MERGER & AMALGMATION COMPANIES ACT, 2013
MERGER & AMALGMATION
Introduction:
The Companies Act, 2013 (2013
Act) has seen the light of day and replaced the 1956 Act with some sweeping
changes including those in relation to mergers and acquisitions (M&A).
On 7th November, 2016 Central
Government issued a notification for enforcement of section 230-233, 235-240,
270-288 etc pertaining to proceedings relating to arbitration, compromise,
arrangements and reconstruction of companies which will get enforced w.e.f.
15th December, 2016. MCA vide notification dated 14th Dec, 2016 has issued
rules i.e. The Companies (Compromises, Arrangements and Amalgamations) Rules,
2016. These rules will be effective from 15th December, 2016.
[1]Consequent to such enforcement, cases which were
dealt by the High Court, will get transferred to the Tribunal and the
proceedings there under will be constituted pursuant to the NCLT Rules, 2016,
which has already been notified by the MCA vide The Companies [2](Transfer of Pending Proceedings) Rules, 2016
vide notification dated 7th December, 2016
Effect of transfer of existing cases:
All the pending Proceedings relating to
Arbitration, Compromise, Arrangements and Reconstruction shall stand
transferred to the Benches of the Tribunal. At present it will be little
difficult that everyone have to wait for transfer of records from High Court to
NCLT. All the matter on which date of hearing was fixed will also not manage by
the High Court.
The idiom [3]‘mergers and
acquisitions’ (abbreviated M&A) refers to the aspect of corporate strategy,
corporate finance and management dealing with the buying, selling and combining
of different companies that can aid, finance, or help a growing company in a
given industry grow rapidly without having to create another business entity. An
‘acquisition’ (also known as a takeover), is the buying of one company (the
‘target’) by another.
Involvement of provisions:
Section Involved:
[4]Where a compromise or arrangement is
proposed for the purposes of or in connection with scheme for the
reconstruction of any company or companies, or for the amalgamation of any two
or more companies, the petition shall pray for appropriate orders and
directions under section 230 read with section 232 of the Act.
Section relating to Merger & Amalgamation
Section 230 & 232.
Rules Involved: [5]Rule 3-24 of The Companies (Compromises,
Arrangements and Amalgamations) Rules, 2016.
Forms Involved:
NCLT-1 – Application (replacement of Judge
summon)
NCLT-2 - A notice of admission
NCLT-6 - An affidavit (Affidavit supporting to
application)
CAA-2 - Notice and Advertisement of notice of the
meeting of creditors or members
CAA-3 - Notice to Central Government, Regulatory
Authorities
CAA-4 - Report of result of meeting by
Chairperson
CAA-5 - Petition to sanction compromise or
arrangement
CAA-6 - Order on petition
CAA-7 - Order under section 232
CAA-8 - Statement to be filed with Registrar of
Companies
Circulars/Notifications
Involved:
[6]Constitution of NCLT
[7]Enforcement of section 230-233, 235-240, 270-288-
[8]The Companies (Compromises, Arrangements and
Amalgamations) Rules, 2016
[9]Transfer of Pending Proceedings
[10]Delegation of Power of CG to Regional Director
Major Changes from Old Act to New act:
a)
If
M&A includes buy- back or variation of rights then under provision of the
Act, 2013 Company have to follow section 68 or 48 respectively.
b)
Any
Objection on M&A shall be made only by persons holding not less than ten percent
of the shareholding or having outstanding debt amounting to not less than five percent
of the total outstanding debt as per the latest audited financial statement. Section
230(4) first proviso.
- Earlier
there was not Limit. Even a shareholder holding single share can object.
c)
List of
Creditor should not be older than 6 month from the date of application.
Rule 9 explanation.
-
Earlier
there was no such limit of 6 month.
d)
Dispense
of Meeting of creditor Where NOC received from the creditor in form of
Affidavit. Section 230(9).
-
Earlier
NOC in form of affidavit was not required.
e)
Company
itself has to serve the notice along with scheme and other documents to SEBI,
Income Tax, RBI etc.
- Earlier
as per MCA notification dated 15th January 2013 this was the
obligation of Regional Director.
f)
Notice
with relevant documents should be sent to ROC, RD, and other authorities in the
Ist Motion along with notice to Shareholders and Creditors.
