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Differs from a consolidation in that no new entity is created from a merger The terms merger and amalgamation have not been defined in the Companies Act, 1956 (hereinafter referred to as the Act) though this voluminous piece of legislation contains 69 definitions in Section 2.The concept paper recently issued by the Ministry of Company Affairs, the fate of which is still unknown, contained 100 such definitions but still stopped short of defining merger or amalgamation.Presently, the High Court enjoys powers of sanctioning amalgamation matters under section 394 of the Act though it is a matter of time when this power will be exercised by National Company Law Tribunal, a forum where Chartered Accountants shall be authorized to appear.Not losing sight of this opportunity coming way of the Chartered Accountants, the seminar on this very topic, assumes greater significance and it is imperative that professionals like Chartered Accountants should keep themselves informed of the provisions relating to merger and amalgamations.
CREDITOR’S RESOLUTIION – NECESSARY The creditors have to pass requisite resolution for a scheme on arrangement or compromise with them.
The powers may be exercised by the courts for the purpose of proper working of the scheme. The effect of those interested should be indicated stating if and how far the same are different from the like interest of other persons. ALL ER It was held in this case that Where that matters involved are of considerable difficulty and doubt, it becomes the duty of the court to examine and scrutinize the content of notice or circular sent to the members and creditors who are parties to the scheme to make sure that the notice is sent contained appropriate disclosures under section 393(1) (a). CLOTNESS IRON COMPANY 1951 SC 476 It was held in this case that a statement made in general “Directors have no interest in the scheme other than as members along with other members” is not a sufficient compliance under the provisions.
Not only this, including any modification in the scheme, with only objective to ensure proper working of compromise or arrangement. Such explanation must be mentioned in the notice being advertised indicating therein that the explanations are available at the Company’s office. : PROVISIONS FOR FACILITATING RECONSTRUCTION AND AMALGAMATION OF COMPANIES. It appeared to the court that the scheme was by way of, what is known as commercial world as a reverse takeover which means that a profit making company merges itself into a loss making company for the purpose of having advantage for tax purpose of examining that the scheme is not that reason against public interest and for evasion of taxes.
WHEN COURT CAN PROCEED TO GIVE EFFECT TO SCHEME The court held that the amalgamation scheme has been approved by the majority of the shareholders of both the companies, the exchange ratio has been fixed by a reputed firm of Chartered Accountants and accepted by the share holders, the statutory formalities have been complied with, the scheme is fair and reasonable and there is no fraud involved, then the court would proceed to give effect to the decision of the majority of the share holders of the company. The Mo A of the company contains power to amalgamate. The affidavit is signed and sworn in prescribed manner by the deponent under Code of Civil Procedure, 1908. Send a copy of application made to the court to the concerned Regional Director, Department of Company Affairs (section 394A). The High Court should give the directions in respect of the matter set out in Rule 69 of Companies Court Rules, with respect to meeting including fixation of time, place and quorum of such meeting, appointment of chairman, etc. Notice of general meeting should be sent to members setting forth the terms of compromise or arrangement and their effect, interest of directors, managing director or manager of the company and effect of those interested on the amalgamation. 36 of Companies Court Rule] shall be sent to the members at least 21 clear days before meeting [ Rule 74 of Companies Court Rules ]. Where notice is sent by an advertisement , he same should be in the form no.
If not, alter the object clause of memorandum by following the procedure laid down under section 17. The Draft scheme of amalgamation (based on fair exchange ratio) prepared and approved by the Board of Directors. 38 of Companies Court Rules and include the aforesaid statement or a notification of the place at which and the manner in which the members who are entitled to attained the meeting may obtain copies thereof [ Rule 74 of Companies Court Rules ]. If the amalgamation affects the rights of debenture holders, the said statement shall give the like information and explanation as respects the trustees of any deed for securing the debenture as it is required to give as respects the company’s Directors [section393(2)]. Provide a copy of statement free of charge to every creditor or member applying for the same within 24 hours of the requisition made so. Ensuring the chairman appointed by the Court for the meeting of company or any other person files an affidavit at least 7 days before the meeting showing the directions regarding the issue of notice and advertisement have been compiled with [Rules 75 and 76 of Companies Court Rules]. Hold the general meeting and pass the resolution as mentioned below: 1. 23 along with copy of resolution and explanatory statement with filing fee with the Registrar of Companies within 30 days of passing. The Chairman should report the result of the meeting to the court on form no 39 within time fixed by the court or within 7 days of conclusion of meeting. Move the High Court for approval by submitting a petition in Form no.
The Act and the relevant rules pertaining to amalgamation are to be followed scrupulously.