Documentation-Merger & Amalgamation – CS Professional Study Material

Chapter 5 Documentation-Merger & Amalgamation – Corporate Restructuring Insolvency Liquidation & Winding Up Notes is designed strictly as per the latest syllabus and exam pattern.

Documentation-Merger & Amalgamation – Corporate Restructuring Insolvency Liquidation & Winding Up Study Material

Question 1.
Draft a notice convening a meeting of creditors in the case of scheme of amalgamation. (Dec 2012, 5 marks)
Answer:
In the Tribunal of Judicature at Mumbai
ORIGINAL JURISDICTION
IN THE MATTER OF THE COMPANIES ACT, 2013
AND IN THE MATTER OF:
COMPANY APPLICATION NO. ___________ OF ___________
(Under section 230 of Companies Act)
IN THE MATTER OF SCHEME OF AMALGAMATION BETWEEN
______________ Limited
AND
______________ Limited.
having their registered office at __________ APPLICANTS,

NOTICE CONVENING MEETING.
To,
Creditor of
__________ Limited.

Take notice that by an order made on __________ 2017, the Tribunal held at _________ on ________ at ________ P.M. for the purpose of considering and if though fit, approving, with or without modification, the proposed scheme of amalgamation as named above.

Take further notice that in pursuance of the said order, a meeting of creditors of the company will be held at __________ on __________ at __________, when you are requested to attend.

Take further notice that you may attend and vote at the said meeting in person or by proxy, provided that a proxy in prescribed form, duly signed by you, is deposited at the Registered Office of the Company at __________, not later than 48 hours before the meeting.

This Tribunal has appointed Shri __________ to be the Chairman and Shri __________ to be the alternative Chairman of the said meeting.

A copy each of the scheme of Amalgamation and a form of proxy is enclosed.

Shri __________
(Chairman)

Dated this

Documentation-Merger & Amalgamation - CS Professional Study Material

Question 2.
Draft a notice convening a meeting of unsecured creditors in a scheme of merger. (Dec 2013, 6 marks)
Answer:
In the Tribunal at….
Original Jurisdiction
In the matter of the Companies Act, 2013
And
In the matter of an application under Section 230 of the Companies Act, 2013.
And
In the matter of ABC Ltd ……………….
Company Application No……….. of 2017..
……Applicant (s)
Notice convening meeting of Unsecured creditors.

To.
……………………
……………………
It may be noted that Tribunal by an order made on …….. (day), the …….. (month) of …….. 2017………., has directed that a meeting of (here mention the class of creditors) the company be held at _____ on the ______ (day), of ______ (month), 2017 …., at _______ o’clock for the purpose of considering, and if thought fit, approving (with or without modifications), the compromise or » arrangement proposed to be made between the said company and (here ” mention the class of creditors or members with whom the compromise or ” arrangement is to be made) of the company.

Documentation-Merger & Amalgamation - CS Professional Study Material

Hence, the notice is hereby given that in pursuance of the said order, a meeting of (here mention the class of creditors or members of whom the meeting is to be held) of the company will be held at _______ on _______ day, the _______ day of ……….. 2017, and you are requested to attend.

Take further notice that you may attend and vote at the said meeting in person or by proxy, provided that a proxy in the prescribed form, duly signed by you is deposited at the registered office of the company at _________ not later than 48 hours before the meeting.

The Tribunal has appointed Shri ________ and failing him Shri ______ to be the chairman of the said meeting.

A copy each of the compromise or arrangement and a form of proxy is enclosed.

Dated this _________ day of __________ 2017.

Chairman appointed for the meeting
(Or as the case may be)

Documentation-Merger & Amalgamation - CS Professional Study Material

Question 3.
What are the details to be disclosed under the explanatory statement of the notice of the meeting in respect of the scheme of compromise or arrangement? (Dec 2019, 3 marks)
Answer:
Explanatory Statement of the notice of meeting in respect of the scheme of compromise or arrangement include the following:
(a) Parties involved in compromise or arrangement;
(b) Appointed date, effective dale, share exchange ratio (if applicable) and other considerations, if any;
(c) Summary of valuation report (if applicable) including basis of valuation and fairness opinion of the registered valuer, if any, and the declaration that the valuation report is available for inspection at the registered office of the company;
(d) Details of capital or debt restructuring, if any;
(e) Rationale for the compromise or arrangement;
(f) Benefits of the compromise or arrangement as perceived by the Board of directors to the company, members, creditors and others (as applicable);
(g) Amount due to unsecured creditors.

Documentation-Merger & Amalgamation - CS Professional Study Material

Question 4.
“Documentation in a proper manner is the steppingstone and an important aspect in fulfilment of legal requirements and obligations in mergers and amalgamations” – analyse the statement indicating the important steps to be involved for successful completion of mergers or amalgamations. (Aug 2021, 5 marks)
Answer:
In cases of a compromise or arrangement in connection with scheme for reconstruction of any company or companies or for amalgamation or merger of any two or more Companies, petitions need to be filed with National Company Law Tribunal (NCLT) in terms of Sections 230 to 232 of the Companies Act, 2013.

