Section 396 of the companies act 1956 the erstwhile act i. This scheme is known as single window clearance scheme. In this type of amalgamation, not only is the pooling of assets and liabilities is done but also of the shareholders interests and the businesses of these companies. The 20 act states that merger between indian companies and companies in notified foreign jurisdiction shall also be governed by the same. As per law, the word amalgamation or merger is not defined in the companies act, 20. A merger is where two or more business entities combine to create a new entity or company. Section 5 and 6 of competition act, 2002 deal with combinations which defines combination by reference to assets and turnover exclusively in india and outside india also. Though, the word merger and amalgamation is used and section 232 of the act talks about the merger and amalgamation of companies.
Pdf amalgamation new method to merge and takeover companies. Power to compromise or make arrangements with creditors and members. The name of the transferor company was changed to r. Cg may make the rules, in consultation with rbi prior. Government makes rules relating to merger or amalgamation.
Critical aspects and compliances issues of corporate. The companies act, 1956 does not define the term merger or amalgamation. Under the 20 act, cross border mergers are permissible between an indian company and any other foreign company which is located within a jurisdiction that is notified by the central government in consultation with the reserve bank of india rbi. Cross border merger under companies act, 1956 foreign company can be only transferor co. The merger is a mix of at least two substances into one, it isnt only the. In the previous articles, we have given as 6 depreciation and as 26 intangible assets. Today we are providing the complete details of as 14 accounting for amalgamation i. Companies act, 1956 ca facilitates compromise, arrangement or reconstruction of a business sections 390 to 396a of ca the terms merger and amalgamation are synonymous in amalgamation, the undertaking, i. Merger and amalgamation under companies act, 20 by national company law tribunal nclt.
Merger of a listed company into unlisted company the companies act, 20 requires that in case of merger between a listed transferor company and an unlisted transferee company, the transferee company would continue to be unlisted until it becomes listed. Scheme of arrangement in the matter of companies act of 1956. Acquiring company is a single existing company that purchases the majority of equity shares of one or more companies. Section 230 to 232 provides for compromises, arrangements and. Such as the procedure amalgamations are given in section 390 to 395 of companies act, 1956 which deals with arrangement, amalgamation and merger. May 21, 2019 section 396 of the companies act 1956 the erstwhile act i. For the purpose of this act the terms merger and amalgamation are synonymous. Sections 390 to 396a of the companies act, 1956 facilitates compromise, arrangement or reconstruction of a business the terms merger and amalgamation are synonymous in amalgamation, the undertaking, i. Power to tribunal to enforce compromise or arrangement. Government makes rules relating to merger or amalgamation of. Analysis of section 396 of the companies act, 1956 in the light of nsel merger order.
Provisions relating to merger, amalgamation and windingup, etc. Ministry of corporate affairs mergers and acquisitions. The income tax act, 1961, stipulates two prerequisites for any amalgamation through which the amalgamated company seeks to avail the benefits of setoff carry forward. Under the companies act 20, the idea of merger and amalgamation is completely clarified though under organizations act 1956, the term merger isnt characterized and furtherm ore under the income tax act, 1961. Jul 22, 2018 all about mergers and amalgamations by lavina bhargava download pdf the author, lavina bhargava, is a 3rd year student of nmims, kirit p. Prior to december 15, 2016, the relevant provisions under the companies act, 1956 1956 act governed mergers and amalgamations in india. Provisions for facilitating reconstruction and amalgamation of companies. Amalgamation is a blending of two or more existing undertaking into one. Under section 394 of the erstwhile companies act 1956, the merger 1 of a foreign company 2 with an indian company inbound merger was allowed but the merger of an indian company with a foreign company outbound merger was not allowed on april, 2017, the central government amended the companies compromises, arrangement and. Merger and amalgamation under companies act, 20 by. This scheme of amalgamation scheme is presented under sections 391 to 394 and other applicable provisions of the companies act, 1956 for amalgamation of 1 jayshree nirman ltd and 2 asian securities exchange private limited with bnk securities pvt. However it deals with schemes of merger acquisition which are stipulated under section 391 to 394. Apr 26, 2011 the terms merger and amalgamation have not been defined in the companies act, 1956 though this voluminous piece of legislation contains more than 50 definitions in section 2 of the act.