-
Earlier
the requirement of submission with ROC, RD and other authorizes was at the time
of IInd Motion.
g)
In case
of increase in authorized capital due to M&A then the Company have to make
payment of stamp duty (difference of duty paid at the time of increase in
authorized capital of transferor Company – duty required to be paid today on
that capital) .
-
Earlier
there was no requirement of payment of stamp duty.
h)
The
Shareholders vote in the meeting either in person or through proxy or through
postal ballot or through electronic means to the adoption of the scheme of
compromise and arrangement.
-
Earlier
there was only option of Poll which is not extend to postal ballot, electronic
voting.
i) Financial
statement should be latest audited financial statement or if such statement is
more than six months old, as per provisional financial statement not preceding
the date of application by more than six months
-
Earlier
there was requirement of last audited financial statement.
Single window clearance:
the
Bombay High Court in its decision in PMP Auto Industries Ltd. Re, (1994) 80 Com
Cases 289; S.S. Miranda Ltd., Re, (1994) 80 Com Cases 289; Morarjee Goculdas
Spg. & Wvg. Co. Ltd., Re, (1994) 80 Com Cases 289 considered it desirable that approval of various
kinds of scheme under sections 391-395 should be granted in the manner of a
"single window clearance".
The court said that, excepting reduction of capital where the special procedure
of reduction may have to be followed, all other formal requirements of the
Companies Act, such as approval of change of objects or any other alteration of
memorandum of association and all other consequential or incidental changes
required for implementing the scheme, should be formalized in a single petition.
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S. No.
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Purpose
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Effect
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Case Law
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1.
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Change of Name
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Change of name can be carried out as a part of the Scheme.
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Jaypee Cement Ltd.
Hipolin
Products Ltd., Re, and Hipolin Surfactants P. Ltd., Re, and Hipolin Ltd., Re,
(1996) 2 Comp LJ 61 (Guj).
Novopan
India Ltd., Re, (1997) 88 Com Cases 596 (AP); G. V. K. Hotels Ltd., Re,
(1997) 88 Com Cases 596 (AP),
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2.
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Change of Object
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Change of Object shall be part of the
scheme
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PMP Auto Industries Limited; Rangkala
Investments Limited., Re, (1997); Golkunda Engineering Enterprises Limited.,
Re, (1997)
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3.
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Reduction of Capital
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Where the reduction of capital is a part of a scheme of
arrangement, the requirements of the Companies Act as regards reduction of
capital are not applicable because the Court can sanction reduction as a part
of the scheme
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Cooper. Cooper and Johnson Ltd., Re, (1902) WN 199; Stephon
Walters & Sons Ltd., (1926) WN 236; Durairajan (T) v. Waterfall Estates
Ltd., (1972) 42 Com Cases 563 (Mad) followed in Asian Investments Ltd., Re,
(1992) 73 Com Cases 517, 523 (Mad).
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4.
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Sell & Lease of Company Property
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No need to comply with the provisions
of section 180(1)(a) for sale, lease, etc. of the Company’s property
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HCL Info systems Ltd.
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5.
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6.
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Shifting of Registered office of the Company
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No need to company with the provisions of shifting of
registered office separately.
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Indo Rama Systematic Limited
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7.
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Conversion of Preference Shares into Equity Shares
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such preference shareholders shall be given an option to
either obtain arrears of dividend in cash or accept equity shares equal to
the value of the dividend payable
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As per Provisions of Section 230(7) of Companies Act, 2013
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Below mentioned required to follow the
respective sections due to Companies Act, 2013
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8.
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Buy Back of Shares
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Need to follow the provisions of Section 68. Buy- Back
can’t be done through scheme of M&A.
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[11]As per Provisions of Section 230(10) of
Companies Act, 2013
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9.
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Variation of Shareholder Rights
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Need to follow the provisions of Section 48. Variation of
Share holder Rights can’t be done through scheme of M&A.
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[12]As per Provisions of Section 230(7) of
Companies Act, 2013
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By-pass of Statutes: An amalgamation is single window clearance for
the many matters as mentioned above. But an amalgamation cannot be used to
by-pass other statutes. Example:
[13]The
transferor company in an amalgamation was the tenant of premises under an
agreement which specifically prohibited subletting without the consent in
writing of the landlord. Under the scheme of amalgamation, all the assets of
the transferor company including the tenancy passed to the transferee company.
The written consent of the landlord was not taken. The transaction was held to
be a transfer of the tenancy without the sanction of the landlord and the
transferee company was held to be liable to be evicted from the premises.