There is no definition of either merger or amalgamation in the Companies Act, 2013. Nevertheless, Central Government made Companies (Compromise, Arrangements and Amalgamations) Rules, 2016 that guides effective steps for fruitful results.

Accordingly, steps involved are Drafting the scheme, approvals by Boards of directors of the companies involved, Stock Exchange approvals in case of Listed companies, Application to NCLT to convene meetings of members and creditors and convening of such meetings, No objections from Regional Director and Official Liquidator, Filing petition to NCLT for Approving Scheme and Obtaining orders and filing the orders with Registrar of Companies.

Documentation-Merger & Amalgamation - CS Professional Study Material

Question 5.
Briefly state the effect of non-receipt of approvals or conditions enumerated in the scheme of amalgamation. (June 2022, 3 marks)

Question 6.
Briefly explain the “Merger or amalgamation of a foreign company with a Company and vice versan.
Answer:
In exercise of the powers conferred by section 234 read with section 469 of the Companies Act, 2013, the Central Government, in consultation with the Reserve Bank of India, makes the rules to amend the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The process of merger or amalgamation of a foreign company with a company and vice versa is as under:

(1) (a) A foreign company incorporated outside India may merge with an Indian company after obtaining prior approval of Reserve Bank of India and after complying with the provisions of sections 230 to 232 of the Companies Act and rules.

(2) (b) A company may merge with a foreign company incorporated in prescribed jurisdictions specified in Annexure B after obtaining prior approval of the Reserve Bank of India and after complying with provisions of sections 230 to 232 of the Act and these rules.

(3) The transferee company shall ensure that valuation is conducted by valuers who are members of a recognised professional body in the jurisdiction of the transferee company and further that such valuation is in accordance with internationally accepted principles on accounting and valuation. A declaration to this effect shall be attached with the application made to Reserve’ Bank of India for obtaining its approval under clause (a) of this sub-rule.

(4) The concerned company shall file an application before the Tribunal as per provisions of section 230 to section 232 of the Act and these rules after obtaining approvals specified in sub-rule (1) and sub-rule (2), as the case may be.

Documentation-Merger & Amalgamation - CS Professional Study Material

Documentation-Merger & Amalgamation Notes

List of Documents filed in case of a scheme of amalgamation
1. Memorandum and Articles ot Association of the First Applicant Company
2. Audited Balance Sheet of the First Applicant Company – latest
3. Board Resolution for approval and authorization of the scheme by the First Applicant Company
4. List of Equity Shareholders of the First Applicant Company
5. Consent Affidavits filed by the Equity Shareholders of the First Applicant Company
6. Auditors Certificate stating out the no. of Secured Creditors in the First Applicant Company
7. Auditor’s Certificate listing out the no. of Unsecured Creditor in the First Applicant Company
8. ,Consent Affidavit filed by no. of Unsecured Creditor of the First Applicant Company
9. Auditors Certificate of the 1 st Applicant Company in relation to the accounting treatment proposed in the Scheme of Amalgamation
10. Memorandum and Articles of Association of the Second Applicant Company
11. Audited Balance Sheet of the Second Applicant Company

Documentation-Merger & Amalgamation - CS Professional Study Material

12. Board Resolution for approval and authorization of the Scheme by the Second Applicant Company
13. List of Equity Shareholders of the Second Applicant Company
14. Auditors Certificate listing out the no. of Secured Creditors in the Second Applicant Company
15. Consent Affidavit filed by the no. of Secured Creditor of the Second Applicant Company
16. Auditors Certificate listing out the no. of Unsecured Creditors in the Second Applicant Company
17. Consent Affidavit filed by the no. of Unsecured Creditor of the Second Applicant Company
18. Auditors Certificate of the 2nd Applicant Company in relation to the accounting treatment proposed in the Scheme of Amalgamation
19. Certificate of the Chartered Accountant for Non-Applicability of obtaining a Valuation Report
20. Fairness Opinion issued by the Merchant Banker on the Scheme of Amalgamation
21. Undertaking regarding the Non-Applicability of paragraph I(A) 9(a) of Annexure I of SEBI Circular No. CIR/CFD/CMD/16/2015 dated 30 November 2015
22. Observation Letter issued by the Stock Exchanges approving the Scheme of Amalgamation
23. Scheme of Amalgamation

Documentation-Merger & Amalgamation - CS Professional Study Material

Components of scheme of Amalgamation

Introductory Part
1. Basic Details of the Transferor & Transferee company like date of incorporation, CIN and registered office and address for service of notice
2. Main objects in Memorandum of Association of Transferor and Transferee Company
3. Jurisdiction of the Bench
4. Limitation –
5. Facts of the case – reason in brief for going into merger or amalgamation
6. Nature of business
7. Share Capital of the companies involved and shareholding relationship between the companies involved
8. Definition Clause

Operating Part – The scheme
9. Appointed Date – The scheme shall clearly indicate an appointed date from which it shall be effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the appointed date.
10. Transfer of the undertaking of the Transferor Company or transfer of the Transferor Company perse
11. Transfer of assets
12. Transfer of debts and liabilities
13. Transfer of licenses, approvals/ permissions
14. Transferor of Company’s staff, workmen and employees

