MERGERS/AMALGAMATIONS
Depending upon the type of companies, their assets and individual features, the issue and procedures involved will be different. Some of the important steps and issues that one needs to keep in mind before and while carrying out the amalgamation are as follows.
BUSINESS AND STRATEGIC ISSUES
1. Need and rationale for merger and preparation of cost-benefit ratio including financials.
2. Carefully evaluating implications of amalgamation under various laws including income-tax, stamp duty, among others
3. Carefully evaluating the need, time frame and costs for various activities and approvals.
4. Deciding on date from which amalgamation is to take effect.
5. Due diligence of transferor company.
6. Valuation and exchange ratio.
INDICATIVE CHECKLIST OF SOME IMPORTANT PROCEDURES AND APPROVALS
1. Preparation of Scheme and other documents.
2. Check power in Memorandum/ Articles of Association of both companies for amalgamation and, if not, incorporate such powers. Check also whether transferee company has powers to carry on business of transferor company.
3. Approval at Board Meetings of both companies including related matters.
4. To intimate the Stock Exchanges where the companies are listed and also to obtain approvals and generally carry out other compliances under the Listing Agreement.
5. Filing of petitions with Court (based on the location of the registered office of the company, there may be application in different courts or a common high court).
6. Audit to be carried out by auditor appointed by Official Liquidator.
7. Meeting objections, if any, by Regional Director.
8. Calling and holding of general meetings of shareholders and creditors, as ordered by Court.
9. Issue of advertisements relating to the amalgamations.
10. Filing of report by Chairman of individual meetings.
11. Obtaining sanction of Court for the amalgamation.
12. Payment of stamp duty, as applicable.
13. Carry out post-merger formalities including filing of order of amalgamation within 30 days with Registrar of Companies, transfer of employees, among others.
14. Issue of shares and/or other consideration to the shareholders of the transferor company.
15. Proper accounting of the amalgamation as per Accounting Standard 14 and generally disclosure in Board’s report regarding the amalgamation.
ACQUISITIONS
Acquisitions of business in substantive terms is similar to an amalgamation except for legal implications and procedures. Kindly, refer to points under "Business and Strategic Issues" for mergers/amalgamations. In particular, a study of the undertaking and surrounding facts should reveal special features and issues that would need consideration and compliance.
INDICATIVE CHECKLIST OF SOME IMPORTANT PROCEDURES AND APPROVALS
1. Check power in Memorandum/Articles of Association to carry out acquisitions and to carry on business of seller Company.
2. Valuation of the undertaking.
3. Board approval for the acquirer company.
4. Board and shareholder approvals for the transferor company.
5. Documentation for the transfer.
6. Consideration and payment of applicable stamp duty.
7. Payment of consideration and formalities therefore, depending upon the type of consideration.
8. Post acquisition issues including accounting, disclosure, transfer of employees, among others.
DEMERGERS
Demerger happens when a company hives of or separates one or more of its industrial undertaking into another company or to an existing company. The company to which the industrial undertaking is transferred is the Resulting company and the company which transfers the industrial undertaking would be the Demerged Company.
Indicative checklist of some important procedures and approvals
1. Check power in Memorandum/Articles of Association to demerge or sell or transfer the assets and liabilities of the company.
2. Valuation of the undertaking.
3. Board approval for the demerger.
4. Obtain necessary consents/approvals, if any prior to the demerger.
5. Prepare Scheme of Arrangement.
6. Apply to the Court/NCLT in prescribed forms. (Refer Form Nos. 33-40).
7. Shareholder’s approval at the general meeting concerned for the purpose.
8. File the approval of the Court with the ROC within 30 days.
9. Documentation for the transfer.
10. Allot the securities in the resulting company to the shareholders of the demerged company.
SLUMP SALE
Slump sale means the transfer of one or more undertakings as a result of a sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sale.
INDICATIVE CHECKLIST OF SOME IMPORTANT PROCEDURES AND APPROVALS
1. Check power in Memorandum/Articles of Association to sell or transfer the assets and liabilities of the company.
2. Valuation of the business to be sold on slump sale basis.
3. Board approval for the slump sale and the consideration thereof. Intimate concerned stock exchanges in case of listed company
4. Ascertain tax liability under Income tax/sales tax etc.
5. Prepare Slump Sale Agreement.
6. Obtain Shareholders’ approval as special resolution if the same is by postal ballot, comply rules thereof. File the special resolution with the ROC.
7. Execute the Agreement.
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