Companies Bill 2013: Merger- Holding & Subsidiary

The Companies Bill, 2012 proposes a fast track and simplified procedure for mergers and amalgamations of certain class of companies such as holding and subsidiary, and small companies. This is a welcome move. The Companies Act, 1956 does not offer a simple process for such mergers and all such restructuring have to follow a cumbersome and time consuming process as any other mergers or amalgamations. The process involves seeking approval from shareholders, creditors, Registrar of Companies and the Official Liquidator as well as a High Court.

Home to Indian Company law
There was a long felt need to simplify and fast track the procedure for mergers of holding-subsidiary or companies where interest of third parties is not involved. And so, the Companies Bill, 2012 has separate provisions to deal with mergers and amalgamations of holding and wholly-owned subsidiary companies, small companies and such other class of companies as the Central Government may prescribe. A ‘small company’ is a company other than a public company with paid-up share capital not exceeding Rs. 50 lakh or turnover not exceeding Rs. 2 crore or such higher sums as may be prescribed by the Central Government.

According to the provisions of the Companies Bill, these companies need not make an application to the National Company Law Tribunal/ High Court for finalizing mergers. As a safeguard measure, the Bill provides that such mergers be approved by 90% of each class of shareholders and creditors instead of the current requirement of 75% majority. Additionally, the directors are required to file ‘Declaration of Solvency’ with the Registrar of Companies (ROC). Also required is an advance notice to ROC and Official Liquidators (OL), who may give their comments on the scheme within 30 days. The comments and concerns of ROC & OL should be addressed by companies before seeking approvals from shareholders and creditors for the scheme. 

The Bill also offers a second opportunity to the central government, ROC & OL to place their objections, if any, after the scheme is approved by shareholders and creditors. If there are no objections from ROC or OL, the central government shall issue confirmation, which shall be registered with the ROC. The registration of the scheme shall be treated as completion of the merger process. In case of an objection by ROC or OL, the central government may file an application with the Tribunal and then the process of normal merger shall be followed. 

The Bill clarifies that this fast track process shall apply not just to mergers but also to all types of compromise & arrangements involving these companies. The companies have the option to follow the normal route of merger process if they desire. 

The new process is a right move towards simplifying procedural aspects of M&A. It is to be seen which other class of companies will be allowed to opt for the simplified process. The law has sufficient checks and balances to avoid its misuse. 

Removing the second opportunity given to ROC, OL & the central government will further expedite the process of approvals.

For any related query, Contact:
Mr. Ankit Singhi
+9111406222208, +919910888952
Email:- ankit@indiacp.com

Popular posts from this blog

Leaves & Holidays under Indian Labour & Employment Laws

Image
Holidays and Leaves of workers in India are governed principally by the Factory Act, 1948 and state shops and establishment acts. Weekend Holidays Mr. Pankaj Singla Sr. Associate +919971508320 pankaj@indiacp.com In India, the law prescribes maximum number of hours a week a worker may not be employed beyond. An adult worker shall not be employed for more than 48 (forty eight) hours in a week and not more than 9 (nine) hours in a day. Weekly holiday is compulsory as per the Factories Act. First day of the week i.e. Sunday shall be a weekly holiday. The employer has to make sure that no worker works more than 10 days without a rest day of 24 hours. Therefore, if the worker is asked to work on weekly
Click to read more »

Work Hours and Overtime under the Factory Act, 1948 and Shops & Establishment Act

Image
India has two major laws concerning working hours of workers i.e. the Factory Act, 1948 and Shops & Establishment Act. The regulations related to the working hours can be separated into four broad categories that help demarcate the dimensions of the discussion. Working Hours for Factory Workers; I. Employment of Adults: Mr. Pankaj Singla Sr. Associate +919971508320 pankaj@indiacp.com An adult worker shall not be employed for more than 48 (forty eight) hours in a week and not more than 9 (nine) hours in a day. A compulsory rest of at least half an hour (30 minutes) between each period of work  and such period of work shall not exceed five hours. Total period of work inclusive of rest interval cannot be more than 10.5 hours. The Chief Inspector may by giving a reason in writing  increase the workday time up to twelve hours. According to Minimum Wages Act, 1948 the working day of a worker shall be so arranged that inclusive of the interval of rest it shall n...
Click to read more »

SEBI's Circulars About Enhancing Liquidity And Curbing Manipulation Regarding Illiquid Scrips

Image
SEBI recently has come out with two different circulars in respect to illiquid scrips wherein one circular talks about enhancing liquidity in the illiquid scrips by promoting incentives by stock exchanges on trading in such scrips, another circular aims at curbing manipulations in the illiquid scrips by introducing Periodic Call Auction in illiquid scrips. Ms. Deepika Vijay Sawhney Partner +919818316936 deepika@indiacp.com The definition of illiquid scrips is kept different in both the circulars with the definition being much wider in case of scrips qualifying for Periodic Call Auctions. The provisions of both the circulars are discussed in detail hereunder: 1. Introduction of Liquidity Enhancement Scheme for illiquid scrips in Equity Cash Market by Circular dated February 08, 2013:
Click to read more »