In this article COMPROMISE
& ARRANGMENT (C&A) will be read in relation to Merger &
Amalgamation only.
In Case of application filing u/s 230 for
Compromise & Arrangement in relation to reconstruction of the Company or
companies involving merger or the amalgamation of any two or more companies
should specify the purpose of the scheme.
PROCESS OF COMPROMISE & ARRANGEMENT (M&A):
As there are two steps of
process of M&A filing of 1st Motion application (Take
permission/ instruction for holding of Meetings) with NCLT and filing of 2nd
motion petition (Scheme of M&A) with NCLT. Each step includes many works
and sub steps.
Who can file the
application for Merger & Amalgamation Purpose?
[14]An application for Merger & Amalgamation can
be file with Tribunal (NCLT). Both the transferor and the transferee company
shall make an application in the form of petition to the Tribunal in whose
jurisdiction registered office of the Company is situated under section 230-232
of the Companies Act, 2013 for the purpose of sanctioning the scheme of amalgamation.
Where more than one company is involved in a
scheme, such application may, at the discretion of such companies, be filed as
a joint-application.
However, where the registered office of the
Companies are in different states, there would be more than one Tribunals
having the jurisdiction over those, companies, hence separate petition will
have to be filed.
Step-1-Preparation of Draft Scheme
Check whether the memorandum of association of
the company contains the powers to amalgamate. Even if the object clause of the
Company not specifically empowers Company to amalgamate the Company can
amalgamate, because there is statutory power of amalgamation under the Act. (AIMCO
Pesticides Limited).
i.
Prepare
the draft scheme of amalgamation as per provisions given below.
ii.
Convene
the Board Meeting to approve the draft scheme from the Board of Directors.
General
process of application with NCLT:
Power of High Court regarding C&A has been
transferred to NCLT. As per general process of filing of application with NCLT,
Every petition or application or reference shall be filed in form as provided
in Form NCLT-1 with attachment thereto accompanied by the Form NCLT-2. Every
application shall be verified by an affidavit in Form No. NCLT-6.
1st Motion Application
I.
Application to the
NCLT for direction to convene Meetings (Members & Creditors):
Company shall prepare an
application in form NCLT-1
mentioning the details about applicant, jurisdiction, limitation, relief sought, the basis on which each class of members or creditors has
been identified for the purposes of approval of the scheme etc. Company
will submit the application along with following documents: Rule 3
i.
A notice of
admission in Form No. NCLT-2
ii.
An affidavit in form
no. NCLT-6 (mention that whatever mention in petition are true of my knowledge,
information etc). Affidavit should be on stamp paper and duly notarized.
iii.
A copy of Scheme of Compromise
& Arrangement (M & A)
iv.
An affidavit
verifying the following information & documents. Section 230(2) and Rule 3(iii)
a)
All material facts
relating to the company, such as details of the pendency of any investigation
or proceedings against the company, Financial Position of Company.
b)
Details of Reduction
of share capital of the company, if any, included in the compromise or arrangement
c)
Verifying the
information of point No. v to vii below.
v.
The copy latest
financial Statement of the Company
vi.
The copy latest
auditor’s report on the accounts of the company
vii.
If application
include any CDR than, submit any scheme of [16]Corporate Debt Restructuring consented to by not less than
seventy five per cent. of the secured creditors in value, including followings;
(this is required only in case of variation in the debt obligation of the
Company towards creditors)
a) A Creditor’s Responsibility statement in the form No. CAA-1.
b) safeguards for the protection of other secured and unsecured
creditors;
c) report by the auditor that the fund requirements of the
company after the corporate debt restructuring as approved shall conform to the
liquidity test based upon the estimates provided to them by the Board;
d) where the company proposes to adopt the corporate debt
restructuring guidelines specified by
the Reserve Bank of India, a statement to that effect; and
e) a valuation report in respect of the shares and the property
and all assets, tangible and intangible, movable and immovable, of the company
by a registered valuer.
II.
Submission of copy
application with NCLT:
Company would file the
application in NCLT-1 to the tribunal in whose jurisdiction registered office
of the Company is situated along with above mentioned 7 documents along with
the fee of Rs. 5.000/-.
III.
Direction by NCLT
for to convene Meetings (Members & Creditors):
Upon hearing of the application
Tribunal shall, unless it thinks fit for any reason to dismiss the application,
give such directions / order as it may think necessary in respect meeting of
the creditors or class of creditors, or of the members or class of members, as
the case may be, to be called, held and conducted in such manner as prescribed.
rule 5 of CAA Rules, 2016 as follow.
