M and A New
M and A New
M and A New
1. Board Approval:
The merger or acquisition process begins with approval from
the Board of Directors of both the merging companies.
The Board passes a resolution for the proposed merger,
acquisition, or amalgamation and appoints advisors (legal,
financial, valuation experts) to carry out the necessary due
diligence.
2. Drafting the Scheme of Merger/Amalgamation:
A Scheme of Merger/Amalgamation is drafted, which outlines
the terms and conditions of the merger, swap ratio for shares,
and other specifics.
The scheme should comply with Section 230-232 of the
Companies Act, 2013, which governs mergers and
amalgamations.
The scheme is also shared with the stock exchanges if the
company is listed.
3. Valuation Report:
A valuation report from a registered valuer is prepared to
determine the share exchange ratio or the fair value of the
companies involved.
This report ensures transparency and fairness in the deal for
all shareholders.
4. Application to National Company Law Tribunal (NCLT):
Both companies involved must submit the merger scheme to
the National Company Law Tribunal (NCLT), seeking its
approval.
The application is filed under Sections 230-232 of the
Companies Act, 2013, with the necessary documents,
including the Scheme of Merger, financial statements, and the
valuation report.
5. Notice to Creditors, Shareholders, and Regulatory
Authorities:
Once the application is submitted, NCLT directs the
companies to issue notices to creditors, shareholders, and
regulatory authorities (such as SEBI, RBI, and CCI).
Approval must also be sought from the Competition
Commission of India (CCI) if the merger involves large
entities that could impact competition in the market.
6. Approval from Shareholders and Creditors:
A meeting of the shareholders and creditors is held (as
directed by NCLT) to approve the scheme of merger or
amalgamation.
A 75% majority approval (in value) from both shareholders
and creditors is required for the scheme to move forward.
7. Approval from Regulatory Authorities:
If the entities involved in the merger are listed, approval from
the Securities and Exchange Board of India (SEBI) and Stock
Exchanges is required.
If the merger exceeds certain financial thresholds, approval
from CCI is necessary to ensure the deal does not result in
anti-competitive practices.
8. NCLT Hearing and Approval:
Once the scheme is approved by shareholders and creditors, it
is submitted back to the NCLT for final approval.
NCLT conducts a hearing, taking into account objections or
concerns raised by creditors, employees, or other
stakeholders.
9. Stamp Duty and Legal Compliance:
Upon NCLT approval, the companies need to comply with the
applicable stamp duty regulations for the transfer of assets in
some states.
Necessary filings with the Registrar of Companies (RoC) are
made after approval, including filing the NCLT order.
10. Transfer of Assets and Liabilities:
After all approvals, the assets, liabilities, contracts, and
employees of the target company are transferred to the
acquiring company or the newly merged entity.
The merged entity or the acquirer must update the
Memorandum and Articles of Association (MoA/AoA) to
reflect the changes.
11. Issuance of Shares:
The acquiring company or the newly formed entity issues
shares to the shareholders of the dissolved or merged
company according to the agreed-upon share exchange ratio.
12. Final Filings and Dissolution:
The transferor company (in the case of amalgamation) or the
acquired company is dissolved without winding up.
Final filings are made with the RoC, and the merger or
amalgamation becomes legally effective.
Key Reforms Introduced by Companies Act, 2013:
Simplification for Small Companies and Fast-Track Mergers: