Approval of Shareholders:

Section 230-232 of the Companies Act, 2013, deals with compromises, arrangements,
and amalgamations. Shareholders' approval is a crucial step in the merger process. A
company needs to obtain approval from a requisite majority of shareholders, as
specified in the Act.

Approval of Creditors:

In addition to shareholder approval, the approval of creditors may be required.

Creditors' meetings are convened to seek their consent for the proposed merger.

Scheme of Arrangement:

The merger process typically involves the preparation of a scheme of arrangement.

This scheme outlines the terms and conditions of the merger, including the share
exchange ratio and other relevant details. Sections 230-232 provide the legal
framework for such schemes.

Regulatory Approvals:

Depending on the nature of the business and industry, mergers may require approvals
from regulatory bodies such as the Competition Commission of India (CCI) to ensure
that the merger does not lead to a monopoly or have an adverse impact on
competition.

Court Approval:

After obtaining shareholder and creditor approvals, the scheme of arrangement is

submitted to the National Company Law Tribunal (NCLT) for approval. The NCLT
examines the scheme to ensure it is fair and reasonable to all stakeholders.

Protection of Minority Shareholders:

The Companies Act, 2013, includes provisions to safeguard the interests of minority
shareholders. The NCLT ensures that minority shareholders are not unfairly
prejudiced by the merger.

Transfer of Assets and Liabilities:

The process involves the transfer of assets and liabilities from the merging companies
to the newly formed or surviving entity. The legal aspects of asset transfer, including
regulatory compliance and taxation, are considered.
Employee Protection:
The Companies Act includes provisions related to the protection of employees'
interests during mergers. Employee contracts and benefits are often a key
consideration in the merger process.
The Effect of Company Law
All mergers in India must be approved by the National Company Law Tribunal
(NCLT), and the Companies Act requires that at least 75% of the relevant
shareholders and creditors consent to the merger.
In the event of an unlisted corporation, a report from a registered valuer chosen by the
board of directors or audit committee is also required.Before the annual general
meeting, the share swap ratio and this share exchange must be made public.
For a merger to be tax-neutral, all of the merging company’s assets and liabilities must
be transferred to the merged entity, and at least 75% of the merging company’s
shareholders must become shareholders of the merged entity.According to Indian tax
law, shareholders of the merging firm who receive shares in the combined company in
exchange for the transfer are exempt from paying capital gains tax on the gains if the
merged company is an Indian corporation.
Section 68 of the Income Tax Act would not apply to the transaction because a share
swap involves shareholders receiving shares of the acquiring company as part of the
deal and is not a share transfer.As a result, investors in the acquired company are
exempt from capital gains tax.
Tax authorities also closely examine merger agreements that only involve the transfer,
rollover, or set-off of losses from the merging company for tax purposes.A merger
plan that has been approved by the NCLT is typically regarded as tax-neutral unless
Indian tax authorities believe that the agreement was drafted to avoid paying taxes or
to violate general anti-avoidance laws.