After considering the application in NCLT-1
tribunal can give the following instructions regarding holding and concluding
of Meeting. Fixing the time and place of the meeting
or meetings, Appointing a Chairperson the procedure to be followed at the
meeting, including voting in person or by proxy or by postal ballot or by voting
through electronic means, The time within which the chairperson of the meeting
is required to report the result of the meeting to the Tribunal; and Such other matters as the Tribunal may deem
necessary.
Class of Creditors or Shareholders:
It is always a moot question
what constitutes a class. It has observed that it is a formidable difficulty to
say what constitutes a "class" of creditors. The creditors composing
the different classes must have different interest. When one finds a different
state of fact existing among different creditors which may differently, affect
their minds and their judgment, they must be divided into different classes.
“class" must be confined to those persons whose rights are not so
dissimilar as to make it impossible for them to consult together with a view to
their common interest (vide Sovereign
Life Assurance Co. v. Dodd), Speaking very generally, in order to
constitute a class, members belonging to the class must form a homogenous group
with communality of interest. If people with heterogenous interests are
combined in a class, naturally, the majority having common interest may ride
rough shod over the minority representing a distinct interest. Below given are
some examples of class:
·
Creditors
with competing rights should be treated as different classes- Hawk Insurance
Co. Lid. Re, Lawtel, 24 March, 2000
·
where
subordinated creditors have an interest in the company which could be affected
in a way which is different from the effect upon other creditors, then they
would constitute a separate class. Re. British & Commonwealth Holdings p1c.
(No. 3), (1992) BCLC 322 per VINELOTT J.
·
the
holders of partly paid shares form a different class from holders of fully paid
shares. See Hellonic & General Trust Ltd., In re, (1975) All ER 382
·
A
wholly owned subsidiary is a separate class. Hellenic & General Trust Ltd.,
Re, (1975) 3 All ER 382.
·
Creditors
who have secured a decree were regarded not as a separate class from other
creditors of the same category. Jalpaiguri Banking and Trading Co. Ltd., Re,
(1935) 5 Com Cases 335;
There may be many questions relating to the class
i.e. whether debenture holders are unsecured creditors or not? Whether all
class will get the same shares. Creditor with different periods etc. There can
be many questions relating to class of creditors or shareholders and their
treatment.
III.I Dispense
of Meeting of Creditors:
The Tribunal may dispense with calling of a
meeting of creditor or class of creditors where such creditors or class of
creditors, having at least ninety per cent. value, agree and confirm, by way of
affidavit, to the scheme of compromise or arrangement.
List of Creditor should not be older than 6 month
from the date of application. Rule 9 explanation
Clarity: It has been cleared in the Act, 2013 that for
despension of meeting of creditors there is need to take consent of 90% of
value of creditors in the form of duly notarized affidavit. By reading of the
provisions of Act, 2013 it seems that dispense of meeting of members are not
allowed in this Act. As specific provisions are given for the dispense of
creditors but no provisions are prescribed for dispense of meeting of share
holders.[17]
IV.
Convene of Meeting/ Issue of Notice:
A.
Notice
of Meeting: The Notice of the
meeting pursuant to the order of tribunal to be give in Form No. CAA-2. Rule
6
Person entitled to receive
the notice The notice shall be sent individually to each of the
Creditors or Members and the debenture-holders at the address registered with
the company. Section
230(3)
Person authorized to
send the notice:
§
Chairman of the
Company, or
§
If tribunal so
direct- by the Company or its liquidator or
by any other person
Modes of Sending of notice:
§
By [18]Registered post, or by
Speed post, or by courier, or
§
By e-mail, or by
hand delivery, or by any other mode as directed by the tribunal
Documents to be send along with notice: The notice of meeting send with
(i)
Copy
of Scheme of C&A and
(ii)
Following
details as mentioned in Annexure- A of C&A
if not included in the said scheme: (It is advisable to include the below
mention information in the scheme itself)
B. [19]Advertisement of Notice of Meeting: The Notice of the meeting shall be advertised in Form No. CAA-2 at lease in one English Newspaper and in at least one
vernacular language newspaper.
it shall indicate the time within which copies of the compromise or arrangement
shall be made available to the concerned persons free of charge from the
registered office of the company
·
Such
Newspaper shall be published on the website of the company at least 30 days
before the date fixed for meeting, as directed by tribunal. Section 230(3)
·
In
case of Listed Company, such notice and other documents shall
also be published on the website of SEBI and stock exchange, where securities
of the Company are listed.
