FAST TRACK MERGER UNDER THE COMPANIES ACT, 2013
Merger/Amalgamation is a restructuring tool that helps Companies in growth & diversification of their business and to achieve their underlying objectives.
Merger is an arrangement whereby one or more existing companies come together to merge their identity into another to form a new & different identity or to carry on one’s business with diversification.
Fast Track Merger Scheme was introduced in December 2016 in India to simplify and fast track the procedure of merger and amalgamation of companies. This scheme was introduced to ease the process of merger of holding and its wholly owned subsidiary and two or more small companies.
Benefits of Fast Track Merger:
- Growth of business
- It results in diversification of business
- Sharing of technological know-how
- Removal of administrative barriers
- Also, no need for issuing public advertisement
- No Court Convened Meeting
- Less expense include
- No mandatory approval of NCLT required, hence less burden on NCLT
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Procedure To Be Followed For Fast Track Merger:
STEP 1: CHECK ARTICLES OF ASSOCIATION
Check if the AOA of both the companies i.e. transferor and transferee company permits for the merger or not. In case AOA restricts to do so, then it needs to be altered first.
STEP 2: PREPARE A DRAFT SCHEME
A draft scheme of merger needs to be prepared by professionals.
STEP 3: HOLD BOARD MEETING TO APPROVE THE DRAFT SCHEME OF MERGER
Both the transferor and transferee company shall conduct a Board Meeting for the purpose of approving the draft scheme of merger. Further each of company involved needs to pass a resolution by authorizing someone to perform all the acts and comply with all the obligations as may be considered necessary and shall act in favor of company.
STEP 4: ISSUE NOTICE OF PROPOSED SCHEME
A company will issue the notice to Registrar of Companies and other regulators for inviting objections / suggestions on the draft scheme of merger. A company needs to file declaration of solvency with the ROC.
STEP 5: APPROVAL FROM CREDITORS
Approval from creditors needs to be obtained at duly convened Creditors Meeting.
STEP 6: PERMISSION FROM MEMBERS
After the approval of the draft scheme from the authorities, the company needs to pass a resolution at a general meeting with majority of members approving the scheme who holds at least 90% of the total number of shares of the company.
STEP 7: FILING OF THE DRAFT SCHEME
Within 7 days form the conclusion of the meeting with creditors and members, a draft of the scheme involving merger must be filed. Simultaneously, a copy of the scheme must be filed with the Regional Director (R.D.) having jurisdiction of the transferee company to obtain necessary approval. Further, the scheme should be filed in form GNL-1 to ROC and filing of scheme with official liquidators though the mode of speed post or registered post.
STEP 8: APPROVAL OF SCHEME BY REGIONAL DIRECTOR
The Official Liquidator might raise an objection on the filed scheme or in case he has no issue with the same, then he will take the note of it and will issue a notice of confirmation to the companies that are involved in the merger.
The scheme further needs to be confirmed by ROC, in case the ROC has any objections, the same will be communicated within 30 days to the regional director in writing, if it is not communicated within the given time the objections will not be considered and the scheme will deemed to be approved by ROC.
STEP 9: FILING OF APPROVED SCHEME
The order of the Regional Director will be final and it must be filed ROC within 30 days of its communication.