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Introduction of Merger & Amalgamation

New Act has been introduced by the corporate organizations for regulating its business with the corporate-friendly regulations, improved disclosure norms, protecting minorities, therefore making the process of M&A smoother and more simplified. Companies Act 2013 seeks to simplify the process of merger, amalgamation, restructuring and facilitate domestic & cross-border amalgamation easier.

Definition of Merger & Amalgamation

The term "Merger" is not defined under the Companies Act, 1956 or Income Tax Act 1961. Though the Companies Act, 2013 does not strictly define the term, it has explained the concept of Merger & Amalgamation. It's a combination of two or more entities into one. The main objective is not to accumulate the Assets & Liabilities of the other entity but the conversion of two entities into a single.

Definition Of Merger & Its Types

Merger is a form of contract in which two or more companies join together or combine together in order to form a one separate company. Merger is a combination of two companies in to a single legal entity.

Following are the different type of mergers:

  • Horizontal merger: It is the type of merger when two firms operating in the same business field combine together. For example: acquisition of times bank by HDFC bank
  • Vertical merger: This merger is between the companies which are in the same supply chain. For example: a tyre manufacturing unit acquires a rubber manufacturer
  • Conglomerate merger: It refers to the merger of two companies that are unrelated to each other. It’s the combination of two companies in entirely different business. For example: watch manufacturer acquires cement manufacturing company. The main objective is to achieve big size.
  • Concentric merger: It’s the combination of two companies that are related in terms of common customer group, functions or technology. For example: merger of a computer manufacturer with the UPS manufacturer.
  • Forward merger: in these types of merger, Target Company merges into the buyer. For example: ICICI bank acquired Madura bank that was the target & it merged with ICICI bank
  • Reverse merger: in this buyer merge into target and the shareholders of the buyer company gets the shareholding in target.

Definition Of Amalgamation & Its Types

Amalgamation is one of the types of merger. It is defined as the combination of one or more companies to form a new company. It includes:

  • two or more company
  • to form a new company
  • one company is absorbed into another

Following are the different types of amalgamation:

  • Amalgamation in the nature of merger:

In this type of amalgamation entire business is pooled including assets, liabilities, and shareholder’s interest. In simple terms, all the assets & liabilities of Transferor Company becomes that of transferee. Business of the transferor company is carried on even after the amalgamation is completed. Shareholders holding 90% of the shares of the transferor company becomes the shareholders of the transferee company.

  • Amalgamation in the nature of purchase:

When the conditions of amalgamation of merger are not satisfied, such amalgamations are in the nature of purchase. Business of the company which is being acquired is not intended to be continued. Shareholders of the transferee company do not continue to have proportionate shares of the new combined company.



An application has to be filed with Tribunal (NCLT) in form NCLT-1 along with necessary documents. The application can be made by any of the both Transferor and Transferee. An application can be made in the form of a petition to the tribunal under Section 230-232 of Companies Act, 2013 to sanction of the scheme of amalgamation. The joint application can also be made in case there is more than one company involved. However separate petitions will be filed in case of two companies having a registered office in two different states.

Documents to be annexed with an application:

  • Notice of admission in form NCLT- 2
  • An affidavit in form NCLT-6
  • A copy of the scheme of Merger & Amalgamation
  • Disclosure in the form of affidavit including the following points:
  • Material facts of the company
  • Latest financial position
  • Any investigation or legal proceeding pending
  • Reduction or restricting of share capital, if any
  • Creditor’s Responsibility Statement in form no CAA-1

On receiving the petition for merger & amalgamation, if the tribunal thinks that the application is fit & proper & correct in all aspects, it will give such orders or direction for the meeting to be held of creditors or members. Such a meeting has to be called, fixed and conducted in the following manner:

  • Fix the time & place of the meeting
  • Appoint the chairperson or scrutinizer and fixing their terms and remuneration
  • Fixing the quorum and procedures to be followed at the meeting
  • Deciding the methods of voting such as voting in person, a proxy or through postal ballot
  • Determine the values of creditors or members whose meeting has to be held.
  • Notice has to be given along with its advertisement
  • Notice has to be given of such a meeting in form CAA-2.
  • Such notice has to be given individually to each creditor or members and the debenture-holders at their address registered with the Company.
  • Notice has to be sent by the person authorized for this such as Chairmen of the company or in case Tribunal directs for by the Company or its liquidator
  • Notice can be sent by Registered Post or by Speed post or even by a courier
  • It can also be sent via mail or even through hand delivery.

