Regulatory
Company Law
The Companies Act 2013 (Companies Act) is the primary Indian legislation that provides for the provisions that govern M&A transactions. When your Company intends to merge, it must file an application with the Tribunal having jurisdiction over such companies, respectively. Where more than one company participates in a scheme, such an application must be filed as a joint application. However, where the registered office of the Companies is in different states, there will be two Tribunals having the jurisdiction, hence separate petitions will have to be filed.
The NCLT application for the merger is filed for either convening meetings of its respective shareholders and/or creditors or seeking dispensation of such meetings where the consents are received from the shareholders/creditors. Based on the order received from the jurisdictional NCLT order, either a meeting is convened or dispensed with it. If the majority in number, representing 3/4th in value of the creditors or shareholders present and the voting body at such meeting (if the meeting is held) agrees to the merger, then the merger is binding on all creditors and shareholders of the company, subject to the NCLT’s approval.
M&A under Companies
Share Capital
Forms part of the corporate restructuring proposed by the company under the merger provisions of Companies Act (viz; section 230 to section 234), then the NCLT has the power to approve and sanction such reduction in share capital and companies will not be required to follow a separate process for reduction of share capital as stipulated under relevant provisions of Companies Act
The provisions governing
M&A under Companies
Act constitute a comprehensive code in itself and under these provisions, the NCLT has full power to sanction any alterations in the corporate structure of a company. For example, in ordinary circumstances a company seeks approval of the jurisdictional NCLT for effectuating a reduction of its share capital.
However, if a reduction of
share capital
Cross Border Merger / Demerger
A cross-border merger involves a merger, amalgamation, or arrangement between an Indian company and a foreign company by the provisions of the Companies Act and the Rules made thereunder.
Section 234 of the Companies Act along with the Foreign Exchange Management (Cross Border Merger) Regulations, 2018 (“Cross Border Merger Regulations”) permits mergers between Indian and foreign companies with prior approval of the Reserve Bank of India (“RBI”).
The foreign company should be incorporated in a permitted jurisdiction
The procedure prescribed under the Company Act for undertaking mergers must be followed.
