Section 233 of the Companies Act, 2013 introduces the globally accepted concept of Fast Track Merger Process which introduces a slightly simpler procedure for mergers and amalgamations of certain classes of companies including small companies, holding and subsidiary companies. Under this process, it enables these companies to undergo merger and amalgamation procedures quickly, simply and within fixed time duration. The Companies Act, 2013 clearly notifies that it applies to all kinds of compromise and arrangements that involve these companies.
In comparison to traditional mergers process, the new Act has simplified the procedures as it no further involves judicial process as concerned with the National Company Law Tribunal. Now the companies are required to take an approval from only three regulatory authorities, i.e. Regional Directors, the Registrar of Companies and Official Liquidator.
In terms of Section 233(1) of Companies Act, 2013, a scheme of merger or amalgamation under the said provisions may be entered into between:
i. two or more small companies
ii. a holding company & its wholly owned subsidiary company.
iii. other class of prescribed companies.
The above mentioned class of companies would also be eligible for out of Court/Tribunal process of compromise or arrangement in terms of Section 233(12) of the Companies Act 2013. Such compromise or arrangement could be:
i between a company and its creditors or any class of them; or
Procedure under the Fast Track Mergers & Amalgamation
The procedure under the Fast Track Mergers & Amalgamation may be summarized as below:
- There must be power to amalgamate with other companies in the Memorandum of Association (MOA) of the companies seeking to merge. If not such power provided in the MOA then as a first step get the MOA to be amended to insert the provision empowering the company to get itself merged with one or more other companies.
- Transferor and transferee companies needs to prepare the Provisional Financials statements as on the date.
- Transferor and transferee companies needs to prepare the Scheme of Merger.
- Board Meeting needs to be convened to approve the Merger Scheme-In the same meeting form CAA 9 needs to be furnished which companies needs to send it to Registrar of Companies (ROC) and Official Liquidator (OL).
- As per Rule 25 Sub rule (1), filing of Notice of proposed scheme to ROC & official Liquidator for Inviting their rejections/Suggestions, if any in Form CAA-9.
- Revert from ROC on Suggestions/ Objections, if any-Roc will take 30 days to give objections/ suggestion
- Revert from Official Liquidator on Suggestions/ Objections, if any-OL will take 30 days to give objections/ suggestion
- As per Rule 25 Sub rule (2), Declaration of Solvency CAA-10 to be filed by the Companies with ROC-Declaration of solvency has to be filed with ROC before sending the notice for convening the meeting of creditors & members.
- NOC from Creditors (Secured & Unsecured)- NOC to be dated after filing of CAA-10 and before EGM for final approval of Scheme
- Transferor and transferee companies needs to convened the Board Meeting to call the EGM
- As per Rule 25 Sub rule (3), Notice of General Meeting-Notice of the meeting should be accompanied with Declaration of Solvency & Detailed statement, CAA-10
- General Meeting for approval of scheme-The scheme of merger & Objections or suggestions received from ROC & Official liquidator, if any will be considered in this meeting & the scheme will be approved.
- As per Section Sec 233 (4), Approval of the scheme by creditors 9/10th in value of companies either in Meeting or otherwise approved in Writing-Written consent to be obtained from the creditors in place of convening the meeting of the creditors.
- Filing of Form MGT-14 for submission of Shareholders resolution
- Intimation of the approved scheme has to be send to all the regulatory authorities.
- As per Rule 25 Sub rule 4(a), Submission of Form CAA -11 in Form GNL -1 to ROC-Within 7 days after Conclusion of General Meeting, and Should contain a detailed statement as required in GNL-1 (This has to be submitted only by the transferee company for both the companies).
- Submission of Form CAA -11, manually to Official liquidator and Regional Director-Within 7 days after Conclusion of General Meeting (This has to be submitted only by the transferee company for both the companies).
- Regional Director will send the questionnaire which needs to be answered within 7 days by the transferee company.
- After consideration of the submissions made by the company Regional director may reject or approved the scheme.
- As per Rule 25 Sub Rule (6), Order for approval of the scheme will be received in Form CAA-12-Order has to be expected within 60 days as the time limit for filing application with Tribunal for rejection of application is 60 days.
- As per Section 233(7), Filing of INC-28 for the order received-Within one month of Order received for the approval of the scheme.
Post-Merger Effects & Compliances
The registration of the scheme shall have the following effects, namely:
(a) Transfer of property or liabilities of the transferor company to the transferee company;
(b) The charges, if any, on the property of the transferor company shall be applicable and enforceable as if the charges were on the property of the transferee company;
(c) Legal proceedings by or against the transferor company pending before any court of law shall be continued by or against the transferee company;
(d) Surrender of PAN, IEC, GST, ESI, PF of the transferor company to the concerned Authorities.