The terms merger and amalgamation have not been defined in the companies act, 1956 though this voluminous piece of legislation contains more than 50 definitions in section 2 of the act. The companies act, 20 categorically deals with crossborder merger and merger of small companies. The transferor company was incorporated on 21 st march, 2001 under the name wa 2wealth advisors private limited as per the provisions of the companies act 1956. Section 237 of the companies act 20 gives power to the central government to order forced amalgamation of two companies if it is satisfied that it is essential in the public interest. Merger and amalgation free download as powerpoint presentation. The terms merger and amalgamation are synonyms and the term amalgamation, as per concise oxford dictionary, tenth edition, means, to combine or unite to form one organization or structure the provisions relating to merger and amalgamation are contained in sections 390 to 396a of the companies act, 1956 and sections 230 to 240 of the. Merger and amalgamation is a restructuring tool available to indian conglomerates aiming to expand and diversify their businesses for various reasons whether it is to gain competitive advantage, reduce costs or availing of tax benefits. This means that, now both inbound and outbound mergers are allowed.
Corporate restructuring merger and amalgamation company. Under the laws of the states of minnesota, this transaction will be characterised. Dec 18, 20 the companies act, 1956 does not define the term merger or amalgamation. This entry was posted in regulatory updates and tagged amalgamation, appointed date, mca, merger, nclt, registrar of companies, roc, scheme for merger amalgamation, section 2326 of companies act 20 on august 22, 2019 by novojuris. Procedure for merger and amalgamation is different from takeover. Penalty for furnishing false statement, mutilation, destruction of documents. Reconstruction and amalgamation legal news law news. Scheme of arrangement in the matter of companies act. Merger and amalgamation as for indian economy, by explaining a few arrangements of new companies act, 20. A merger happens when two or more companies who share similar operations or are engaged in the same line of business combine to.
It requires companies to make application to the court under section 391, which empowers the court to sanction the compromise or arrangement proposed by the companies. It provides a composite code for facilitating mergers and amalgamations which obviates the need for. Merger and amalgamation of indian companies with foreign. Regulatory framework applicable indian laws companies act, 1956 sec 3994listing agreementaccounting standard 14sebi takeover code in case of acquisition byof a listedcompany company court rulesfema in case of merger of companies having foreigncapital competition act, 2002income tax act, 1961indian stamp act. Companies act, 1956 has provided for a set of provisions specially dealing with amalgamation of companies, to facilitate the transactions. The word merger hasnt been defined in the companies act, 1956. Before discussing the law and the relevant procedures to be followed under the. In other words, all assets and liabilities of the transferor company become that of the transfer company. As 14 accounting for amalgamation revised summary pdf. Merger, amalgamation and reconstruction concept of merger. There has been an issue from a long time that whether there is any difference between merger and amalgamation. Cross border merger activity is on the rise in india.
The mergeramalgamation should be compliant with the provisions of section 230 to 232 of the act. The companies act, 1956 consolidates provisions relating to mergers and acquisitions and other related issues of compromises, arrangements and reconstructions, however other provisions of the companies act get attracted at different times and in each case of merger and acquisition and the procedure remains far from simple. Cg may make the rules, in consultation with rbi prior approval of. Analysis of section 396 of the companies act, 1956 in the. Co pany pursuant to the relevant provisions of the companies act, 1956 and the ompanies act, 20, as may be applicable. The statutory provisions relating to merger and amalgamation are contained in sections 390 to 396a. Mar 01, 2017 cross border merger under companies act, 1956 foreign company can be only transferor co. Mergers, amalgamation and demergers of companies under the companies act 1956 are governed by sections 391 to 396 companies act 1956. Mergers and amalgamations are regulated under the provisions of the companies act, 1956 whereas takeovers are regulated under the sebi substantial acquisition of shares and takeovers regulations. Under the companies act, 1956, cross border mergers were restricted to indian transferee companies. Difference between merger, amalgamation and acquisition. But in its literal sense it means joining two together. In contrast to the companies act, 1956, this is a new provision under ca 20 which deals with out of courttribunal, fast tracked merger or amalgamation of certain companies.