C.
Notice
to Statutory Authorities: Section 230(5) and Rule 8
This is the major change in process of
M&A from the Companies Act, 2013. Earlier the requirement of filing of notice
with statutory authorities was with the 2nd Motion application. But
under Act, 2013 this requirement is clubbed with 1st motion
application. Second as per MCA notification dated 15th January 2013 this was
the obligation of Regional Director to send the notice to RBI, Income Tax
authorities, CCI etc.
A notice in Form No CAA-3 along with Copy of Scheme of C&A, the
explanatory statement and Disclosures mentioned in Annexure A, shall also be
sent to followings:
§
The
Central Government, The Registrar of Companies and The income-tax authorities,
in all cases
§
The
Reserve Bank of India, the Securities and Exchange Board of India, the
Competition Commission of India, and the stock exchanges, as may be applicable.
§
Other
Sectoral Regulators or authorities, as required by Tribunal.
Notice shall be sent to the office of the
authority after sending of notice to members or creditors of the Company by
Registered post, or by Speed post, or by courier, or by hand delivery.
Representation by authority:
·
The authority desire
to make any representation then shall sent to the tribunal within a period of
30 days from the date of receipt of such notice.
·
Copy of such
representation shall simultaneously be sent to the concerned companies
·
In case of no
representation within the 30 days then presumed that authority doesn’t have any
representation.
D.
Voting:
The persons to whom the notice is sent may vote in the
meeting either themselves or through [20]proxies or by postal
ballot to the adoption of the compromise or arrangement within one month from the date of receipt of such notice. Section
230(4) Rule 9
Right of Objections: Section 230(4)
Any objection to the compromise or arrangement shall be made
only by
§
Persons holding not
less than 10% (Ten Percent). of the shareholding
or
§
Person having outstanding debt amounting to not less
than 5% (five percent) of the total outstanding debt as per the latest audited
financial statement
E.
Holding
of Meeting:
The Company on the requisition of the creditors or members
entitled to attend meeting shall furnish a copy of scheme of C&A and copy
of statement required to furnish in section 230(2)(c) with in one day of
requisition.
Liability to Service: The Chairperson appointed for the meeting of the company or
other person directed to issue the advertisement and the notices of the meeting.
[21]Above mentioned shall file an affidavit before the Tribunal
at least seven days before the date fixed for the meeting or the date of the
first of the meetings, as the case may be, stating that the directions
regarding the issue of notices and the advertisement have been duly complied
with.
G.
Result
of Meeting:
The report of the result of the meeting shall be in Form No. CAA.4 and shall state
accurately
·
The number of
creditors or class of creditors or
·
The number of
members or class of members, as the case may be,
§
who were present and
§
who voted at the
meeting either in person or by proxy, and
§
Where applicable,
who voted through electronic means, their individual values and the way they
voted.
H.
Report
of the result of the meeting by Chairperson: -
[22]The Chairperson of the meeting shall, within the time fixed
by the Tribunal, or where no time has been fixed, within 3 (Three) days after
the conclusion of the meeting, submit a report to the Tribunal on the result of
the meeting in Form No. CAA.4.
2nd Motion Application
V. Petition for confirming Merger &
Amalgamation Rule 15
[23]The Company shall, within 7 (seven) days of the filing of the
report by the Chairperson, present a petition to the Tribunal in Form No. CAA.5 for sanction of the scheme of compromise or arrangement. The
petitioner will pray for the appropriate orders and directions from the
Tribunal.
Where a compromise or arrangement is proposed for the
purposes of or in connection with scheme for the reconstruction of any company
or companies, or for the amalgamation of any two or more companies, the
petition shall pray for appropriate orders and directions under section 230
read with section 232 of the Act.
VI. Notice of Hearing by Tribunal Rule 16; The Tribunal shall
fix a date for the hearing of the petition.
Legal Responsibility
of the Tribunal: The notice of the
hearing of the petition shall also be served by the Tribunal ;
§ To the Objectors or
§ To Their Representatives under sub-section (4) of section 230
of the Act and
§ To the Central Government and
§ Other Authorities who have made representation under rule 8
and have desired to be heard in their representation.
