Section 232 of Companies Act 2013 – Provisions Mergers and Acquisitions of Companies
Mergers and acquisitions are strategic actions taken by companies for expansion or to eliminate competition. However, these are regulated arrangements and the Companies Act, 2013 lays down explicit provisions for mergers and amalgamations of companies. What are the provisions for the mergers and acquisitions companies act has specified? Find out here!
Section 232 Companies Act 2013: Procedure for Mergers and Amalgamations
Following is the procedure laid down under Section 232 for the merger and amalgamation of companies in India:
- An application shall be filed with the National Company Law Tribunal (NCLT or Tribunal) as per section 230 of companies act 2013. The application shall contain the scheme of merger and amalgamations of companies whereby the whole or part of any asset, liability or undertaking of a company shall be transferred to another company.
- After considering the application, the Tribunal shall order a meeting of members or class of members or creditors or class of creditors. It shall be called, held and conducted in such manner as the Tribunal may decide.
- After the order of the Tribunal, the merging companies shall circulate the following for the purpose of the meeting:
- Draft of the proposed terms of the scheme that are being drawn up and adopted by the directors of the merging companies
- Confirmation that the draft scheme has been filed with the registrar
- Report adopted by the directors of the merging companies
- Report of the expert in relation to valuation
- Supplementary accounting statement
- The tribunal after being satisfied that the procedure has been duly followed may order the merger and amalgamation of companies. Tribunal has the power to make detailed provisions in relation to the same.
- However, merger or acquisition shall not be sanctioned unless a certificate from the company’s auditor has been received to the effect that the accounting treatment proposed in the scheme is in conformity with the accounting standards under section 133.
- The order of acquisition by the Tribunal shall be filed with the registrar within 30 days of the receipt of the order.
- The scheme shall indicate the appointed date from which the scheme shall be effective.
- The companies in relation to which the order has been passed by the Tribunal shall file a statement with the registrar every year. The statement should be certified by a Chartered Accountant or a Company Secretary or a Cost Accountant in practice. It shall indicate whether the scheme is being complied with according to the orders of the Tribunal or not.
Approval of Creditors and Shareholders – Section 230
When the meeting is held, the majority of the persons representing 3/4th of the members or class of members or creditors or class of creditors, as the case may be, must agree to the merger or acquisition for the approval of the same. Once it is sanctioned by the Tribunal, it shall be binding upon the company, all the creditors or class of creditors and all the members or class of members.
Following were the explicit provisions governing Section 232 of Companies Act 2013 under mergers and acquisition of companies. The Companies Act, 2013 also lays down the provisions for takeovers and cross-border acquisitions. In case you need any assistance in relation to Section 232 of Companies Act 2013 under mergers and amalgamations of companies, feel free to contact the ASC Group.