Procedure & Applicability of Fast Track Merger U/s 233 of Companies Act, 2013



Section 233 of the Companies Act, 2013 read with rule 25 of the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016 deals with the fast track mergers which require approval from shareholders, ROC, Official Liquidators, creditors and Regional Director.

Companies which can enter into the fast track merger scheme are:

  • Holding Company and its wholly-owned subsidiary Company;
  • Two or more small Companies;
  • Such other class or classes of Companies as may be prescribed.

Small Company under Companies Act, 2013:

Section 2(85) of the Companies Act considers a company as small if:

  • It is not a public company;
  • Has a paid-up share capital of not more than INR 50 lakhs or such higher amount as may be prescribed (which shall not be more than INR 10 crores); and has a turnover (as per the profit and loss account of the immediately preceding financial year) of not more than INR 2 crores or such higher amount as may be prescribed (not more than INR 100 crores).

The procedure of merger under fast track merger scheme:

  • Authorization by the Articles of Association

First of all, the transferor and the transferee Company shall be authorized by their respective Articles of Associations for the merger. If they are not authorized to do so, then their respective AOA s shall be altered first.

  • Calling of Board Meeting:

A Board Meetings must be convened to pass the following resolutions:

  • Approval of the draft scheme.
  • Scheduling the shareholders' meeting.
  • Scheduling the creditors' meeting.
  • Submission of notice (Form CAA-9) for the invitation of objections or suggestions from the concerned authorities and persons

After obtaining the approval of Board of Directors, both the Companies shall file the draft scheme of merger or amalgamation with the Registrar of Companies, where the registered office the respective Companies are situated, Official Liquidator and persons affected by the scheme and the objections or suggestions, as the case may be shall be sent by the ROC, OL and persons effected within 30 days of the date of notice.

  • Declaration of Solvency

Each Company involved in the Merger shall file their respective declaration of solvency in Form CAA-10 with the ROC in Form GNL-2.

  • Passing of resolution in general meeting

The scheme shall be approved by the members or class of members, as the case may be holding at least 90% of the total no of shares. Further, both the Companies shall consider the objections and suggestions received from the ROC & OL in their respective general meetings.

The notice of such general meetings shall be given before at least 21 clear days along with the following documents:

  • The copy of the proposed scheme
  • The statement of details of the merger
  • A declaration of solvency made in Form CAA 10
  • Copy of the latest audited financial statements of each company
  • Copy of the valuation report (if any)
  • Any other relevant information

Alternatively, instead of convening the meetings, written approval of the creditors forming majority representing 9/10th of the value of creditors/class of creditors may be considered of the respective Companies

  • Convening a meeting of creditors

The scheme shall be approved by the majority representing the nine-tenths in value of creditors or class of creditors of respective Companies.

The notice of such general meetings shall be given before at least 21 clear days along with the following documents:

  • The copy of the proposed scheme
  • The statement of details of the merger
  • A declaration of solvency made in Form CAA 10
  • Copy of the latest audited financial statements of each company
  • Copy of the valuation report (if any)
  • Any other relevant information

Alternatively, instead of convening the meetings, written approval of the creditors forming majority representing 9/10th of the value of creditors/class of creditors may be considered of the respective Companies

  • Filing of the scheme

A copy of the scheme and a report on the result has to be filed with the Regional Director of each meeting.

Further, a copy of the scheme along with Form CAA. 11 shall also be filed with the ROC in GNL-1 and OL through hand delivery or registered post or speed post within 7 days of the conclusion of meetings.

  • Approval of the scheme by Regional Director
  • If the Registrar or the Official Liquidator has no objections/suggestions to the scheme, the Regional Director may register the same and issue a confirmation on this regard to the companies. On the other hand, any objection or suggestion may be communicated in writing to the Regional Director within a time-frame of 30 days. In the absence of any communication connected with the latter, it may be assumed that he/she does not hold an objection to the scheme.
  • The Regional Director, after reviewing the objections or suggestions (or on any other grounds), may consider the scheme to be against the public/creditor's interest. In such instances, the company may apply to the Tribunal in Form CAA 13 within 60 days of the receipt of the scheme by stating its objections and requesting the Tribunal to consider the scheme.
  • In the absence of any objection or suggestion from the Registrar and Official Liquidator or if such objection/suggestion is considered to be not sustainable, and the Regional Director conveys that the scheme is in the interest of the public or creditors, the latter may issue a confirmation order of the scheme in Form CAA 12.

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