Publication of the
Notice:
The notice of the hearing shall be advertised in the same
newspaper in which the notice of the meeting was advertised or in such other
newspaper as the Tribunal may direct, at least 10 (ten) days before the date
fixed for the hearing.
[24]Elements of
satisfactory scheme.- It is the duty of the tribunal to go through the matter
carefully and find out whether all provisions of law and directions of the tribunal
as the conduct of the meetings have been complied with and whether the scheme
is in the interest of the company as well as in that of its creditors and
should be given effect to. The tribunal
has to satisfy itself that:
§
the meeting was duly held and conducted;
§
that the compromise
was a real compromise;
§
that it was accepted
by a competent majority;
§
that the majority
was acting in good faith and for common advantage of the whole class;
§
that what they did
was reasonable, prudent and proper;
"Keeping in
mind the above principles, the role which the tribunal have to play in this
country is more vital and potent; it is not only an inquisitorial and supervisory role
but also a pragmatic role which requires the forming of an independent and
informal judgment as regards the feasibility or proper working of the scheme
and making suitable modifications in the scheme and issuing appropriate
directions with that end in view." Tata Oil Mills Co.
Ltd., Re, (1994) 3 Comp LJ 46 at 55; Hindustan Lever Ltd., Re, (1994) 81 Com
Cases 754 (Bom). On appeal before the Supreme Court Hindustan Lever Employees'
Union v. Hindustan Lever Ltd., (1995) 83 Com Cases 30: AIR 1995 SC 470.
In considering any
scheme proposed, the Court will also consider its effects on the workers or
employees and see that, as far as possible, it works as little hardship as it
can to them. In Re, River Steam
Navigation Co. Ltd., (1967) 2 Comp LJ 106 (Cal) and affirmed on appeal (1968)
38 Com Cases 99 (Cal-DB).
VII.
Order by Tribunal Rule 12;
Where the Tribunal sanctions the Merger &
Amalgamation, An order made under section 232 read with section 230 of the Act
shall be in Form No.CAA.6
& CAA 7 with such variation as the circumstances
may require.
Effect of order of court:
An order of the court sanctioning the scheme
becomes binding on all the creditors, including Government creditors and the
liquidator and the contributories and the dissenting creditors or members so
that whether it is valid or not, a shareholder cannot afterwards question it. Gupta (SX) v. K.P. Jain, (1979) 49 Com Cases 342, 350 (SC).
See also Craigs Claim, Re, (1895) 1 Ch-267; S.B. Mathur v. India Porcelain
Ltd., (1956) 26 Com Cases 161 (Punj).
Modification of scheme
Once a scheme has been sanctioned by the court, it has no
power to modify it subsequently without the consent of those who agreed to the
original scheme. Mymensingh Loan
Office Ltd., Re, AIR 1937 Cal 667.
Compliance after approval/ order of Merger
& Amalgamation
VIII.
Filing of Order of
Tribunal with ROC: Section 232(5)
The order of the Tribunal shall be filed with the Registrar
by the company within a period of thirty days of the receipt of the copy of
order, or such other time as may be fixed by the Tribunal.
IX. Compliance until completion of scheme: Every company in relation to which the order is made shall,
until the completion of the scheme, file a statement in Form No. CAA.8 and
within two hundred and ten days from the end of each financial year with
the Registrar every year duly certified by a chartered accountant or a cost
accountant or a company secretary in practice indicating whether the scheme is
being complied with in accordance with the orders of the Tribunal or not.
INFORMATION
REQUIRED TO CIRCULATE ALONG WITH NOTICE
a. Details of the order of the
Tribunal directing the calling, convening and conducting of the meeting:-
§
Date
of the Order;
§
Date,
time and venue of the meeting.
b. Details of the company including:
§
Corporate
Identification Number (CIN) or Global Location Number (GLN) of the company;
§
Permanent
Account Number (PAN);
§
Name
of the company;
§
Date
of incorporation;
§
Type
of the company (whether public or private or one person company);
§
Registered
office address and e-mail address;
§
Summary
of main object as per the memorandum of association; and main business carried
on by the company;
§
Details
of change of name, registered office and objects of the company during the last
five years;
§
Name
of the stock exchange (s) where securities of the company are listed, if
applicable;
§
Details
of the capital structure of the company including authorised, issued,
subscribed and paid up share capital; and
§
Names
of the promoters and directors along with their addresses.
