Merger and amalgamation are the essential keys which helps companies in expansion and diversification of their business and to achieve their under lying objectives. Mergers and acquisitions (M&A) are defined as consolidation of companies. Differentiating the two terms, Mergers is the combination of two companies to form one, while Acquisitions is one company taken over by the other. M&A is one of the major aspects of corporate finance world. The reasoning behind M&A generally given is that two separate companies together create more value compared to being on an individual stand. With the objective of wealth maximization, companies keep evaluating different opportunities through the route of merger or acquisition.
Fast Track Merger is a new concept introduced under the Companies Act, 2013. The whole process takes 3-5 months for the complete merger. Unlike regular mergers the approval of high court is not required under the fast track merger. Only regional directors, Registrar of Companies and Official Liquidator are the authorities whose approval is required. Fast track merger are for Small Companies and merger of Holding companies with its wholly owned Subsidiary Companies.
Section 233 of Companies Act, 2013 read with Rule 25 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 deals with the procedure of Fast Track Merger.
Section 233 states that notwithstanding the provisions of section 230 and section 232, a scheme of merger or amalgamation may be entered into between two or more small companies or between a holding company and it’s wholly owned subsidiary company or such other class or classes of companies as may be prescribed.
Under the procedure for fast track mergers, the notice of the proposal to the Registrar, official regulators and persons affected by the merger has to be sent within thirty days. They can provide their objections and suggestions. The merger proposal has to be approved by member holders of 90% shares at the general meeting and majority representing nine-tenths in value of the creditors at the meeting convened by giving 21 days notice. The notice to the meeting to members and creditors has to be accompanied by merger scheme and declaration of solvency.
The transferee company has to file merger scheme (within 7 days of meeting) and declaration of solvency with ROC. Objections of ROC or official liquidator have to be communicated to Central Government within 30 days in writing. Central government has time period of 60 days after receiving merger proposal to file objections before tribunal which will consider whether the scheme is appropriate for fast track merger or not.
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