14 June 2010
Consider the following scenario: ABC, a private co. has a wholly owned subsidiary XYZ. ABC now wants to merge with XYZ. Question: 1. Can ABC necessarily have to amalgamate with XYZ, or can ABC also "takeover" XYZ? 2. I understand that amalgamation as per Sec 394 of the Companies Act, 1956 may or may not attract stamp duty depending on the state of incorporation etc., what is the take on "takeover" i.e., if take over in Q(1) above is possible, what would the stamp duty implications be?
14 June 2010
Stamp duty in case of amalgamation is governed as per state acts. Most states charge the Order of the High Court. It is considered as a Conveyance and duty is charged at x% of the shares issued or immovable property transferred, whichever is higher.
In case of takeover, stamp duty is levied on the value of the immovable properties transferred and the movable properties are charged to Vat.
If the subsidiary does not have any immovable property, then amalgamation would be better. It would be very easy and also no stamp duty
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