Fast Track process of Merger contemplated under Section 233 of the Companies Act, 2013 By CS Rahul Agarwal and CS Heena Agrawal


MAMTA BINANI & ASSOCIATES
Company Secretaries

INTRODUCTION:

Under a new regime for Arrangements, an option given is to the certain class or classes of Companies to use the Fast Track process contemplated under Section 233 of the Companies Act, 2013. In short, we can say that Companies Act has provided a scheme of fast track mergers, dispensing with cumbersome procedure laid down for certain classes of Companies. The mandatory approval of the Tribunal is no longer required, instead seeking

confirmation from Central Government with some reporting and procedural requirements.

CLASSES OF COMPANIES:

  • Holding and Wholly Owned Subsidiary
  • Small Companies
  • Such other class or classes of Companies as may be prescribed.
BRIEF PROCEDURE FOR FAST TRACK MERGER UNDER SECTION 233 OF THE COMPANIES ACT,2013 READ WITH THE COMPANIES (COMPROMISE, ARRANGEMENTS AND AMALGAMATIONS) RULES, 2016
  • Both the transferor and transferee Company shall be authorised by their Articles of Association or Memorandum of Association for merger.
  • Preparation of Valuation Report by the Registered Valuer. (Not required if merger of Holding Company with 100% wholly owned subsidiary)
  • Drafting the scheme of Merger.
  • Both the transferor and transferee company shall Conduct their respective Board Meeting
  • To Consider Scheme of Merger.
  • To authorize someone to do all acts and things as may be considered necessary and expedient in relation thereto.
  • Both the Transferor and Transferee company shall file Notice of proposed scheme in Form CAA-9 with Registrar, OL or person affected by the scheme to invite their objections & suggestions.
(E-Form GNL-1 to be filed with ROC for filing form CAA-9 along with draft scheme of merger. Form CAA-9 along with draft scheme of merger to be given to OL through hand delivery or by post.
  • After the elapse of 30 days from filing Form CAA-9 with Registrar and OL, both the transferor and transferee company shall Dispatch the Notice of members and creditors meeting (at least 21 clear days before the meeting). Notice shall be accompanied with
  • Scheme of merger
  • Declaration of solvency.
  • Explanatory Statement as per Rule 6(3) of The Companies (Compromises, Arrangements and Amalgamations) rules, 2016
  • Both the transferor and transferee companies shall also file Declaration of solvency in Form CAA-10 with ROC. (In our opinion, on the date of dispatch or notice to members and creditors)
(E- Form GNL-2 to be filed with ROC for filing Form CAA-10)
  • Both the transferor and transferee company shall hold the General Meeting of the members and creditors:
  • To get the scheme of merger approved by the members and creditors.
  • To Consider the suggestions received by ROC, OL, if any
(The scheme is to be approved by majority representing nine-tenths in value of the creditors or class of creditors or shareholders of respective companies.)

(E-Form MGT-14 to be filed with ROC within 30 days of passing of special resolution)

  • Transferee Company shall file copy of scheme so approved by members and creditors along with report of results of each meeting in Form CAA 11 with
  • Regional Director
  • Official Liquidator
Within 7 days of approval of members and creditors.

(In our opinion its better to draft a detailed application mentioning all the briefs facts and annexing all the other attachments like Memorandum of Association, Article of Association, PAN cards, List of Shareholders, List of Creditors, Provisional and last filed audited financial statement etc.)

(E-Form RD-1 to be filed for filing form CAA-11 with RD. Form CAA-11 to be provided to Official Liquidator through hand delivery or by post.)

  • Regional Director shall issue a confirmation order in FORM CAA-12 for approval of the scheme, if no objections from Registrar or Official Liquidator received.

(Provided where objections or suggestions is received from Registrar or Official Liquidator, RD may file application before Tribunal in Form CAA-13 within 60 days of receipt of the scheme and requesting Tribunal may consider the scheme under section 232 of the Act.)

  • The Confirmation Order of the Regional Director shall be filed with the ROC by transferor and transferee company along with the prescribed fees.
(E Form INC-28 has to be filed within 30 of receipt of the order of confirmation.)

FORMS TO BE FILED IN BRIEF:

S.No. FORM No. PARTICULARS TO BE FILED BY TO WHOM
1 CAA 9 in e-form GNL 1 Notice inviting objections from RoCs in form CAA 9 is to be filed in e-Form GNL 1 Both Companies ROC
2 CAA 9 in hard copy Notice of scheme inviting objections & suggestions from competent authorities. Both Companies Official Liquidator
3 CAA 10 in e-form GNL 2 Declaration of solvency in Form CAA 10 is to be filed with ROC in form GNL 2 Both Companies ROC
4 MGT 14 Special Resolution passed for approving the scheme Both Companies ROC
5 e-form GNL 1 Filing of detailed application and Form CAA 11 Transferee Company ROC
6 CAA 11 in hard copy Filing of detailed application and Form CAA 11 Transferee Company Official Liquidator
7 e-form RD 1 Filing of detailed application and Form CAA 11 Transferee Company Regional Director
8 e-formINC 28 Confirmation order Both Companies ROC

BENEFITS OF FAST TRACK MERGER:
  • No mandatory approval of NCLT required
  • No need of issuing public announcement
  • No court convened meeting.
  • Less administrative burden.
  • Series of hearing may be avoided
  • Registration of scheme shall deemed to have effect of dissolution of transferor companies without the process of winding up.
LIST OF DOCUMENTS REQUIRED FOR FAST TRACK MERGER UNDER SECTION 233 OF THE COMPANIES ACT,2013:
  • Memorandum and Articles of Association of both the Companies.
  • List of Secured and Unsecured Creditors of both the Companies as on date.
  • List of shareholders of both the Companies as on date.
  • Copy of PAN card of both the companies.
  • Audited Financial Statements of both the Companies of immediately preceding three financial years. If the aforementioned Companies have investments in other companies, then Audited Financial Statements of the companies in which investments are made would also be required.
  • Conveyance/ Sale Deed of properties involved in the process would also be required if there is a transfer of land.
  • Statement of assets and liabilities and auditors report thereon of the companies not older than 2 months duly certified by the statutory Auditor of the Company.
CONCLUSION:

Thus, it can be concluded that the above-mentioned class or classes of Companies can follow this plain sailing process for merger. It’s a worthwhile step to bring the Companies in a tranquillity. On one hand, the premium offered to the Companies in terms of easy-going process and on the other hand by this unique concept, it envisages doing away with requirement of approaching the National Company Law Tribunal for seeking sanction to a scheme and of course it also results in bring down the burden of National Company Law Tribunal (NCLT). Though, it is not entirely free from lacunae but an attempt made to facilitate the restructuring in India. 

For detailed study: 
  1. http://ebook.mca.gov.in/Actpagedisplay.aspx?PAGENAME=17643
  2. http://ebook.mca.gov.in/Actpagedisplay.aspx?PAGENAME=26222

Authors-

Rahul Agarwal - Senior Associate
Heena Agrawal - Associate
 
At Mamta Binani & Associates.

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