POINTS

EXPLANATION

1. Companies who may enter into scheme of merger or amalgamation [Sub-section (1)]:
 

A scheme of merger or amalgamation may be entered into between two or more small companies or between a holding company and its wholly-owned subsidiary company or class or classes of companies i.e., between two or more start-up companies or one or more start- up company with one or more small company [given in Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016].

A scheme of merger or amalgamation may be entered, subject to following conditions:

1. a notice of the proposed scheme inviting objections or suggestions, if any, from the Registrar and Official Liquidators where registered office of the respective companies are situated or persons affected by the scheme within thirty days is issued by the transferor company or companies and the transferee company.
2. the objections and suggestions received are considered by the companies in their respective general meetings and the scheme is approved by the respective members or class of members at a general meeting holding at least ninety per cent of the total number of shares.
3. each of the companies involved in the merger files a declaration of solvency, in the prescribed form, with the Registrar of the place where the registered office of the company is situated; and
4. the scheme is approved by majority representing nine-tenths in value of the creditors or class of creditors of respective companies indicated in a meeting convened by the company by giving a notice of twenty-one days along with the scheme to its creditors for the purpose or otherwise approved in writing.

2. Filing of copy of scheme with the Central Government, Registrar and the Official Liquidators [Sub-section (2)]:

The transferee company shall file a copy of the scheme so approved in the manner as may be prescribed, with the Central Government, Registrar and the Official Liquidators where the registered office of the company is situated.

3. Approval or Rejection of scheme [Sub-sections (3) and (4)]:
 

On the receipt of the scheme if the Registrar or the Official Liquidator has no objections or suggestions to the scheme, the Central Government shall register the same and issue a confirmation thereof to the companies.

If the Registrar or Official Liquidator has any objections or suggestions, he may communicate the same in writing to the Central Government within a period of thirty days.

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

4. Filing of application by Central government with Tribunal [Sub-section (5)]:
 

If the Central Government after receiving the objections or suggestions or for any reason is of the opinion that such a scheme is not in public interest or in the interest of the creditors, it may file an application before the Tribunal within a period of sixty days of the receipt of the scheme, stating its objections and requesting that the Tribunal may consider the scheme under section 232.
 

5. Passing of an order of Tribunal [Sub-section (6)]:

On receipt of an application from the Central Government 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.

Provided that if the Central Government does 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.
 

6. Communication of order to Registrar [Sub-section (7)]:
 

A copy of the order confirming the scheme shall be communicated to the Registrar having jurisdiction over the transferee company and the persons concerned and the Registrar shall register the scheme and issue a confirmation thereof to the companies and such confirmation shall be communicated to the Registrars where transferor company or companies were situated.

7. Dissolution of transferor company [Sub-section (8)]:

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

8. Effect of Registration of Scheme [Sub-section (9)]:

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

1. 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.
2. 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.
3. legal proceedings by or against the transferor company pending before any court of law shall be continued by or against the transferee company; and
4. 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 itis unpaid, shall become the liability of the transferee company.
    

9. Effect of merger and amalgamation on transferee company [Sub-section (10)]:
 

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.
 

10. Filing of application by transferee company with the Registrar [Sub-section (11)]:

The transferee company shall file an application with the Registrar along with the scheme registered, indicating the revised authorized capital and pay the prescribed fees due on revised capital:

Provided that the fee, if any, paid by the transferor company on its authorized 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 authorized capital enhanced by the merger or amalgamation.