MEANING OF MERGER AND AMALGAMATION
As per Companies Act, 1956
The terms merger and amalgamation have not been defined in the Companies Act, 1956 though this voluminous piece of legislation contains more than 50 definitions in Section 2 of the Act. For the purpose of this act the terms Merger and Amalgamation are synonymous. The statutory provisions relating to merger and amalgamation are contained in sections 390 to 396A.
As per General Dictionary Meaning
According to Oxford Dictionary, the expression merger or amalgamation means combining of two commercial companies into one merging of two or more business concerns into one respectively. Merger is a fusion between two or more enterprises, whereby the identity of one or more is lost and the result is a single enterprise whereas Amalgamation signifies blending of two or more existing undertakings into one undertaking, the blended companies losing their identities and forming themselves into a separate legal identity. There may be amalgamation either by the transfer of two or more undertaking to a new company, or by the transfer of one or more undertaking to an existing company.
As per Income Tax Act, 1961
Amalgamation as defined in section 2 (1B) of the Income Tax Act, 1961 means the merger of one or more companies with another company or the merger of two or more companies to form one company in such a manner that the following conditions are satisfied:
a) All the property of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation.
b) All the liabilities of the amalgamating company or companies immediately before the amalgamation becomes the liabilities of the amalgamated company by virtue of the amalgamation
c) Shareholders holding at least three-fourths in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamated company or its nominee) becomes the shareholders of the amalgamated company by virtue of the amalgamation.
As Per Accounting Standard
According to the mandatory Accounting Standard 14 (AS-14) issued by the Institute of Chartered Accountants of India (ICAI), amalgamation means an amalgamation pursuant to the provisions of the Companies Act, 1956 or any other statute which may be applicable to companies. Under the said AS-14 the following two methods of amalgamation have been contemplated:
1) Amalgamation in the nature of merger:- Amalgamation in the nature of merger is an amalgamation which satisfies all the following conditions:-
a) All the assets and liabilities of the transferor company become, after amalgamation, the assets and liabilities of the transferee company.
b) Shareholders holding not less than 90% of the face value of the equity shares of the transferor company (other than the equity shares already held therein, immediately before the amalgamation, by the transferee company or its subsidiaries or their nominees) become equity shareholders of the transferee company by virtue of the amalgamation.
c) The consideration for the amalgamation receivable by those equity shareholders of the transferor company who agree to become equity shareholders of the transferee company is discharged by the transferee company wholly by the issue of equity shares in the transferee company, except that cash may be paid in respect of any fractional shares.
d) The business of the transferor company is intended to be carried on, after the amalgamation, by the transferee company.
e) No adjustment is intended to be made to the book values of the assets and liabilities of the transferor company when they are incorporated in the financial statements of the transferee company except to ensure uniformity of accounting policies.
2) Amalgamation in the nature of purchase:- Amalgamation in the nature of purchase is an amalgamation which does not satisfy any one or more of the conditions specified in (1) above
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