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Procedural Road Map for Merger

Vikram Sirohi 
on 03 June 2020

LinkedIn


MERGER

    

STEPS TO BE TAKEN

FORMS

  1. Authorization in MOA & AOA
  • If not, then firstly alter the MOA & AOA: pass the SR

MGT-14

  1. Prepare the Draft Scheme of Merger
 
  1. Call the Board Meeting to:
  • Approve the Draft scheme of Merger
  • Authorization to file application with NCLT
  • Authorization to file petition for confirmation of the scheme by NCLT
  • Appointment of Registered valuer
 
  1. Section 230(1) read with Rule-3: File application with the NCLT to convene the Meeting along with:
  • a notice of admission
  • an affidavit
  • a copy of scheme of C&A which shall include the following point as mentioned in Annexure-1
  • a Creditors responsibility statement as per Rule-4

Note-1: 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.

Note-2: Where the registered office of the Companies is in different states, there will be two Tribunals having the jurisdiction over those companies, hence separate petition will have to be filed.

Note-3: where the Company is not the applicant, a copy of notice of admission and affidavit shall be served on the Company, not less than 14 days before the date fixed for hearing.

Note-4: The applicant shall also disclose to the Tribunal in the application, the basis on which each class of members or creditors has been identified for the purposes of approval of the scheme.

Form NCLT-1

Form NCLT-2

Form NCLT-6

-

Form CAA-1

  1. Section 230(1) read with Rule-5: NCLT hearing and NCLT may pass the order for convene the Meeting the meeting of Members and Creditors

Direction of the Tribunal: as mentioned in the Annexure-2

 
  1. Section 230(3) read with Rule-6: Notice of the Meeting shall be given pursuant to the order of the tribunal which shall be sent individually to each creditors or members

Note: Notice related compliances as mentioned in the Annexure-3

Form CAA-2

  1. Section 230(3) read with Rule-7:

The notice of the meeting shall be advertised in at least one English newspaper and in at least one vernacular newspaper having wide circulation in the state in which the registered office of the company is situated, or such newspaper as may be directed by the Tribunal.

Note: The Advertisement shall also be placed, not less than thirty days before the date fixed for the meeting, on the website of the company of the SEBI and the recognized stock exchange where the securities of the company are listed (not applicable in case of private company)

Note: where separate meetings of classes of creditors or members are to be held, a joint advertisement for such meetings may be given.

Form CAA-2

  1. Section 230(5) read with Rule-8:

Notice to the Statutory authorities: the notice shall be accompanied with a copy of the scheme of compromise or arrangement, the explanatory statement and the disclosures mentioned under rule 6, and shall be sent to:

  • The central Government
  • The ROC
  • The Income Tax Authorities

Note: The authorities can make their representation and the same shall be sent to the tribunal within 30 days from the date of receipt of notice and also sent to the concern companies and if no representation is received with in the stated period then it will presumed that the authorities have no objection.

Form CAA-3

  1. As per Rule-12:

Affidavit of Service: The chairperson appointed for the meeting of the company or other person directed to issue the advertisement and the notices of the meeting shall file an affidavit before the Tribunal not less than seven days before the date fixed for meeting or 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.

 
  1. Section 230(4) & (6):

Resolution at Member’s Meeting & Creditors Meeting:

Where, at a meeting held in pursuance of Tribunal directions, majority of persons representing three-fourths in value of the creditors, or class of creditors or members or class of members, as the case may be, voting in person or by proxy or by postal ballot, agree to any compromise or arrangement and if such compromise or arrangement is sanctioned by the Tribunal by an order, the same shall be binding on the company, all the creditors, or class of creditors or members or class of members, as the case may be, or, in case of a company being wound up, on the liquidator and the contributories of the company.

 
  1. As per Rule-14:

Report on result of the Meeting: The chairperson of the meeting shall, within the time fixed by the tribunal, or where no time has been fixed, within three days after the conclusion of the meeting submit a report to the Tribunal on the result of the meeting

Form CAA-4

  1. As per Rule-15:

Petition for confirming C&A to the Tribunal: Where the proposed compromise or arrangement is agreed to by the members or creditors with or without modification, the company shall, within seven days of the filing of the report by the chairperson, present a petition to the tribunal for sanction of the scheme of compromise or arrangement.