c. Relationship
in case of Combined Application: if
the scheme of compromise or arrangement relates to more than one
company, then the fact and details of any relationship subsisting between
such companies who are parties to such scheme of compromise or arrangement,
including holding, subsidiary or of associate companies.
d. Disclosure about effect of M&A
on material [25]interests
of directors, Key Managerial Personnel (KMP) and debenture trustee
e. Details
of Board Meeting:
§
The
date of the board meeting at which the scheme was approved by the board of
directors
§
The
name of the directors who voted in favour of the resolution,
§
The
name of the directorswho voted against the resolution and
§
The
name of the directorswho did not vote or participate on such resolution
f. Explanatory
Statement disclosing details of the scheme of compromise or arrangement
including:
§
Parties
involved in such compromise or arrangement;
§
Appointed
date, effective date, share exchange ratio (if applicable) and other
considerations, if any;
§
Summary
of valuation report (if applicable) including basis of valuation and fairness
opinion of the registered valuer, if any, and the declaration that the
valuation report is available for inspection at the registered office of the
company;
§
Details
of capital or debt restructuring, if any;
§
Rationale
for the compromise or arrangement;
§
Benefits
of the compromise or arrangement as perceived by the Board of directors to the
company, members, creditors and others (as applicable);
§
Amount
due to unsecured creditors.
g. Disclosure
about the effect of the Merger & Amalgamation (C&A) on: Section 230(3)
§
Key
Managerial Personnel;
§
Directors;
§
Promoters;
§
Non-Promoter
Members;
§
Depositors;
§
Creditors;
§
Debenture
holders;
§
Deposit
trustee and debenture trustee;
§
Employees
of the company:
§
Share
holders of the Company
h.
A
report adopted by the directors of the merging companies explaining effect of
compromise on each class of shareholders, key managerial personnel, promoters
and non-promoter shareholders laying out in particular the share exchange
ratio, specifying any special valuation difficulties;
i.
Below Mentioned Details: Following below mentioned details
§
Investigation
or proceedings, if any, pending against the company under the Act.
§
Details
of approvals, sanctions or no-objection(s), if any, from regulatory or any
other governmental authorities required, received or pending for the proposed
scheme of compromise or arrangement
§
A
statement to the effect that the persons to whom the notice is sent may vote in
the meeting either in person or by proxies, or where applicable, by voting
through electronic means
j. Details
of avaibility of documents: Details
of the availability of the following documents for obtaining extract from or
for making or obtaining copies of or for inspection by the members and
creditors, namely
§
Latest
audited financial statements of the company including consolidated financial
statements;
§
Copy
of the order of Tribunal in pursuance of which the meeting is to be convened or
has been dispensed with;
§
copy
of scheme of Merger & Amalgamation ( C&A);
§
Contracts
or agreements material to the Merger & Amalgamation ( C&A);
§
The
certificate issued by Auditor of the company to the effect that the accounting
treatment, if any,
§
Proposed
in the scheme of Merger & Amalgamation ( C&A) is in conformity with the
Accounting Standards prescribed under Section 133 of the Companies Act, 2013;
and
§
Such
other information or documents as the Board or Management believes necessary
and relevant for making decision for or against the scheme;
k. Some
Other documents: Where
an order has been made by the Tribunal under section 232(1), merging companies
or the companies in respect of which a division is proposed, shall also be required
to circulate the following:
§
The
draft of the proposed terms of the scheme drawn up and adopted by the directors
of the merging company;
§
Confirmation
that a copy of the draft scheme has been filed with the Registrar;
§
The
report of the expert with regard to valuation, if any;
§
Supplementary
accounting statement if the last annual accounts of any of the merging company
relate to a financial year ending more than six months before the first meeting
of the company summoned for the purposes of approving the scheme
Explanation- For the purposes of above
disclosure required to be made by a company shall be made in respect of all the
companies, which are part of the compromise or arrangement.
|
(Author
– CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in
Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)
Disclaimer: The entire
contents of this document have been prepared on the basis of relevant
provisions and as per the information existing at the time of the
preparation. Although care has been taken to ensure the accuracy,
completeness and reliability of the information provided, I assume no
responsibility therefore. Users of this information are expected to refer
to the relevant existing provisions of applicable Laws. The user of the
information agrees that the information is not a professional advice and is
subject to change without notice. I assume no responsibility for the
consequences of use of such information. IN NO EVENT SHALL I SHALL BE
LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING
FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.
