Professional Documents
Culture Documents
Amalgamation and Mergers
Amalgamation and Mergers
Appointed Date
Effective Date
Record Date
Transferor Company- Can be any body Corporate
Transferee Company – Can only be company under
this Act.
The Procedure
The Terms used
Compromise -- “a dispute, a sacrifice”
Arrangement – “parties agree without any
dispute between them”
“Compromise and arrangement covered u/s 391 are of
the widest character, ranging from a simple composition
or moratorium to an amalgamation of various
companies, with a complete reorganisation their share
and loan capital….. Sec 391 is a complete code by itself”
–Navjivan Mills Co. Ltd In re.(1972) Comp. Cas.265
(Guj.)
The Procedure…
To Review of Memorandum of Association
-to verify that power to amalgamation is
available
-transferee has power to carry on the business
of the transferor company.
Value the Company and determine value of
shares as of appointed date
The Scheme of Merger/Amalgamation
- Transfer of Licences, permits, Sanctions
The Procedure…
Hold the Board Meeting of both companies and approve
in principle the amalgamation
File the applications to the Court
File details of Shares of held by Non Residents with RBI
(FEMA/20 Para 7)
Court appoints chairman for both the companies
Prepare Notice convening the Meeting
Court appointed chairman convenes shareholders
meeting (Certificate of Posting)
Paper advertisement of the notice
The Procedure…
Pass the resolution by poll
On the same day the transferee company can hold EGM
to increase the authorised capital/81(1A) resolution
Get the minutes of the meeting approved by the court
appointed chairman
Petition to high courts seeking approval of the scheme
High court sends copy of petition to the central Govt
(R.D.) And official liquidator seeking their report that the
affairs of the company have not been conducted in a
manner prejudicial to the members or public interest
The Procedure…
Public Notice in local dailies intimating the hearing date of
the petition by the advocate
Official Liquidator on scrutiny of the books and papers of
the company files his report to the Court in respect of
transferor companies being wound up.
Where the Court Passes an order providing for transfer
any property or liabilities then, the properties shall be
transferred to and vest in, and liabilities shall become
liabilities of transferee company.
--The Dept does not permit transfer of Authorised
Capital….. (property includes powers of every description)
The Procedure…
File the Certified copies of the Court orders with ROC within
30 days
Attach Copy of the order made by Court u/s 391(2) to every
Memorandum of the company
Intimation to Stock Exchanges, and apply for in principle
approval for allotment of shares
Apply to RBI for getting in principle approval to allot shares to
Non Residents ( Approval from FIPB in case % increases)
Fix the Record Date
Convene Board Meeting and allot shares as per the Scheme
File the return of allotment (Which Form to be used)
Post Merger
Board Meeting
Intimation to Stock Exchanges
General Intimation in news papers
Transfer of Licences, Registrations, Bank Accounts, Mutation
of Title Deeds, RC Books of vehicles, Insurance policies, PF,
ESI, Sales Tax
Action plan for integration in Finance and Accounts
Intimate the Auditors of the transferor company
Any pending legal cases to be in the name of transferee Co.
(Obtain sufficient copies of Certified order of the Court)
What happens to Remuneration of Directors where Appointed date is
substantially larger?
Precedents
Tenancy rights cannot be transferred to
transferee company– General Radio & Appliances Co. Ltd. V.
M.A. Khader (1986) 60 Company Cas.1013
Employees cannot be compulsorily transferred to
another under a scheme—John Wyeth (India) Ltd., In. re.
(1988) In. re. (1988) 63 Comp. Cas.233 (Bom)
Who can file petition under Section 391?
Creditor, member or liquidator in addition to the company only can
move a petition u/s391 -- S.K. Gupta Vs. KP Jain (1979) Comp. Cas.
342 (SC)
Precedents…
Rights of creditors or members of a
company to make an application u/s 391
are not taken away after winding up order
has been passed -- Rajdhani Grains & Jaggery
Exchange Ltd., In re (1983) 54 Comp. Cas.166 (Delhi)
It is not compulsory for Court to give direction to
convene a meeting contemplated under Section 391(1)–
Sakamari Steel & Alloys Ltd. In re (1981) 51 Comp.
Cas.266 (Bom)
Precedents…
Scheme once sanctioned becomes
binding and cannot be varied except with
the Sanction of Court—JK (Bombay)(P) Ltd.
Vs.New Kaiser-I-Hind Spg. & Wvg. Co. Ltd (1970) 40
Comp. Cas.689 (SC)