Form CAA-5

  1. As per Rule-16:

Date & notice of Hearing: The tribunal shall fix a date for the hearing of petition, and 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, not less than ten days before the date fixed for the hearing.

 
  1. Section 230(8) read with Rule-17:

Order of Petition: the copy of the order shall be filed with the ROC within 30 days in form INC-28 from the date of receipt of copy of the order, or such time as may fixed by the tribunal

Order shall be in Form CAA-6

Procedural Road Map for Merger

Stamp Duty provisions for Merger:

Annexure-1

As per Section 230(2) read with Rule-3: The Scheme of C&A shall include the following

1. All material facts relating to the company, such as the latest financial position of the company, the latest auditor’s report on the accounts of the company and the pendency of any investigation or proceedings against the company;

2. reduction of share capital of the company, if any, included in the compromise or arrangement;

3. any scheme of corporate debt restructuring consented to by not less than seventy-five per cent. of the secured creditors in value, including—

  • a creditor’s responsibility statement in the prescribed form;
  • safeguards for the protection of other secured and unsecured creditors;
  • 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;
  • where the company proposes to adopt the corporate debt restructuring guidelines specified by the Reserve Bank of India, a statement to that effect; and
  • 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.

Annexure-2

As per Rule-5: The Tribunal can give the following direction as mentioned below

  1. determining the class or classes of creditor or of members whose meeting or meetings have to be held for considering the proposed compromise or arrangement
  2. fixing the time and place of the meeting or meetings
  3. appointing a Chairperson and scrutinizer for the meeting or meetings to be held, as the case may be and fixing the terms of his appointment including remuneration
  4. fixing the quorum and the procedure to be followed at the meeting or meetings, including voting in person or by proxy or by postal ballot or by voting through electronics means
  5. determining the values of the creditors or the members, or the creditors or member of any class, as the case may be, whose meetings have to be held
  6. notice to be given of the meeting or meetings and the advertisement of such notice
  7. notice to be given to sectoral regulators or authorities as required under sub-section (5) of section 230
  8. the time within which the chairperson of the meeting of the meeting is required to report the result of the meeting to the tribunal

Annexure-3

As per Section 230(3) read with Rule-6: the notice shall contain the followings

The notice shall be sent by the chairperson appointed for the meeting, or, if the Tribunal so directs, by the company (or its liquidator), or any other person as the Tribunal may direct, by registered post or speed post or by courier or by e-mail or by hand delivery or any other mode as directed by the Tribunal to their last known address at least one month before the date fixed for the meeting.

The notice of the meeting to the creditors and members shall be accompanied by a copy of the scheme of compromise or arrangement, if such details are not already included in the said scheme: -

Details of the order of the Tribunal: 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

Details of the Company: the 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 authorized, issued, subscribed and paid up share capital; and
  • name of the promoters and directors along with their addresses.

Relationship between the Companies: if the scheme of compromise or arrangement relates to more than one company, 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.

Details of Board Meeting: the date of the Board meeting at which the scheme was approved by the Board of directors including the name of the directors who voted in favour of the resolution, who voted against the resolution and who did not vote/ participate on such resolution

Explanatory statement: explanatory statement disclosing details of the scheme of compromise or arrangement including:

  • parties involved in such compromise or arrangement;
  • in case of amalgamation or merger, 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 reports is available for inspection at the registered office of the company;
  • details of capital/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.

Effect of C&A: Disclosure about the effect of the compromise or arrangement on:

  • key managerial personnel;
  • directors;
  • promoters;
  • non-promoter members;
  • depositors;
  • creditors;
  • debenture holders;
  • deposit trustee and debenture trustee;
  • employee of the company:

Effect of C&A: Disclosure about effect of compromise or arrangement on material interests or directors, Key Managerial Personnel (KMP) and debenture trustee.

Details of Investigation proceedings: investigation or proceedings, if any, pending against the company under the Act.

Details of the availability of the Documents: details of the availability of the following documents for obtaining extract from or for making/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 compromise or arrangement;
  • contracts or agreements material to the compromise or arrangement;
  • the certificate issued by Auditor of the company to the effect that the accounting treatment if any proposed in the scheme of compromise or arrangement 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.
 
 

Details of approvals, Sanctions or NOC: details of approvals, sanctions or no-objection(s), if any, form regulatory or any other government authorities required, received or pending for the purpose scheme of compromise or arrangement.

Statement to the effect that voting through proxy: 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 electronics means.


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