A Complete Guide on Fast Track Mergers and Amalgamation
Performing a Merger or Acquisition is tiresome and challenging in nature, especially if it concerns small entities. To deal with this challenge, the Ministry of Corporate Affairs (MCA) announced fast track mergers on 15 December 2016, and have been given under Section 233 of Companies Act, 2013 read with Rule 25 of the companies (Arrangements, Compromises and Amalgamations) Rule, 2016. Scroll down to check more information regarding the fast track mergers and amalgamation.
The idea of Fast Track Mergers and Amalgamation
Companies Act, 2013 (Section 233) announced the idea of the fast track merger process, which furnishes a more simple procedure for Mergers and Amalgamations of certain classes of entities such as small companies, subsidiary and holding entities.
According to this process, it permits these entities or companies to experience the Merger and Amalgamation process easily, rapidly, and within the prescribed time duration. Companies Act, 2013, informs that it applies to all kinds of understandings and compromise that consists of these companies.
When compared with conventional mergers procedure, the new act has made the process easy and simple as it does not further indulge in the judicial process as concerned with the National Company Law Tribunal (NCLT). Further, the entities are now required to take consent from just three regulatory authorities, namely – Registrar of Companies, Official Liquidator, and Regional Directors.
According to Section 233(1) of the Companies Act, 2013, the scheme of Merger and Amalgamation under the proposed provisions can be entered into between the following:
- Two or more small entities or companies;
- Holding Company and its completely-owned subsidiary company;
- Other classes of specified companies.
It is worth describing here that such class of companies would also be appropriate for out of Tribunal or Court process of arrangement or compromise as per Section 233 (12) of Companies Act, 2013. Such arrangement or settlement may be:
- Between the creditors and Company or any class of them;
- Between the Company and their members or any class of them.
Procedure of Fast Track Mergers and Amalgamation
Following is the procedure of fast track mergers and amalgamation:
- There should be the power to amalgamate with other entities in the MOA (Memorandum of Association) of the companies that want to merge. In case no such power is delivered in the MOA (Memorandum of Association), then obtain the Memorandum of Association) to be changed to insert the provision authorising the entity to get it combined with other companies;
- The transferee and transferor companies should prepare the provisional financial statements as of the date;
- These entities should also prepare the Merger Scheme;
- The Meeting Board should be convened to consent to the Merger Scheme. In this meeting, Form CAA 9 should be delivered, which entities should further send it to the Registrar of Companies (ROC) and Official Liquidator;
- As per Rule 25 sub-rule (1), file notice of proposed scheme to the Registrar of Companies and Official Liquidator to invite their refusals or suggestions, if any, in Form CAA-9;
- If there are any recommendations or objections, the Registrar of Companies will take thirty days to give recommendations or objections;
- In case of recommendations or objections from the official liquidator, they will take thirty days to provide such recommendations or objections;
- As per Rule 25 Sub-rule (2), Declaration of Solvency CAA-10 to be filed by the entities with the Registrar of Companies;
- No Objection Certificate to be dated once CAA-10 is filed and before EGM for the final consent of scheme;
- Transferee & transferor entities should convene the Meeting of Board to call the EGM;
- As per Rule 25 Sub-rule (3), a notice of the meeting must be joined with the Declaration of Solvency and detailed statement, CAA-10;
- The objections and merger scheme or suggestions attained from the Registrar of Companies and official liquidator, if any, would be deemed in the meeting, and the scheme shall have consented;
- As per Section 233 (4), written approval to be attained from the creditors in place of convening the meeting of creditors;
- File Form MGT-14 for the submission of shareholders resolution;
- Intimation should be sent concerning the consented scheme to all the regulatory authorities;
- As per Rule 25 Sub-Rule 4(a), submit Form CAA-11 in Form GNL-a to the Registrar of Companies within seven days after the completion of General Meeting and should comprise a detailed statement as needed in GNL-1. It should be submitted by the transferee only for both the entities;
- Submit the Form CAA-11 manually to the Regional Director & official liquidator within seven days after the completion of the General Meeting. It must be submitted only by the transferee company for both entities;
- Regional Director shall send the questionnaire to be answered within seven days by the transferee of the Company;
- Once the submission made by the entity is deemed, the Regional Director may decline or consent to the scheme;
- As per Rule 25 Sub Rule (6), an order for the consent of the scheme would be attained in Form CAA-12. The order can be anticipated within sixty days as the limited time for filing the application with the Tribunal for the decline of application is sixty days;
- File Form INC-28 for the order attained within one month of getting the order for the consent of the scheme.
With fast track mergers and amalgamations, entities have been able to experience the merger and amalgamation process easily, rapidly and within the duration of time fixed. Entities are now required to take consent from Regional Directors, Official Liquidator, and Register of Companies (ROC).
Read our article:Procedure for Merger and Amalgamation: A Complete Guide