition is to be submitted before NCLT along with the application for a scheme of merger, the scheme shall contain the following:
It includes the Name, CIN, the address of the two companies merging and a brief history of the company.
This includes the reason of Merger & Acquisition, what made companies go for the merger & acquisition, let say. Greater financial strength and flexibility improve the economic and competitive position of the combined entity; for future growth and expansion and to create a business structure, Reduction of overheads and other expenses; reduced regulatory compliance thereof etc.
Necessary terms which are required to be defined that are relevant to understand the scheme let’s say:
Details of authorized share capital and issued share capital as on date of start of the merger & acquisition of both companies are required to be mentioned.
This part shall contain all the details of all contracts, deeds, bonds, agreements, arrangements and other instruments of whatsoever nature to which the Transferor Company is a party or to the benefits of which the Transferor Company may be eligible and which are subsisting.
Upon the coming into effect of this Scheme, what and how the accounting treatment in the books of accounts will be done should be mentioned.
What will be the effect on all taxes, levies, cess etc. (whether direct or indirect) when the merger & acquisition has not become effective for any tax liability that arises after the Appointed Date
This Scheme should be framed in compliance with the definition and conditions relating to “Merger” as specified under Section 2(1B) and Section 47 of the Income-tax Act, 1961.
With effect from the Appointed Date and up to the Effective Date what will be the status of the business of the transferor and transferee company shall clearly state.
What will be the effect on all suits, actions, writ petitions, revisions or other proceedings by or against the Transferor Company pending and/or arising on or before the Effective date?
Employees are to be taken either on rolls of the newly forming company or contract or whatever is the terms and its effective date should be mentioned.
If any then it should be detailed about the price of shares number of shares to allotted and other information about it.
Upon sanction of this Scheme of merger, the Authorised Share Capital of the Transferee Company shall automatically stand increased, is there any further action required?
How the application should be made either through the dispensation of meetings or for directions of holding and conducting of the meeting(s) of the members and/or creditors of these companies, as may be directed by the Tribunals.
What should be the modus of giving it effect to any modification/amendments, like through resolution of BOD?
What shall happen in the event of any approvals or conditions enumerated in the Scheme not being obtained or complied with, or for any other reason, the Scheme cannot be implemented.
Who shall be bearing the costs, charges, and expenses, including any taxes and duties of the merging companies shall bear?