Note on Merger & Amalgamation

Dear Sir / Madam,

With reference to your requirements, we are clarifying you a detailed note on Merger & Amalgamation as follows:-

1. INTRODUCTION:

The term ‘Merger’ is generally a scheme of arrangement or Compromise between a Company, Shareholders and Creditors. Whereas, the term ‘Amalgamation’ is defined under section 2(1b) of Income Tax Act, 1961 as a merger of one or more Companies with another Company or Merger of two or more Companies to form a new Company.

The terms merger and amalgamation have not been defined in the Companies Act, 1956 and the new Companies Act, 2013 (hereinafter referred to as the Act). 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 new Companies Act, 2013.

2. STEPS INVOLVED FOR MERGER / AMALGAMATION:

Following are the steps involved in merger / amalgamation:-

S. No.

STEPS

1)
Due Diligence. System, Business, Tax, Financial & Legal Due Diligence

2)
Calling Board meeting to appoint valuers, lawyers and consultants

3)
Notifying the Stock Exchange, if applicable, about Board Meeting for the proposed Amalgamation

4)
Determination of Share Exchange Ratio on the basis of Report of a Chartered Accountant.

5)
Drafting of Scheme of Amalgamation

6)
Approval of Scheme of Amalgamation

7)
Notification to Stock Exchanges, press releases, if applicable

8)
Intimation to Bankers, Financial Institutions and other secured creditors and obtain their consent

9)
Application to be filed to the Court for direction to convene the Extraordinary General Meeting of Shareholders, Creditors – Secured and Unsecured or to obtain dispensation.

10)
Draft notice, form of proxy and approved by the Registrar of the Court or companies, if meetings not dispensed with

11)
Dispatch of notices for holding the meeting to pass the resolution along with the explanatory statement as required under the Companies Act, 2013.

12)
Publication of advertisement in English & Local Language newspapers, as approved by the Court, regarding holding of the Meetings of Shareholders and Creditors.

13)
Filing of Report in the form of affidavit by the Chairpersons of the meetings with the Court.

14)
Holding of General Meeting to approve Merger or Amalgamation with requisite majority

15)
Drafting and passing of resolution approving the Scheme of Amalgamation subject to High Court confirmation by both companies

16)
Filing of Resolutions with the registrar of companies within 30 days in E-Form MGT – 14

17)
Filing of the petition with High Court for approval of the scheme within 7 days of filing of Chairman’s Reports of meetings

18)
Notice to the Official Liquidator of the Transferor Company and from Registrar of Companies of Transferor and Transferee company(ies)

19)
Publication of advertisement as approved by the Court notifying the date of hearing fixed by the High Court regarding consideration of petition.

20)
Official Liquidator & Regional Director to submit reports – Follow-up required

21)
Hearing by the Court and prior to passing order allowing the scheme, to hear objections. Court may approve, with or without conditions.

22)
Filing of certified copy of Court’s Order with the Registrar of Companies within 30 days.

23)
To carry out the scheme of amalgamation as approved by the High Court issuing notices, allotting shares, etc.

24)
Allotment of shares and to file Return of allotment with the Registrar of Companies in E-Form PAS – 3

3. DUE DILIGENCE:

Any proposal of merger or amalgamation commences 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. The due diligence process makes the journey see the light at the end of the tunnel – the light of wisdom to amalgamate or not.

Due Diligence refers to the process of appraising, assessing and evaluating business risk with analysis of cost benefit which is involved in Merger & Amalgamation. It is like trying to find a switch to put on the light when in entering a dark room. The decision to merge or amalgamate has to be based on considered opinion, which can be formed only after scanning of information and records available.

Due Diligent involves following steps:

1. Collection of Documents/Information from Management
2. Assemblage of Information from Independent Sources
3. Review of Documents/Information

4. ROLE OF SHAREHOLDERS & CREDITORS, VARIOUS AUTHORITIES, PROFESSIONALS AND OTHERS:

The role of the Shareholders & Creditors, the Chairman, the High Court, the Registrar of Companies, the Professionals such as Company Secretaries, Chartered Accountants, Lawyers, etc.

The approval of shareholders’ and creditors – secured and unsecured are obtained in meetings convened under the directions of the Court. The resolution approving the scheme of amalgamation should be passed by majority in number representing 3/4th in value of the creditors or members. It is incumbent upon the Chairperson to submit report of proceedings of the meeting

The High Court enjoys vast powers in relation to grant of sanction for merger or amalgamation of companies

The Registrar of Companies/Regional Directors & Official Liquidators have to make a report to the High Court that the affairs of the company are not being conducted in a manner, prejudicial interest of their member or to public interest.

The role of Professionals such as Company Secretaries, Chartered Accountants, Lawyers, etc., in any amalgamation case, cannot be undermined as without their uncanny insight within the financial maze, no due diligence, valuation, share exchange ratio etc. can be accomplished.

4. TIMELINE:

Subject to timely receipt of information, documents and payment, incorporation of a company may take 6 to 8 months from the kick-off date.

5. EXPENSES:

We are pleased to inform you that total expenses for merger or amalgamation will depends on facts of the case.
6. PLACE OF RENDERING SERVICES:

The place of rendering services generally shall be our office situated at 496B, 2nd Floor, Near KCC Classes, Kasba Peth, Pune – 411011.

For us clients are important and we are interested in keeping long term relationship with client’s always.

Kindly sign a copy of the letter/ or mail me at info@csladda.com in token of approval or
you may issue separate letter accepting terms and condition of this letter.

Thanking you and assuring best professional services.

Sd/-
Pramodkumar R. Ladda
Company Secretary

For, CS Pramodkumar R. Ladda
Company Secretary

Land line No. 020-24570055
Office Cell Nos: 9404923393, 8624919609, 9175395604
Personal Cell No. 9922735476 / 9595271145
Skype id: pramodladda
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