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fast-track-merger-under-the-companies

Fast Track Merger

The Court’s involvement in case of merger involved time and money so to promote the Ease of Doing Business significantly Fast Track Merger (“FTM”) was introduced; it was intended not only to reduce the time and money but to boost the operations by significantly reducing the legal aspect of Merger and amalgamation.

Section 233 of Companies Act, 2013 (“the Act) read with rule 25 of Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016 (“Rules”) provides the concept of a Fast Track merger.

Companies that can avail of the Fast Track Merger Benefit
  • Small Companies whose paid-up capital is not more than 50 Lakhs and Turnover does not exceed 2 Crore as per the last audited books of accounts;
  • Holding or wholly-owned subsidiary company of a Private or a public Company.
  • Between two or more small companies.
  • Such other classes of companies as may be notified from time to time as per Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016
Companies that cannot avail of the Fast Track Merger Benefit
  • Public Company (except amalgamation withholding or wholly-owned subsidiary company).
  • Section 8 Company
  • Companies or corporations formed by any special statute.
Merger and amalgamation Checklists

Each of the steps to be taken for FTM is important for the ultimate success of the proposed merger; it is pertinent to note that the Checklist along with attachments are required to be viewed with great efficiency, although efforts have been made to reduce the missing of any important steps error if any is apologies before notice.

Step No
Detailed Step
Time LimitDocument/ Form By whom
1Convening and Holding of Board Meeting ---
2a) Approval of Scheme
b)Fixing Date, Time, and Venue of a Shareholder meeting
c) Fixing Date, Time and Venue of Creditors meeting
---
3At the meeting of the Board, Pass the Resolutions :

The notice of Proposed scheme inviting suggestions or comment on, if any, shall be sent to Registrar of Companies (ROCs) or Official Liquidators (OL) of the concerned state along with a scheme
At Holding the Board Meeting
CAA. 9 Both Transferor and Transferee
4Filing of Declaration of Solvency with ROCCAA. 10
Both Transferor and Transferee
5Convening a meeting of Members
The notice of the meeting sent to the creditors shall be accompanied by –
a) a statement, disclosing the details of the compromise or arrangement, as far as applicable, as referred to in subsection 230 (3) of the Act read with sub-rule (3) of rule 6 of the Rules.
b) The declaration of solvency made in Form No. CAA.10;
c) A copy of the scheme.

The objections and suggestions received by the ROC, Official Liquidator, and persons affected by the scheme are considered by the companies in their respective general meetings and the scheme is approved by the respective members or class of members at a general meeting holding at 90% of the total number of shares.

Clear 21 days before the date of the meeting
Both Transferor and Transferee
6Convening a meeting of creditors

The notice of the meeting sent to the members shall be accompanied by –
a) a statement, disclosing the details of the compromise or arrangement, as far as applicable, as referred to in subsection 230 (3) of the Act read with sub-rule (3) of rule 6 of the Rules.
b) the declaration of solvency made in Form No. CAA.10;
c) a copy of the scheme.

The scheme is to be approved by a majority representing nine-tenths in value of the creditors or class of creditors of respective companies indicated in a meeting.

Clear 21 days before the date of the meetingBoth Transferor and Transferee.
7Filing of Scheme

a) File a copy of the Scheme and report of the result of each of the meetings with the Regional Director.

b) A copy of the scheme along with Form CAA. 11 shall also be filed with :

· The ROC in Form GNL 1;

· The Official Liquidator through hand delivery or by registered post or speed post.
a) Within seven days from the conclusion of the meeting of members or creditors.a) CAA.11


b) GNL 1
Transferee Company
8Approval of the Scheme by the Regional Director

• On the receipt of the scheme, if the ROC or the Official Liquidator has no objections or suggestions to the scheme, the Regional Director shall register the same and issue a confirmation thereof to the companies.

• If the ROC or Official Liquidator has any objections or suggestions, he may communicate the same in writing to Regional Director within thirty days. If no such communication is made, it shall be presumed that he has no objection to the scheme.

• If the Regional Director after receiving the objections or suggestions or for any reason believes that such a scheme is not in the public interest or the interest of the creditors, it may apply to the Tribunal in Form No. CAA.13 within sixty days of the receipt of the scheme under sub-section (2) stating its objections and requesting that the Tribunal may consider the scheme under section 232.


• On receipt of an application from the Regional Director or any person, if the Tribunal, for reasons to be recorded in writing, believes that the scheme should be considered as per the procedure laid down in section 232, the Tribunal may direct accordingly or it may confirm the scheme bypassing such order as it deems fit.

• If the Regional Director does not have any objection to the scheme or it does not file any application under this section before the Tribunal, it shall be deemed that it has no objection to the scheme.

• Where no objection or suggestion is received to the scheme from the ROC and Official Liquidator or where the objection or suggestion of ROC and Official Liquidator is deemed to be not sustainable and the Regional Director believes that the scheme is in the public interest or the interest of creditors, the Regional Director shall issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA. 12.


9Filing of confirmation order with the ROC

A copy of the order confirming the scheme by the Tribunal or Regional Director shall be communicated to the ROC having jurisdiction over the transferee company and the persons concerned and the ROC shall register the scheme and issue a confirmation to the companies and such confirmation shall be communicated to the ROC where transferor company or companies were situated.
Within 30 days of the receipt of the order of confirmation of the scheme.Form INC-28
Both Transferor and Transferee.
Benefits of Merger
  • Economies of Scale
  • Economies of Scope
  • Synergies in Merger and Acquisition
  • Increased Market share
  • Diversification of Risk
  • Income Tax Benefit
  • High Level of Competition

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