The terms merger and amalgamation have not been defined in the companies act, 1956 hereinafter referred to as the act though this voluminous piece of legislation contains 69 definitions in section 2. In a number o c absorption a tion existing comp wing does. Case studies and practical aspects of mergers and demergers. Under section 234, companies act, 20 foreign company indian company notified by cg now indian co. Definitions meaning of merger merger is an absorption of one or more companies by a single existing company. The statutory provisions relating to merger and amalgamation are contained in. Companies act, 1956 ca facilitates compromise, arrangement or reconstruction of a business sections 390 to 396a of ca the terms mergerand amalgamation are synonymous in amalgamation, the undertaking, i. Sep 18, 2010 mergers, amalgamation and demergers of companies under the companies act 1956 are governed by sections 391 to 396 companies act 1956. Companies act, 1956 which jointly deal with the compromise and arrangement with creditors and members of a company needed for a merger. This entry was posted in regulatory updates and tagged amalgamation, appointed date, mca, merger, nclt, registrar of companies, roc, scheme for mergeramalgamation, section 2326 of companies act 20 on august 22, 2019 by novojuris. All about mergers and amalgamations by lavina bhargava download pdf the author, lavina bhargava, is a 3rd year student of nmims, kirit p.
The present article deals with state of law relating to cross border mergers under the companies act, 1956 and the jurisdiction of indian. This was invoked for the first time by the ministry of corporate affairs mca in 2014. Law relating to cross border mergers under companies act, 1956. An amalgamation is where one business entity acquires one or more business entities. The merger amalgamation should be compliant with the provisions of section 230 to 232 of the act.
Procedure for mergers and amalgamations under the companies. The merger is a combination of two or more entities into one, it is not just the accumulation of assets and liabilities of the distinct entities. The income tax act, 1961, stipulates two prerequisites for any amalgamation through which the amalgamated company seeks to avail the benefits of setoff. The merger of the transferor company under this scheme of amalgamation will be effected as a scheme under sections 230 to 232 of the companies act, 20 read with section 234of t he companies act, 20and provisions of the other applicable laws. Oct 28, 2016 the companies act, 20 categorically deals with crossborder merger and merger of small companies. Section 233 of the companies act, 20 ca 20 dealing with merger or amalgamation of certain companies has also come into force with effect from 15th december, 2016. The provisions relating to merger and amalgamation are contained in sections 390 to 396a in chapter v of part vi of the companies act, 1956. Yamini investments company ltd and anax com trade limited and fidelo power and infrastructure limited and their respective members and creditors under section 391 to 394 of companies act 1956 this scheme of arrangement provides for. Merger amalgamation demerger financial reconstruction acquisition of shares deals with section 391 394 deals with section 395 consolidation of businesses entities divest noncore business acquiring interest in new business entity restructuring within the company re organization provisions as per companies act, 1956 1956 era. Any proposal of amalgamation or merger begins with the process of due diligence, as the proposal for merger without due diligence is like entering a tunnel with darkness growing with each step. Dec 29, 2015 the provisions relating to merger and amalgamation are contained in sections 390 to 396a in chapter v of part vi of the companies act, 1956. Companies act 1993 nz by s 8 of th e companies amendment act 1998 nz. Merger or amalgamation of company with foreign company the 1956 act does not contain provisions for merger of indian company into a foreign company transferee company has to be an indian company. Companies compromises, arrangements and amalgamations rules, 2016, effective from 15122016 have also been notified by the mca.