In the world of business, mergers and acquisitions are a common phenomenon. Companies merge to expand their operations, increase market share, and improve efficiency. However, the traditional merger process can be lengthy and complex, involving multiple regulatory approvals and stakeholder negotiations. To address this issue, the concept of fast track merger was introduced, providing a quicker and more efficient way for companies to merge.
What is Fast Track Merger?
The Fast Track Merger process was introduced in India through the Companies Act, 2013, with the aim of providing a speedy and efficient way for companies to merge. This process is governed by Section 233 of the Companies Act, 2013, and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. Section 233 provides for the fast track merger process, which allows for the merger of two or more companies small companies, wholly owned subsidiary without the need for a court-approved scheme of arrangement.
Benefits of Fast Track Merger
The fast track merger process offers several benefits, including:
1. Speed: The process is much faster than the traditional merger process, with a reduced timeline for completion.
2. Cost Savings: The process involves fewer regulatory approvals and stakeholder negotiations, resulting in lower costs.
3. Simplified Procedure: The process is less complex, with fewer documentation requirements and procedural formalities.
4. Increased Efficiency: The process allows companies to focus on their core operations, rather than getting bogged down in lengthy merger negotiations.
Steps involved in Fast Track Mergers
The following steps need to be followed in a fast track merger:-
1. First of all, both the companies need to check their Articles of Association (AoA) and assess if they have the requisite authority under them to enter into a merger. If no, then the AoA need to be amended before such merger can take place.
2. Convene the Board Meeting and prepare a draft scheme of merger or amalgamation.
3. Prepare a financial statement of assets and liabilities and get an auditor’s report prepared.
4. Get the draft scheme approved in the Board Meeting.
5. Both the companies need to send a notice to the Registrar of Companies (ROC) and Official Liquidator (OL) of their respective regions inviting suggestions/objections to the scheme, if any within 30 days of issuing the notice.
6. Such notice to the RoC should be in Form CAA 9 and have the following attachments:
- Copy of the scheme
- Shareholding pattern of the transferee pre and post-merger
- Last 3 years audited financial statements
- Memorandum and Articles of Association
- Board Resolution
- Valuation Report
7. Both the companies are required to file a declaration of solvency with their respective ROCS This declaration of solvency shall be accompanied by the following:
- Board Resolution
- Statement of Assets and Liabilities
- Auditors Report
8. Sending notice of shareholders’ meeting and creditors’ meeting
9. Conducting the shareholders’ meeting and getting the scheme approved.
10. Conducting creditors’ meeting and getting the scheme approved.
11. Filing of the results of each meeting with the Regional Director and the Official Liquidator by the transferee company.
12. Objections/Suggestions to be sent to the Regional Director by the RoC/Official Liquidator
13. Regional director may file an application with the Tribunal if he is of the opinion that the scheme is against public interest.
14. The Tribunal can approve or disapprove the scheme.
15. If approved it shall be filed with the RoC of the transferee company and the transferor company respectively.
In short, Fast track merger is a speedy and efficient way for companies to merge, offering several benefits, including speed, cost savings, and simplified procedure. However, the process also involves certain challenges and issues, including regulatory risks, stakeholder approval, and complexity.
By understanding the process and its requirements, companies can navigate the fast track merger process successfully, achieving their consolidation goals quickly and efficiently.
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