Dr.

Shakuntala misra national rehabilitation university

FACULTY OF LAW

ASSIGNMENT ON TOPIC

“Cross border Mergers- Boon or Bane?”

SUBJECT: - Corporate Law - II

COURSE: - B.COM LL.B (HONS.)

SEMESTER: - 6th

SUBMITTED BY: - Ujjawal Prakash

ROLL NO.: - 194140051

Acknowledgement
AT THE VERY FIRST INSTANCE, I WOULD LIKE TO THANK MY
PROFESSOR, MR. SHAIL SHAKYA, WHO GAVE ME THE WONDERFUL
OPPORTUNITY TO EXPLORE AND DO MY RESEARCH IN MY FIELD OF
INTEREST “CROSS BORDER MERGERS- BOON OR BANE?”.
SECONDLY, I WOULD LIKE TO THANK MY FAMILY. MY MOTHER, MRS.
AMITA SRIVASTAVA, WHOSE LOVE AND WARMTH HELPED ME
THORUGHOUT. MY FATHER, MR. GYAN PRAKASH, WHO’S STRICT
NATURE, HELPED ME STAY FOCUSED. MY YOUNGER BROTHER AND
ELDER SISTER WHO HELPED ME IN GIVING THE FINAL TOUCHES TO
THIS ASSIGNMENT.
AT THE LAST BUT NOT THE LEAST I WOULD LOVE TO THANK ALL MY
FRIENDS, WHO WERE NOT THERE WITH ME PHYSICALLY, BUT
SHOWED THEIR FULL SUPPPORT THROUGH VARIOUS MEANS IN
SUCH A DIFFICULT TIME.

THANKS A LOT!

INTRODUCTION
The topic we deal with today is “ Cross-Border Mergers – Boon or Bane?”. Cross-Border
Mergers, what exactly does the term suggest? The term Cross-Border Merger explained in
simplistic terms is a merger of two companies which are located in different countries
resulting in a third company. A cross-border merger could involve an Indian company
merging with a foreign company or vice versa. A company in one country can be acquired by
an entity (another company) from another country. The local company can be a private,
public, or state-owned company. In the event of the merger or acquisition by foreign
investors referred to as cross-border mergers and acquisitions.

Now coming to the questioning part of our topic, whether such mergers are a boon or a bane?
To answer such a question, we must first know what is a boon or a bane. Anything is termed
as a boon if it is of a very helpful or useful nature to mankind. Whereas a bane is anything
that causes trouble to people in one way or the other. While I was in school, in different
classes I was asked to write essays and articles determining if a thing is a boon or bane. Now
is the time I realise that there not a single true boon which does not act as a bane.

Everything that we may see as a boon act as a bane for some other person. For ex. The most
common appliance in every household, the television, a boon for those who want to learn and
gain knowledge but a bane for those who waste their priceless time sitting in front of the big
screen doing nothing. Be it smartphones, be it washing machines or Air conditioners or any
other thing we may feel is a boon, acts as a bane too. So, let’s ponder the question that if we
can actually define whether cross-border mergers are a boon or a bane!

Cross-Border Mergers

Cross-border Mergers refer to a transaction between two or more companies of different

countries. It can also be referred to as an overseas merger and acquisition. In such a
transaction, the assets and operations of two (or more) companies belonging to different
nations combine to establish a new legal entity. This results in a transfer of the control of
assets and operations from a local company to a foreign company or vice-versa; the former
becoming an affiliate of the latter. Section 234 of the Companies Act, 2013 notified by the
Ministry of Corporate Affairs provides the legal framework for cross-border mergers in India.
This has been brought into effect from 13th April, 2017, hence operationalising the concept
of cross-border merger.

Legal terminology in the cross-border mergers involves two countries:-

A.) The state where the origin of the companies that make an acquisition (the acquiring
company) in other countries: – “Home Country”.

B.) A country where the target company is situated refers to as the “Host Country”. 

