PROCEDURAL ASPECTS OF FAST TRACK

MEREGER

Date: October 23, 2019

Submitted By: Submitted To:

Ayushi Mr. Surya Raju

Sem VII (Faculty of Corporate Law)

Sec “C”

Roll No. 40

Hidayatullah National Law University,

Atal Nagar, Raipur, Chhattisgarh
 Certificate of Declaration

I hereby declare that this research work titled “Procedural Aspects of Fast Track Merger” is
my own work and represents my own ideas, and where others’ ideas or words have been
included, I have adequately cited and referenced the original sources. I also declare that I
have adhered to all principles of academic honesty and integrity and have not misrepresented
or fabricated or falsified any idea/data/fact/source in my submission.

……………………...

(AYUSHI)

On Roll- 40

Semester VII
 Acknowledgement

Thanks to the Almighty who gave me the strength to accomplish the project with sheer hard
work and honesty. This research venture has been made possible due to the generous co-
operation of various persons. To list them all is not practicable, even to repay them in words
is beyond the domain of my lexicon.

May I observe the protocol to show my deep gratitude to the venerated Faculty-in-charge Mr.
Surya Raju for his kind gesture in allotting me such a wonderful and elucidating research
topic. Apart from that I would like to thank my friends for their support and suggestions
during the process of making this project.

Ayushi

Semester VII

On Roll - 40

B.A. L.L.B. (Hons)

 TABLE OF CONTENTS

PAGE NO. 1……………………………….………CHAPTER 1: INTRODUCTION

PAGE NO. 2-3..........CHAPTER 2: APPLICABILITY OF FAST TRACK MERGER

PROVISIONS

PAGE NO. 4-5.....................CHAPTER 3: BENEFITS OF FAST TRACK MERGER

PAGE NO. 6-9..........…..CHAPTER 4: PROCEDURE OF FAST TRACK MERGER

PAGE NO. 10………………………………………….CHAPTER 5: CONCLUSION

PAGE NO. 11……………………………………………...……………REFERENCE

 CHAPTER 1
INTRODUCTION

Merger and amalgamation are rebuilding instrument which helps organizations in

development and broadening of their business and to accomplish their hidden destinations.
Merger implies a course of action whereby at least one existing organizations blend their
personality into another to shape another element which might possibly be one of those
current substances.

The Companies Act, 2013 has presented the idea of 'Quick Track Merger' (FTM) for Small
Companies and merger of Holding organizations with its completely possessed Subsidiary
Companies. Segment 233 of Companies Act, 2013 read with Rule 25 of Companies
(Compromises, Arrangements and Amalgamations) Rules, 2016 arrangements with the
technique of FTM.

Area 233 has been included the Companies Act, 2013 on 15 December 2016. The area
accommodates the most optimized plan of attack merger for certain class of organizations. It
implies that lone the particular class of organizations can experience the procedure of quick
track merger and not all sort of organizations can decide on the equivalent.
 CHAPTER 2
APPLICABILITY OF FAST TRACK MERGER
PROVISIONS

Notwithstanding the provisions of section 230 and section 232, 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 such other class or classes of
companies as may be prescribed.

Section 233 of the Companies Act, 2013 dispenses with the cumbersome and time consuming
process for mergers and lays down a simple, fast track merger procedure for the merger of
certain companies like holding and subsidiary companies, and small companies.

Small Company [Section 2(85) of Companies Act, 2013]

“Small Company” means a company, other than a public company,—

i. Paid-up share capital of which does not exceed 50 lakh or such higher amount as may
be prescribed which shall not be more than Rs. 10 Crore; or

ii. Turnover of which, as per profit and loss account for the immediately preceding
financial year, does not exceed 2 Crore or such higher amount as may be prescribed
which shall not be more than Rs. 100 Crore:

Provided that nothing in this clause shall apply to—

 A holding company or a subsidiary company;

 A company registered under section 8; or
 A company or body corporate governed by any special Act;

Companies between which fast track merger scheme can be entered

1. Holding Company and its wholly owned subsidiary company-

Holding and Wholly Owned Subsidiary Company can be public or private company
or it may be section 8 Companies. Further If Holding Company desires to merger with
 more than one of its wholly owned subsidiary, it has to make more than one
application.