Documentation-Merger & Amalgamation - CS Professional Study Material

15. The transfer of undertaking or the Transferor Company not to affect the transaction / contracts of transferor Company
16. Enforcement of contracts, deeds, bonds and other instruments
17. Enforcement of Legal Proceedings
18. Issue and Allotment of Shares under the Scheme
19. Increase in Authorized Share Capital
20. Accounting Treatment
21. Conduct of business by the transferor Company till effective date
22. Dissolution of Transferor Company
23. Effect of Scheme
24. Expenses relating to the Scheme
25. Scheme conditional upon approval / sanctions
26. Effect of non-receipt of approvals
27. General terms and conditions applicable for the scheme

Prayer / Relief Part
28. Approval of scheme
29. Particulars of Bank draft evidencing payment of fee for the Application

Documentation-Merger & Amalgamation - CS Professional Study Material

Standard guidelines for presenting an application or petition before NCLT
1. The petition / application being filed shall fall under the proper territorial jurisdiction of NCLT Bench.

2. The petition/application and all enclosures shall be legibly typewritten in English language.

3. The petition/application/appeal/reply shall be printed in double line spacing on one side of the standard petition paper with an inner margin of about 4 cms width on top and with a right margin of 2.5 cm left margin of 5 cm and duly paginated, indexed and stitched together in paper book form.

4. The petition/ application shall be filed in triplicate by duly authorised representative of the companies or by an advocate duly appointed in this behalf.

5. The petition shall also be accompanied by an index.

6. The cause title of the petition/application shall be “Before the National Company Law Tribunal” and it shall also specify the Bench to which it is presented.

7. All the relevant provisions of the Companies Act, 2013 / NCLT Rules, 2016 shall be clearly mentioned in the petition / application.

8. The petition/application shall be divided into paragraphs and shall be numbered consecutively and each paragraph shall contain a separate fact or point.

9. The foot of petition / application shall have name and signature of the authorized representative.

10. The name of the petitioner/ applicant along with complete address, viz, the name of the road street lane and municipal division or ward, municipal door and other number of the house, the name of the town or village; the post office; postal district and pin code shall be mentioned in the petition /application.

Documentation-Merger & Amalgamation - CS Professional Study Material

11. The fax number, mobile number, valid email addresses of the petitioner / applicant shall also be mentioned.

12. Every interlineations, eraser or correction or deletion in petition / application shall be initialed by the party or his authorized representative.

13. The affidavit verifying the petition in Form NCLT-6 shall be drawn on non-judicial /stamp paper of requisite value duly attested by Notary public / Oath Commissioner.

14. Full name, parentage, age, description of each party, date, address and in case a party sues or being sued in a representative character, has been set out in accordance to Rule 20(5) of the NCLT Rules, 2016.

15. Petition / application / appeal reply has been drawn in the prescribed form as per Annexure A of NCLT Rules, 2016 with stipulated fee given in the Schedule of these rules. The fee is to be paid by way of demand draft / PO drawn in favour of the “The Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi”.

16. The documents attached with petition / application shall be duly certified by the authorized representative or advocate filing the petition or application.

17. The annexure to the petition / application shall be serially numbered.

18. The Vakalatnamashall bear court fee stamp.

19. The documents with regard to shareholding/ paid-up capital/latest balance sheet of the petitioner/applicant shall be attached.

Documentation-Merger & Amalgamation - CS Professional Study Material

Drafting of Notice of Meeting
The Notice of the meeting pursuant to the order of Tribunal shall be given in Form No. CAA-2.The notice shall be accompanied with a copy of the scheme. Additionally, if the scheme does not include the following details, then the same shall also be sent along with the notice.

  • Details of the order of the Tribunal directing the calling, convening and conducting of the Meeting
  • Details of the company
  • Relationship between companies
  • Disclosure about the effect of the compromise or arrangement on various stakeholders
  • Disclosure about effect of M&A on material interests of directors, Key Managerial Personnel (KMP) and debenture trustee.
  • Details of Board Meeting
  • Investigation or proceedings, if any, pending against the company under the Act.
  • Details of approvals, sanctions or no-objection(s), if any, from regulatory or any other government authorities required, received or pending for the purpose of scheme of compromise or arrangement.
  • A statement to the effect that the persons to whom the notice is sent may vote in the meeting either in person or by proxies, or where applicable, by voting through electronic means. .

Documentation-Merger & Amalgamation - CS Professional Study Material

Basic principles of drafting of application and petition

  • Every pleading shall contain only a statement in a concise form of material facts on which the party is relying upon.
  • Before any one proceed to commence drafting, it is absolutely necessary to gather information/ documents/papers by having extensive discussions with the clients.
  • Every pleading shall be signed by the party and his pleader, if any
  • Therefore, the contents of petition must always be set out under various headings or sub-headings in accordance with the format prescribed
  • Every petition or application or reference shall be filled in form as provided in Form No. NCLT-1
  • Every petition or application including interlocutory application shall be verified by an affidavit in Form No. NCLT-6.

Leave a Comment

Your email address will not be published. Required fields are marked *