MoneymintMoneymint
    • ABOUT
    • BANK
    • CRYPTO
    • MONEY
    • TIPS
    • DISCLOSURE
      • DMCA
      • Terms and Conditions
      • Privacy Policy
    Subscribe
    MoneymintMoneymint
    Home»BUSINESS

    Companies Act 2013 – Mergers and Acquisitions 2014

    By ADITYAUpdated:August 8, 2020
    mergers-acquisitions-companies-act
    Share
    Facebook Twitter LinkedIn Pinterest Email

    The changes proposed would require companies to consider the scale and extent of compliance requirements while formulating their restructuring plans once the 2013 Act is enacted. These changes are quite constructive and could go a long way in streamlining the manner in which mergers and other corporate schemes of arrangements are structured and implemented in India.

    1. Streamlining requirements

    The section dealing with compromises and arrangements deals comprehensively with all forms of compromises as well as arrangements and extends to the reduction of share capital, buy-back, takeovers and corporate debt restructuring as well. Another positive inclusion within this section is that objection to any compromise or arrangement can now be made only by persons holding not less than 10% of shareholding or having an outstanding debt amounting to not less than 5% of the total outstanding debt as per the latest audited financial statements. [section

    230 of the 2013 Act] Further, currently, under the 1956 Act, an order does not have any effect until the same is filed with the ROC. However, such a requirement has been done away with under the 2013 Act. The 2013 Act merely requires the filing of the order with the ROC.

    Companies Act 2013 – Mergers and Acquisitions 2014

    2. MERGERS OR DIVISION OF COMPANIES

    There are certain additional documents mandated to be circulated for the meeting to be held of creditors or a class of members (section 232 of the 2013 Act). These include the following:

    1. Draft of the proposed terms of the scheme drawn-up and adopted by the directors of the merging company.

    2. Confirmation that a copy of the draft scheme has been filed with the ROC.

    3. Report adopted by the directors of the merging companies explaining the effect of the compromise.

    4. Report of the expert with regard to valuation.

    5. Supplementary accounting statement if the last annual accounts of any of the merging companies relate to a financial year ending more than six months before the first meeting of the company summoned for the purpose of approving the scheme.

    3. Certifying the accounting treatment

    Currently, under the 1956 Act, there is no mandate requiring companies to ensure compliance with accounting standards or generally accepted accounting principles while proposing the accounting treatment in a scheme.  However, listed companies are required to ensure such compliance as the Equity Listing Agreement mandates such companies to obtain an auditor’s certificate regarding the appropriateness of the accounting treatment proposed in the scheme of arrangement. The 2013 Act requires all companies undertaking any compromise or arrangement to obtain an auditor’s certificate (section 230 and 232 of the 2013 Act). This requirement will help in streamlining the varied practices as well as ensuring appropriate accounting treatment. However, another aspect that is yet to be addressed is that the applicable notified accounting standards in India, currently, address only amalgamations and not any other form of restructuring arrangements.

    4. Simplifying procedures

    The current procedural requirements in case of a merger and acquisition in any form are quite cumbersome and complex. There are no exemptions even in the case of mergers between a company and its wholly-owned subsidiaries. The 2013 Act now introduces simplification of procedures in two areas, firstly, for holding wholly-owned subsidiaries and secondly, for arrangements between small companies (section 233 of the 2013 Act). Small companies are a new category of companies, introduced within the 2013 Act, with defined capital and turnover thresholds, which has been given certain benefits, including simplified procedures.

    One of the significant restrictions proposed in case of these situations is the restriction on the transferee company to hold any shares either in its own name or in the name of a trust, subsidiary or associate since all shares will need to be canceled or extinguished on merger or amalgamation. This requirement will stem the practice followed by several companies that have in the past followed this route. Further, in certain cases, it has also rationalized the requirements, for example in the case of the reduction of the share capital, which is part of compromise or arrangement, the company will need to comply with the provisions of this section only, as against the existing requirement under the 1956 Act, where the company is required to comply with the provision of section 108 in case of a reduction of share capital as well those relating compromise.