2. Merger between two or more small companies

As per section 2(85) of Companies Act, 2013 small company” means a company,
other than a public company, 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 10
(ten crore rupees).

3. Such Other class or classes of companies as may be prescribed.

The Rules under Companies (Compromises, Arrangements and Amalgamation) Rules
2016 have been enforced from 15.12.2016, but these do not define the other
prescribed class or classes of companies.
 CHAPTER 3
BENEFITS OF FAST TRACK MERGER

1. No Mandatory approval of NCLT required.

2. No Need of Issuing Public Advertisement.
3. No Court Convened Meeting.
4. Less Administrative Burden.
5. Series of Hearing may be avoided.
6. Registration of scheme shall deem to have effect of dissolution of transferor
companies without the process of winding up.
7. Comparatively less cost.

Drafting of Scheme of Merger

The scheme may generally be divided into 4 parts as follows

I. Preamble

II. PART-A

(i) Definitions
(ii) Pre & Post merger share capital

III. PART- B

(i) Transfer and vesting of the assets and liabilities.

(ii) Appointed / Operative date of the scheme.
(iii) Treatment of the scheme in terms of accounts, tax and dividend.
(iv) Company staff, workmen and employees their benefits.
(v) Cancellation of the shares of the transferor company – wholly owned
subsidiary.
(vi) Consolidation of Authorized Share Capital.
 (vii) Dissolution without winding up.

IV. PART –C

(i) Notice of approval of the scheme of merger.

(ii) Modification/amendments to the scheme.

Preliminary Procedure

Before getting on with the merger process, the companies desirous of such a move must duly
verify whether the Articles of Association (AOA) of the Transferor and Transferee
companies facilitate mergers and amalgamations. If not, a provision for the same must be
created by altering the document.
 CHAPTER 4
PROCEDURE OF FAST TRACK MERGER

Following is the procedure which the companies have to follow for the fast track merger
under the Section 233 of the Companies Act, 2013 -

Step 1: Convene a Board Meeting –

Both the transferee and transferor company has to convene a board meeting to initiate the
process of a fast track merger. The board meeting so convened has to pass following board
resolutions:

 Approval of the scheme of fast track merger,

 To fix the date, time and place for convening the meeting of shareholders,
 To fix the date, time and place for convening the meeting of creditors.

Step 2: Notice of Proposed Scheme –

The next step in the process of fast track merger after holding the board meeting is to give
notice of the proposed scheme of merger. It is required under Section 233 of the Companies
Act that a notice inviting objections or suggestions to the fast track merger shall be sent to the
office of Registrar of Companies (ROC) or to the office of official liquidators where
registered office of the respective companies are situated or persons affected by the scheme
along with a copy of the Scheme.

Step 3: Filing a declaration of solvency with ROC –

Both the transferee and transferor company has to a file a declaration of solvency with the
office of ROC as the next step in process of fast track merger as provided under the Section
233 of the Companies Act, 2103. The notice has to be filed in a prescribed form and manner
before the meetings of shareholder and creditors are convened for the approval of the scheme
of fast track merger.
Step 4: Convening a meeting of shareholders –

Both the transferee and transferor company has to convene a meeting of members or
shareholders and a notice for the meeting has to be sent to the members. The notice of a
meeting must contain the following information:

 A statement disclosing the details of the arrangement or compromise, as referred to in

Section 230(3) of the Act read with the sub-rule (3) of rule 6 of the Rules.
 Declaration of solvency made in Form No. CAA 10. The form should be cleared at
least 21 days before the date of a meeting, and
 Copy of Scheme.

If any objections or suggestions have been received by the company from the office of ROC
or the Official Liquidator or by the persons who are affected by the arrangement of the
scheme have to be considered by the company in their respective general meetings and the
scheme is approved by the respective members or class of members at a general meeting
holding at 90% of the total number of shares.

Step 5: Convening creditors meeting –

The next step in the process of fast track merger under section 233 of the Companies Act,
2013 is that both the transferee and the transferor company have to convene a meeting of
creditors for their approval to the scheme of merger. A notice has to be sent to the creditor
before convening the meeting and the notice must include:

 A statement disclosing the details of the arrangement or compromise, as referred to in

Section 230(3) of the Act read with the sub-rule (3) of rule 6 of the Rules.
 Declaration of solvency made in Form No. CAA 10. The form should be cleared at
least 21 days before the date of a meeting, and
 Copy of Scheme.

