FAST TRACK MERGER (FTM) : Section 233 of Companies Act, 2013 – Merger or Amalgamation of certain companies

FAST TRACK MERGER (FTM)

Section 233 of Companies Act, 2013 – Merger or Amalgamation of certain companies
{Rule 25 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016}
[Effective from 15th December, 2016]

Fast Track Merger (FTM) is a new concept introduced under the Companies Act, 2013. It is unique concept because High Court approval is not required in this Merger, only Regional Directors (Powers of Central Government delegated to Regional Director vide Notification No. S.O. 4090(E) dated 19th December, 2016), Registrar of Companies and Official Liquidator are the authorities whose approval is required. The whole process can take 3-5 months time for completion.
In Fast Track Merger, a scheme of merger or amalgamation may be entered into between
i. two or more small companies, or
ii. a holding company and its wholly-owned subsidiary company, or
iii. Such other class or classes of companies as may be prescribed. (No such other Companies are prescribed yet)

 

Small Company: Section 2(85) of the Companies Act, 2013

“Small company” means a company, other than a public company,-
(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than five crore rupees; and
(ii) turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees:
Provided that nothing in this clause shall apply to-
A. A holding company or a subsidiary company;
B. A company registered under section 8; or
C. A company or body corporate governed by any special Act.

 

STEPS FOR THE FAST TRACK MERGER (FTM):

1. Check the Articles of Association of the respective companies involved in the merger, whether there is clause to merge the business of the Companies with the other companies, if not then, first of all, alter the AOA of the Companies.

2. Call the Board Meeting and Prepare the Draft Scheme of Amalgamation or Merger

3. Conduct Board Meeting and do the followings:

a. Get the Draft scheme approved
b. Authorized any director or Company Secretary or any other person to do such acts in this regard.
c. Prepare the Statement of Assets and Liabilities of the Companies which reveals the current position of the Companies and receive the Auditor’s Report on the Statement.

4. Send a notice in Form CAA-9 of the proposed scheme inviting objections or suggestions, if any, within 30 days of issuing the notice from the Registrar and Official Liquidators where registered office of the respective companies are situated or persons affected by the scheme with the attachments are given below:
a. Scheme of Merger or Amalgamation
b. Pre and post Merger Shareholding of the Transferee Company
c. Last 3 years Audited financial statements with Auditors report thereon filed to ROC
d. MOA and AOA
e. Board Resolution
f. Valuations report for Share Exchange ratio from the registered Valuer, in case of WOS Company no need of Valuation report
Note: To ROC and OL, the Notice in CAA-9 shall be submitted via hand delivery. And to Person affected by the scheme (i.e. Income Tax Department, RBI, SEBI, Respective Stock Exchange, CCI, if necessary, or other sectoral regulators or authorities which are likely to be affected), the notice shall be served via post or speed post or via courier.
5. the objection or suggestions shall be given by ROC, OL or Person affected by the Scheme within 30 days of serving notice to the RD and authorized representative of Transferor Company.

6. each of the companies involved in the merger files a declaration of solvency in the Form CAA-10 with the ROC of the place where the registered office of the company is situated along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 before convening the meeting of members and Creditors for approval of the Scheme. The attachments are:
a. Board Resolution
b. Statement of Assets and liabilities
c. Auditors report on the statement of Assets and Liabilities
Note: Currently, this form is not available as e-form, so it may be filed in GNL-2 or may be filed at the time of submission of File as an annexure of the Scheme of merger or amalgamation.
7. After getting objections or suggestions call a Board meeting and amend the Draft Scheme and consider the Day, Date, Time and Place for General Meeting and Creditors Meeting. If no such objections or suggestion received, then get the scheme approved without alteration and do the further proceeding for the Meeting of Members and Creditors.

8. Send the notice of the meeting to the members and creditors shall be accompanied by-
a. a statement, as far as applicable, referred to in sub-section (3) of section 230 of the Act read with sub-rule (3) of rule 6 hereof;
b. the declaration of solvency filed in Form CAA-10
c. a copy of the scheme.

9. Conduct General Meeting and get the scheme approved by the respective members or class of members at a general meeting holding at least 90 per cent of the total number of shares.
(Note: The meeting should be conducted after 30 days of the sending Notice in CAA-9, so that the objections or suggestions shall be considered)
10. Conduct Creditors Meeting by giving a notice of 21 days along with the above attachments (point no. 6) and get the scheme approved by majority representing nine-tenths in value of the creditors or class of creditors of respective companies or otherwise approved in writing.

11. the Transferee company shall, within seven days after the conclusion of the meeting of members or class of members or creditors or class of creditors, file a copy of the scheme as agreed to by the members and creditors, along with a report of the result of each of the meetings in Form No. CAA.11 with the
a. Regional Directors along with the fees as provided under the Companies (Registration Offices and Fees) Rules, 2014. (file shall be submitted via hand delivery along with payment challan)
b. Copy of the scheme shall also be filed, along with Form No. CAA. 11 with the Registrar of Companies in Form No. GNL-1 along with fees provided under the Companies (Registration Offices and Fees) Rules, 2014; and
c. the Official Liquidator through hand delivery or by registered post or speed post.

12. The objections or suggestions shall be given by ROC and OL to the RD within 30 days of the filing the Form CAA-11.

13. Where no objection or suggestion is received to the scheme from the Registrar of Companies and Official Liquidator or where the objection or suggestion of Registrar and Official Liquidator is deemed to be not sustainable and the Regional Directors is of the opinion that the scheme is in the public interest or in the interest of creditors, the Regional Directors shall issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA.12.

Note: If no such communication is made, it shall be presumed that he has no objection to the scheme.

14. Where objections or suggestions are received from the ROC and OL and the Regional Directors is of the opinion, whether on the basis of such objections or suggestions or otherwise, that such a scheme is not in public interest or in the interest of the creditors, it may file an application before the Tribunal in form CAA-13 within a period of 60 days of the receipt of the scheme stating its objections or opinion and requesting that the Tribunal may consider the scheme under section 232 of the Companies Act, 2013.

15. On receipt of an application from the Regional Directors or from any person, if the Tribunal, for reasons to be recorded in writing, is of the opinion that the scheme should be considered as per the procedure laid down in section 232, the Tribunal may direct accordingly or it may confirm the scheme by passing such order as it deems fit.

Note: If the Regional Directors do not have any objection to the scheme or it does not file any application under this section before the Tribunal, it shall be deemed that it has no objection to the scheme.

16. The confirmation order of the scheme issued by the Regional Directors or Tribunal shall be filed, within 30 days of the receipt of the order of confirmation, in Form INC-28 along with the fees as provided under Companies (Registration Offices and Fees) Rules, 2014 with the Registrar of Companies having jurisdiction over the transferee and transferor companies respectively.

17. It is clarified that with respect to schemes of Merger or Amalgamation falling within the purview of section 233 of the Act, the concerned companies may, at their discretion, opt to undertake such schemes under sections 230 to 232 of the Companies Act, 2013, including where the condition prescribed in clause (d) of sub-section (1) of section 233 of the Act has not been met.

 

POST MERGER EFFECT:

1. The registration of the scheme shall be deemed to have the effect of dissolution of the transferor company without process of winding-up.

2. The registration of the scheme shall have the following effects, namely:-

a. transfer of property or liabilities of the transferor company to the transferee company so that the property becomes the property of the transferee company and the liabilities become the liabilities of the transferee company;

b. the charges, if any, on the property of the transferor company shall be applicable and enforceable as if the charges were on the property of the transferee company;

c. legal proceedings by or against the transferor company pending before any court of law shall be continued by or against the transferee company; and
d. where the scheme provides for purchase of shares held by the dissenting shareholders or settlement of debt due to dissenting creditors, such amount, to the extent it is unpaid, shall become the liability of the transferee company.

3. A transferee company shall not on merger or amalgamation, hold any shares in its own name or in the name of any trust either on its behalf or on behalf of any of its subsidiary or associate company and all such shares shall be cancelled or extinguished on the merger or amalgamation.

4. The transferee company shall file an application with the Registrar along with the scheme registered, indicating the revised authorised capital and pay the prescribed fees due on revised capital: Provided that the fee, if any, paid by the transferor company on its authorised capital prior to its merger or amalgamation with the transferee company shall be set-off against the fees payable by the transferee company on its authorised capital enhanced by the merger or amalgamation.

 

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For any further queries, feel free to call or mail:

 

VISHAL SHARMA

Company Secretary

Membership No.: A 42678

Mob: 9716763754

Email: csvishalpbs@gmail.com, vishal_swiss456@yahoo.in

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