Following documents are required to be attached with notice:

  • Copy of scheme of amalgamation
  • Details of the order of Tribunal for directing to call & conduct the meeting such as date & time of the order received
  • Complete details of the company have to be given such as:
  • CIN Number
  • PAN of the Company
  • Name of the Company
  • Date of its incorporation
  • Type of company such as it is private, public, OPC, etc.
  • Registered Address
  • The capital structure of the company such as its Authorized Capital & Paid-up Capital
  • Name, Address and details of promoters & Directors.
  • In case of Joint application, then facts & details of the relationship between such companies including their subsidiary, holding or associated concerns
  • Details of the Board Meeting in which scheme of amalgamation was approved along with the complete details of directors who voted in its favor, against or even who did not vote or participated in the meeting.
  • An explanatory statement containing the details of the scheme of amalgamation that includes:
  • Parties involved
  • Appointed date
  • Effective date
  • Share Exchange Ratio
  • Summary of the Valuation report
  • Details of capital & debt restructuring
  • Amount due to unsecured creditors
  • Disclosing the effects of such amalgamation on the followings:
  • KMP
  • Directors
  • Promoters
  • Non-promoters’ members
  • Depositors
  • Creditors
  • Debenture holders
  • Deposit trustee
  • Employees
  • Shareholders
  • Details of any investigations or proceedings that are pending against the companies under amalgamation.
  • Details of the approval, sanction or NOC from the regulatory authority or any government authority that is received or pending for the proposed scheme of amalgamation
  • Statement to the effect that a person who is entitled to attend the meeting can vote in person, proxy or in electronic means.

The Tribunal if it is satisfied that proper procedure has been duly complied with, may order or direct by sanctioning such scheme of amalgamation & merger and make the provisions of:

  • For the transfer of assets, liabilities or property, in full or partial, of transferor company to the transferee company
  • Any legal proceeding or case pending against transferor company will be continued against or in the name of the transferee company
  • Dissolution of the transferor company
  • Transfer of all the employees of the transferor company to the transferee company
  • In the case of the transferor company is listed and transferee is unlisted, the transferee company remains unlisted until it lists its shares.
  • Every company under amalgamation & order is passed for such scheme, has to file with registrar such statement duly certified by CA, CS or CMA stating the scheme is being complied per the orders of Tribunal


Following are the difference between merger & amalgamation on the basis of different criteria:





Two or more companies are combined together to form a new separate company or a one existing company absorbs the existing target company. Merger is a process of consolidation of multiple businesses into one business entity.

It is one of the types of merger in which two or more companies are combined to form one new company.

Number of Companies involved

Minimum two as the one being transferor and other being transferee.

Minimum three companies are required as two companies are amalgamated to form one new company


In case of merger transferor company is relatively larger than transferee company

Size of the target companies is comparable.

Identity of resulting   company

One of the existing companies may absorb into target company, thus may retain its existence.

Existing company loses its identity and form a new company.


Shares of the transferor companies are given to the shareholders of transferee company

All the shareholders of the existing company become the shareholders of new entity

Accounting treatment

All the assets & liabilities of both the companies are consolidated

Assets & liabilities of the existing entity are transferred into the balance sheet of newly formed company


Types of mergers are horizontal, vertical and conglomerate

Amalgamation is of two types in the nature of purchase & in the nature of merger.

Controlling stake

It can be mutually agreed and discussed between the parties

Controlling stake remains with the company who acquires and minority remains the company being acquired

Frequently Asked Questions (FAQs)

Companies who have applied to M&A should have the power through its object clause of Memorandum of Association to undergo amalgamation more smoothly. Although in its absence is also not a hindrance.

A statement containing the availability of documents for the inspection by the creditors or members shall be annexed to the notice. Members of Creditors can make the extract or copies of the following documents:

  • Latest Audited Financial Statements
  • Copy of the order of Tribunal
  • Copy of Scheme of Amalgamation & Merger
  • Contracts or Agreements entered into for such M&A
  • Certificate from the auditors certifying statements of accounts.

Section 35A of Income Tax Act 1961 deals with the expenditure incurred on the acquisition of patent or copyrights. If during the period of such right, an asssesse is amalgamated to another company, then such a transferee company has all the right to claim unexpired installment as a deduction from its total income.

An amalgamation is where one business entity acquires another business. While the merger is a combination of two or more companies having similar operations and are engaged in the same line of business to expand their services and business.

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