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The merger provisions are contained in Chapter XV of the Companies Act, 2013, containing Sections 230 to 240, which deals with 'Compromises, Arrangements and Amalgamations.' Section 234 specifically deals with the cross-border mergers concerning merger or amalgamation of an Indian company with a foreign company and vice-versa.


Erstwhile, the provisions for merger of the Indian company with the foreign company incorporated outside India was not there in Companies Act, 1956. Hence, Cross Border Mergers were restricted under previous law due to the provisions of Sec.394(4)(b) of Companies Act, 1956, wherein it was provided that Transferee company has to be a company registered under Indian Companies Act and the Transferor company included any body corporate whether incorporated under Indian Companies Act or not. Therefore, under the previous Companies Act, 1956, it was possible for a foreign company to merge with an Indian company, but an Indian company could not be merged with a foreign company.

Now, the Companies Act, 2013 allows both inbound and outbound cross-border mergers and amalgamations between Indian and foreign companies. This is a welcome step which broadens the idea of globalization.

However, such mergers would entail two primary conditions;

(i) Requirement for the prior approval of Reserve Bank of India (RBI)
(ii) Overseas jurisdictions where such cross-border mergers and amalgamations would be permitted.

Legal Framework for Cross-Border Merger:

On 13th April, 2017, Ministry of Corporate Affairs (MCA) has vide its Commencement Notification notified Section 234 of Companies Act, 2013 which provides for Merger or Amalgamation of company with Foreign Company which has come into force with effect from 13th April, 2016. MCA has also notified Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2017 by inserting Rule 25A for Merger or Amalgamation of company with a Foreign company and vice versa.

Provisions of Sec.234 under Companies Act, 2013:

Prior RBI approval: Section 234(2) states that subject to the provisions of any other law for the time being in force, a foreign company may with the prior approval of Reserve Bank of India, merge into a company registered under this Act or vice versa.

For the purpose of this sub-section, the expression “Foreign Company” means any company or body corporate incorporated outside India whether having a place of business in India or not.

General Provisions of Chapter XV will be followed: Section 234(1) states that the provisions of this Chapter unless otherwise provided under any other laws for the time being in force, shall apply mutatis and mutandis to scheme of merger and amalgamation under this section.

Rule 25 A of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016: The approval required under the newly inserted rules can be explained as follows:

Annexure-B: A company may merge with a Foreign company incorporated in any of the jurisdictions:

(i) Whose security market regulator is a signatory to:

- International Organisation of Securities Commission's Multilateral Memorandum of Understanding, or
- Bilateral Memorandum of Understanding with SEBI

(ii)  Whose Central Bank is a member of Bank of International Settlements(BIS), and

(iii)  Which is not identified in the public statement of Financial Action Task Force (FATF) as:

  • A jurisdiction having a strategic Anti-Money Laundering,
  • A jurisdiction combating the financing of Terrorism deficiencies to which countermeasures apply,
  • A jurisdiction that has not made significant progress in addressing the deficiencies or
  • A jurisdiction that has not committed to an action plan developed with FATF to address the deficiencies.

An insight into general provisions of merger under Section 230 to Section 232:

  • The memorandum of association of the companies seeking to merge, should give power to companies to amalgamate.
  • Also, the creditors and members of the companies must approve the merger scheme.
  • Notice of merger along with merger proposal and valuation report etc. needs to be served upon creditors, shareholders, and various regulators (RD, ROC, OL, SEBI, RBI, CCI, Stock exchanges of listed companies, IT authorities and other sector authority likely to be affected by merger.)
  • Shareholders and creditors are given option to cast their vote through postal ballot.
  • Tribunal can dispense meeting of creditors if creditors having 90% of value agree by way affidavit to the scheme of a compromise or an arrangement for merger or amalgamation.
  • Objections can be raised by shareholders who hold 10% or more equity or creditors whose outstanding debt is 5 % or more of the total debt as per last audited balance sheet.
  • Prior certification from auditors saying accounting treatment is in consonance with accounting standards needs to be filed with Tribunal.
  • After the NCLT order sanctioning the scheme, its certified true copies will be filed with the Registrar of Companies.


The 1956 Act prohibited the merger/ demerger of Indian company with the foreign company, however, the vice versa was possible. But as per the 2013 Act, both types of mergers have been allowed with those foreign entities permitted by the Government in its amended Rules. Prior RBI approval is also required to be taken for concluding these types of deals along with the compliance of the provisions of sections 230 to 232 of the Companies Act, 2013 and the rules. The payment in the scheme can be done through cash or through depository receipts or both.

Cross-border merger may become a useful tool for companies to undertake expansion and restructuring activities. This is a welcome step which broadens the idea of globalization.


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