The scheme of the merger has to be approved by a majority of the creditors representing 9/10
of the creditors or class of creditors present in the meeting.
Step 6: Filing of the Scheme –

Section 233 of the Companies Act, 2013 provides that this step of the fast track merger has to
be done only by the transferee company. A copy of the scheme has to be submitted along
with the result of each of the meetings with Regional Director. A copy of the scheme along
with the form CAA 11 within seven days from the conclusion of the meeting of members or
creditors to the office of ROC having jurisdiction in the form GNL 1 and to the office of
Official Liquidator through hand delivery or by speed post or registered post.

Step 7: Approval of Scheme by Regional Director –

The next step is to get the approval for the scheme of fast track merger from the Regional
Director. Following are the steps involved in getting the approval of regional director:

 If on receiving the copy of scheme, the ROC or the official liquidator has no objection
or suggestion to the scheme then the same shall be registered by the Regional Director
and he will issue the confirmation to the merging companies.
 If on receipt of the scheme the ROC or official liquidator has some objections or
suggestions to the scheme he may communicate the same to the Regional Director in
writing within a period of thirty days. If no such communication is made by the ROC
or the official liquidator it shall be assumed that there is no objection to the scheme.
 If objections or the suggestions have been received by the Regional director in due
time and after receiving the same he is of the opinion that the objection or suggestion
is not in the public interest or is not in the interest of the creditors then he may file an
application before the Tribunal in Form No. CAA.13 within a period of sixty days of
the receipt of the scheme under sub-section (2) stating its objections and requesting
that the Tribunal may consider the scheme under section 232.
 On receipt of an application from the Regional Director 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.
 If the Regional Director does not have any objection to the scheme or it does not file
an application under this section before the Tribunal, it shall be deemed that it has no
objection to the scheme.
  Where no objection or suggestion is received to the scheme from the ROC and
Official Liquidator or where the objection or suggestion of ROC and Official
Liquidator is deemed to be not sustainable and the Regional Director is of the opinion
that the scheme is in the public interest or in the interest of creditors, the Regional
Director shall issue a confirmation order of such scheme of merger or amalgamation
in Form No. CAA. 12.

Step 8: Filing of Confirmation Order with the ROC –

For the effective fast track merger both the transferee and the transferor company has to
submit a copy of order conforming the scheme of fast track merger from the tribunal or the
regional director to the office of the ROC. The persons concerned and the ROC shall register
the scheme and issue a confirmation to the companies and such confirmation shall be
communicated to the ROC where Transferor Company or companies were situated.

Exclusion of Demerger

This Section says Merger or Amalgamation of certain companies means Demerger is not
under the purview of section 233 of the Companies Act, 2103. Section 233 of the Companies
Act, 2013 does not contain the word “Reconstruction” which is mentioned in Section 232 of
Act.

Prohibition of Treasury Stock

Section 233(10) Act prohibits the maintenance of the Treasury Stock. At the time of Merger
shares held by Transferee Company in the Transferor Company have to be cancelled.

Clubbing of Authorized Capital

Section 233(11) of the Act give legal sanctity to this concept. Fee, if any, paid by the
Transferor Company (Amalgamating) on its authorized capital prior to its merger or
amalgamation with the transferee company (Amalgamated) shall be set-off against the fees
payable by the transferee company on its authorized capital enhanced by the merger or
amalgamation.
 CHAPTER 5
CONCLUSION

The simplification of process will encourage corporate entities to undertake

merger/amalgamation activities and help them in achieve their under lying objectives. The
time taken to complete the merger/ amalgamation through court process and the cost involved
in it, is saved substantially. Fast track merger will help small companies in strengthening their
position in the market. Such companies will become more competitive and exhibit a better
bargaining power in the market.
 REFERENCE

 http://corporatelawreporter.com
 http://www.legalservicesindia.com
 https://www.caclubindia.com
 https://taxguru.in
 https://www.indiafilings.com
 https://www.myadvo.in
 https://www.rna-cs.com