Fast Track Merger Gets a Time Boost – 60 Days to Seal the Deal! Discover the game-changing MCA Notification
Introduction:
In the world of business, mergers play a crucial role in growth and expansion. They allow companies to combine resources, maximize efficiencies, and achieve economies of scale. However, the merger process can often be time-consuming and cumbersome, involving various legal and regulatory procedures. To address this issue and promote a more streamlined approach, the Companies Act, 2013 introduced the concept of Fast Track Merger under Section 233.
What is Fast Track Merger?
Fast Track Merger is a provision that allows certain classes of companies to undergo a merger process with a simplified and expedited timeline. It aims to reduce procedural complexities, save costs, and ensure that the merger is completed within a specified deadline. This provision operates under the purview of Section 233 of the Companies Act, 2013.
Recent Development- The Time-bound Approach
A recent MCA notification, numbered G.S.R 367(E) and dated 15th May 2023, has introduced a significant development in the Fast Track Merger process. It mandates a strict time limit of 60 days for concluding the fast-track merger application filed before the Central Government (Regional Director).
It is important to note that this notification will come into force from the 15th day of June, 2023. Therefore, any application filed after this date will be subject to the new rule.
The Intent Behind
The new notification emphasizes the importance of concluding fast track merger applications within a specific timeframe. Delays in the merger process can have adverse effects on companies, including increased costs and prolonged uncertainty.
The recent notification mandating a 60-day timeline for concluding fast track merger applications reflects a clear intent to prevent unnecessary delays and establish specific deadlines for the merger process. By imposing these strict timelines, the government aims to expedite the merger process and promote efficiency. This move aligns with the government’s broader objective of promoting ease of doing business in India’s corporate landscape.
In the event of delays in concluding the fast-track merger application within the prescribed 60-day timeline, the application will be deemed to have no objection to the scheme. Consequently, a confirmation order will be issued accordingly. This provision serves as a way to encourage timely decision-making and avoid unnecessary bottlenecks in the merger process.
New Timelines and Actions:
To further enhance the efficiency of the Fast Track Merger process, a recent notification by the Ministry of Corporate Affairs (MCA) has introduced a specific timeline:
1. ROC/OL (Registrar of Companies/Official Liquidator) has 30 days to submit objections or suggestions after receiving the scheme.
2. The CG (RD) has 15 days to issue a confirmation order (Form No. CAA.12) if no objections or suggestions are received from the ROC/OL within the stipulated time.
3. In cases where the CG (RD) fails to issue the confirmation order within 60 days of receiving the merger scheme, it will be deemed that the government has no objection to the scheme. Consequently, a confirmation order will be issued accordingly.
4. If objections or suggestions are received within 30 days and are not sustainable, the RD has 30 additional days to issue a confirmation order (Form No. CAA.12).
5. If objections or suggestions are received within 30 days and are sustainable, the RD has 60 days to file an application (Form No. CAA.13) before the Tribunal, stating the objections or opinion and requesting consideration of the scheme under section 232 of the Act.
Simplified Procedure:
The fast-track merger mechanism provides a simplified procedure for specific classes of companies. These include:
1. Merger between two or more Small Companies.
2. Merger between a Holding Company and its Wholly-owned Subsidiary Company.
3. Merger involving two or more start-up companies or one or more start-up company with one or more Small Company.
No NCLT Involvement or Administrative Formalities:
A notable advantage of the fast-track merger process is that it eliminates the need for involvement from the National Company Law Tribunal (NCLT). Unlike traditional mergers, which often require approval and oversight from the NCLT, the fast-track merger process operates independently from the tribunal.
Furthermore, the fast-track merger process does not impose the requirement of a special audit or involve excessive administrative formalities. This simplifies the procedure and reduces the burden on companies involved in the merger.
In contrast to regular mergers, there is no obligation to publish newspaper advertisements or make public announcements regarding the merger. This not only saves time and costs but also maintains confidentiality and avoids unnecessary attention.
Conclusion:
Fast Track Merger, governed by Section 233 of the Companies Act, 2013, introduces a new era of efficient and timely company mergers. The recent notification mandating a 60-day timeline for concluding the merger process further emphasizes the importance of swift decision-making and avoids unnecessary delays.
This streamlined approach, with its cost-effectiveness, time-saving benefits, and avoidance of NCLT involvement, provides a simplified and expedited solution for eligible companies seeking to merge. By embracing the Fast Track Merger mechanism, companies can navigate the merger process smoothly, unlock synergies, and drive growth in today’s fast-paced business environment.
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Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. For legal advice, please consult with a Qualified Company Secretary familiar with the relevant laws and regulations. I make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the article or the information contained in it.
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