    5. CROSS-BORDER MERGERS

    The 1956 Act, allows the merger of a foreign company with an Indian company but does not allow the reverse situation of merger of an Indian company with a foreign company. The 2013 Act now allows this flexibility, with a rider that any such mergers can be effected only with respect to companies incorporated within specific countries, the names of which will be notified by the central government. With prior approval of the central government, companies are now allowed to pay the consideration for such mergers either in cash or in depository receipts or partly in cash and partly in depository receipts as agreed upon in the scheme of arrangement. (section 234 of the 2013 Act). These new provisions can be greatly beneficial to Indian companies that have a global presence by providing them structuring options that do not exist currently.

    6. Squeeze out provisions

    The 2013 Act has introduced new provisions for enabling the acquirer of a company (holding 90% or more shares) by way of amalgamation, share exchange, etc to acquire shares from the minority holders subject to compliance with certain conditions. This has also introduced the requirement for ‘registered valuers’, since the price to be offered by majority shareholder needs to be determined on the basis of valuation by a registered valuer (section 236 of the 2013 Act).

    2013 companies act accounting under companies act companies act 2013 applicable from which date companies act merger
    Share. Facebook Twitter Pinterest LinkedIn Tumblr Email
    ADITYA

    Aditya is a talented content writer with a passion for crafting engaging and informative content that resonates with readers. With 10 years of experience in the industry, he has honed his writing skills to produce high-quality content across a wide range of topics.

    Keep Reading

    How to Buy in Bulk for Resale: A Guide

    How to Buy in Bulk for Resale: A Complete Guide

    Best Profitable Side Hustles for Couples

    How to Resell Items on Amazon? A Complete Guide

    How to Resell Items on Amazon? A Complete Guide

    25 Best Scalable Business Ideas You Can Start

    25 Best Scalable Business Ideas You Can Start

    Buying a Laundromat: Everything To Know

    How to Make and Sell Stickers Online: Ultimate Guide

    How to Make and Sell Stickers Online: Ultimate Guide

    Latest Articles
    Bhushan Kumar Net Worth, Income, Property
    March 18, 2023
    What do Public Utilities Jobs Pay? Full List of Jobs
    March 18, 2023
    Ulta Credit Card Payment Process
    March 17, 2023
    Best Weekend Side Jobs to Earn Extra Income
    March 17, 2023
    Sunil Shetty Net Worth, Hotels, Property
    March 16, 2023
    How many Jobs are available in Consumer Services? Full List
    March 16, 2023
    How to Find the History of a Property Online? Full Guide
    March 15, 2023
    A Comprehensive Govt ITI Courses List
    March 15, 2023
    Chiranjeevi Net Worth, Salary, House Price
    March 14, 2023
    20 Best Paying Jobs in Transportation with Salaries
    March 14, 2023

    Subscribe to Moneymint

    Every Sunday we email people like you with top tips, insights and opportunities to manage your finances and build your online business.

    The form collects name and email so that we can add you to our newsletter list for updates. Check out our privacy policy
    Please enter a valid email address
    That address is already in use
    The security code entered was incorrect
    Thanks for signing up
    Moneymint
    Moneymint is a personal finance website that offers a variety of resources and tools to help individuals earn money online, save money, and create passive income streams. The site aims to empower users to take control of their finances and achieve their financial goals.

    Moneymint™ | Corporate Park, D-21, Sector 21, Dwarka, Delhi 110077
    Categories
    • Bank
    • Business
    • Credit Cards
    • Crypto
    • Loan
    • Money
    • Net Worth
    DISCLAIMER

    The content on this site is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, consult a licensed financial or tax advisor. References to products, offers, and rates from third party sites often change. While we do our best to keep these updated, numbers stated on our site may differ from actual numbers. See our Privacy Policy & Disclaimer for more details.

    © 2023 Framed Media
    • About
    • Contact us
    • DMCA
    • Terms
    • Privacy Policy

    Type above and press Enter to search. Press Esc to cancel.