This is only a knowledge sharing initiative and author
does not intend to solicit any business or profession.
|
[1] List of Matter
transferred to NCLT given in the following link: http://www.csdiveshgoyal.info/2016/12/list-of-matters-transfer-to-nclt-wef.html
[3] Amalgamation was
defined by the Supreme Court of India in the case of Saraswati Industrial
Syndicate Ltd. v. CIT 3 The Honorable Court opined that in
an amalgamation two or more companies are fused into one by merger or
one taking over the other.
[4]
Comparative Section of Companies Act, 1956 is Section 391- 394A
[5]
Earlier Company Court Rules, 1956 (Rule
68-84)
[11]
No
compromise or arrangement in respect of any buy-back of securities under this section
shall be sanctioned by the Tribunal unless such buy-back is in accordance with the
provisions of section 68
[12]
if
the compromise or arrangement results in the variation of the shareholders
rights, it shall be given effect to under the provisions of section 48
[13]
General
Radio & Appliances Co. Ltd. v. M.A. Khader, (Decd.) (1986) 60 Com Cases
1013 : AIR 1986 SC 1218
[14]
In the case of Kirloskar Electricals Co.
Ltd., the Court held that various clauses of Section 394(1) of the
Companies Act suggest that both the transferor and the transfer company shall
make an application to the Court and under section 391-394 of the Companies
Act, 1956 for sanction of the scheme of Compromise or arrangement involving
amalgamation of the Companies.
[15]
In Mohan Exports (India) Ltd. v. Tarun
Overseas P. Ltd., (1999) 95 Com Cas 53: (1994) 3 Comp LJ 193 (Del) BAHRI J
followed the decision in W.A. Beardsell & Co. (P.) Ltd. and Mettur
Industries Ltd., Re, (1968) 38 Com Cases 197 (Mad) and concluded as
follows: "A joint petition by transferor and transferee companies for
seeking court's approval to a scheme of compromise or arrangement under section
394 of the Companies Act, 1956, is competent. if both the Companies are under
the jurisdiction of the same High Court, Joint petition may be made.
[16]
Scheme of Corporate Debt restructuring as referred in section 230(2)(c) means
“a scheme that restructures or varies the debt obligation of a company toward
its creditors”.
[17]
Re; Feedback Reach Consultancy Services (p) Limited in this care it instruct
that “where the written consent to the proposed scheme is granted by all the members
and secured and unsecured creditors, separate meeting of members and secured
and unsecured creditors can be dispensed with”.
[18]
It is hereby clarified that the service of
notice of meeting shall be deemed to have been effected in case of delivery by
post, at the expiration of forty eight hours after the letter containing the
same is posted.
[19]
Where separate meeting of classes of creditors or members are to be held, a
joint advertisement for such meetings may be given.
[20]
Guidelines for proxy given in rule no 10.
[21]
In case of
default under this provision, the application along with copy of the last order
issued shall be posted before the Tribunal for such orders as it may think fit
to make
[22] Where there are separate
meetings, the Chairperson of each meeting.
[23]
Rejection of Petition: After the meetings have, been held, a
petition is presented to the court to sanction the scheme. The petition should
be moved within 7 days of the filing of the report by the chairman of the
meeting (Rule 79). A delayed petition is liable to be rejected. Bhagwan Singh & Sons Pvt. Ltd. v.
Kalawati, (1986) 60 Com Cases 94, 97 (Del). The petition need not state
that the company is carrying on business. Great Universal Stores Ltd., Re,
(1960) 1 WLR 78.
[24]
The
court is not justified in going into the reasons which led the creditors in
their meeting to give up a part of their debts. Lakshmi Commercial Bank Ltd., Re, (1948) 18 Com Cases 265, 266, 267
: AIR 1948 EP 38.
[25]Explanation
– For the purposes of these rules it is clarified that-
(a) the term ‘interest’ extends beyond an interest in
the shares of the company, and is with reference to the proposed scheme of
compromise or arrangement.
(b) the valuation report shall be made by a registered
valuer, and till the registration of persons as valuers is prescribed under
section 247 of the Act, the valuation report shall be made by an independent
merchant banker who is registered with the Securities and Exchange Board or an
independent chartered accountant in practice having a minimum experience of ten
years.
[26]
the valuation report shall be made by a registered valuer, and till the
registration of persons as valuers is prescribed under section 247 of the Act,
the valuation report shall be made by an independent merchant banker who is registered
with the Securities and Exchange Board or an independent chartered accountant
in practice having a minimum experience of ten years
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