Procedure under the Merger Provisions

Since a merger essentially involves an arrangement between the merging companies and their respective shareholders, each of the companies proposing to merge with the other(s) must make an application to the Company Court5 having jurisdiction over such company for calling meetings of its respective shareholders and/or creditors. The Court may then order a meeting of the creditors/shareholders of the company. If the majority in number representing 3/4th in value of the creditors and shareholders present and voting at such meeting agrees to the merger, then the merger, if sanctioned by the Court, is binding on all creditors/shareholders of the 5. The High Court of each Indian State will usually designate a specific bench of the High Court as the Company Court, to which all such applications will be made. Upon the constitution and notification of the National Company Law Tribunal (NCLT), the competent authority for filing this applica- tion will be the NCLT and not the Company Court. company. The Merger Provisions constitute a comprehensive code in themselves, and under these provisions Courts have full power to sanction any alterations in the corporate structure of a company. For example, in ordinary circumstances a company must seek the approval of the Court for effecting a reduction of its share capital. However, if a reduction of share capital forms part of the corporate restructuring proposed by the company under the Merger Provisions, then the Court has the power to approve and sanction such reduction in share capital and separate proceedings for reduction of share capital would not be necessary.

B.Applicability of Merger Provisions to foreign companies.

 Sections 230 to 234 of CA 2013 recognize and permit a merger/reconstruction where a foreign company merges into an Indian company. Although the Merger Provisions do not permit an Indian company to merge into a foreign company, the merger provisions under Section 234 of the CA 2013 do envisage this, subject to rules made by the Government of India. However, neither is Section 234 currently in force nor have any rules been formulated by the Government of India. II. Securities Laws A.Takeover Code The Securities and Exchange Board of India (the “SEBI”) is the nodal authority regulating entities that are listed and to be listed on stock exchanges in India. The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the “Takeover Code”) restricts and regulates the acquisition of shares, voting rights and control in listed companies. Acquisition of shares or voting rights of a listed company, entitling the acquirer to exercise 25% or more of the voting rights in the target company or acquisition of control, obligates the acquirer to make an offer to the remaining shareholders of the target company. The offer must be to further acquire at least 26% of the voting capital of the company.6 However, this obligation is subject to the exemptions provided under the Takeover Code. Exemptions from open offer requirement under the Takeover Code inter alia include acquisition pursuant to a scheme of arrangement approved by the Court.