Types of Cross-Border Mergers:-

1. Inbound M&As:- In this process, a foreign company merges with or acquires an

Indian company.
E.g., Daichi Acquiring Ranbaxy
2. Outbound M&As:- In this process, an Indian company merges with or acquires a
foreign company.
For E.g., Tata steel Acquires Corus

Procedure Of “MERGER OR AMALGAMATION OF COMPANY WITH

FOREIGN COMPANY” u/s 234 of Companies Act, 2013:-

1) The provisions of this Cross-border merger unless otherwise provided under any
other law for the time being in force, shall apply mutatis mutandis to schemes of
mergers and amalgamations between companies registered under this Act.. And,
companies incorporated in the jurisdictions of such countries as may be notified from
time to time by the Central Government. Provided that the Central Government may
make rules, in consultation with the Reserve Bank of India, in connection with
mergers and amalgamations provided under this section.
2) Subject to the provisions of any other law for the time being in force, a foreign
company, May with the prior approval of the Reserve Bank of India, merge into a
company registered under this Act or vice versa. And, the terms and conditions of the
scheme of merger may provide, among other things, for the payment of consideration
to the shareholders of the merging company in cash, or in Depository Receipts, or
partly in cash and partly in Depository Receipts, as the case may be, as per the
scheme to be drawn up for the purpose. 
3) A foreign company incorporated outside India may merge with an Indian company
after obtaining prior approval of Reserve Bank of India and after complying with the
provisions of sections 230 to 232 of the Act and these rules.
4) A company may merge with a foreign company incorporated in any of the
jurisdictions specified in Annexure B after obtaining prior approval of the Reserve
 Bank of India and after complying with provisions of sections 230 to 232 of the Act
and these rules.
5) The transferee company shall ensure that valuation is conducted by valuers who are
members of a recognised professional body in the jurisdiction of the transferee
company and further that such valuation is in accordance with internationally
accepted principles on accounting and valuation. A declaration to this effect shall be
attached with the application made to Reserve Bank of India for obtaining its
approval under clause (a) of this sub-rule.

Advantages of cross border M&A

Despite the various challenges that crop up in a cross-border transaction, it is a mechanism

that fosters the growth of the company and increases its shareholder value. Cross-border
M&A provides easy access to new markets and customers. Following are the various benefits
of a cross-border transaction: 

 Quicker and easy access to new markets. 

 Enables companies to scale through acquisition.

 Helps in absorbing a competitor.

 Expansion of markets

 Geographic and industrial diversification

 Technology transfer

 Avoiding entry barriers & Industry consolidation

 Tax planning and benefits Advertisement

 Foreign exchange earnings & Accelerating growth

 Utilisation of material and labour at lower costs

 Increased customers base & Competitive advantage

Risks and challenges posed by cross border merger and acquisitions

There are various advantages of cross-border transactions like expediting time to market,
gaining access, scale, brand recognition, and mitigating competitive moves. But like with
every strategic decision, rewards come with certain risks. All jurisdictions do not offer
stringent legal protections as various businesses have found to their costs as they might have
expected in their homelands.

The specific challenges that arise during such transactions are: 

 Imposition caps on foreign investments in the country where the target company is
situated. 

 Fetching relevant information about the target company might be an issue. 

 There may be disclosure and reporting requests to be untangled and complied with.

 Complex tax structures 

 The legal processes in the foreign land may be complex and not similar to those in the
home country. 

 The other country might have stringent labour laws and might have considerable
obligations of consulting with unions and work councils. 

 Costlier and complex due diligence process. 

 Cultural differences and a difference in approach might lead to more nuanced

negotiations. 

 The probable requirement of regulatory clearance to further proceed with the deal as
in, due to competition law and/or antitrust concerns. 

 A possible conflict in the regulatory and/or taxation regimes of the countries. 

 The expenses and length of complying with the target’s regulatory regime. 

 Political challenges and government interference in the target’s company’s

jurisdiction. 

 There might be implicit challenges from politicians if the target provides a vital public
service or a considerable number of jobs. 

 A substantial increase in the operating costs due to the difference in the legal
landscape might make the acquisition less profitable in the long run. 
 Conclusion

As we saw above like every other boon cross border merger also adds some demerits to its
side along with some major merits. As it is popularly said in the corporate world– “ Greater
the Risk, the Better is the Reward.” The same goes with the Cross-Border Mergers, these
kinds of mergers can prove to be a boon but also have some very concerning risk factors. If
the things go the right way, then is the chance we can call such mergers as a Boon or else we
are left with no choice but to call it a Bane.