Fast Track Merger | Section 233 | Companies Act, 2013

Small companies with fewer resources were also subject to same complex procedure. This was proving to be an obstacle in the way of their growth and expansion. Having the same procedure for merger for all companies was proving to be counter-productive. The complexities of the earlier laws gave rise to the need for a simplified procedure and a more efficient legal regime for merger process. This need was embedded in the following benefits which a fast-track merger offered under Section 233 of the Companies Act, 2013:

1. Simplified procedure for merger.

2. No judicial approval required.

3. Separate procedures for certain type of companies would enable them to expand without any roadblocks.

4. Form filings required also significantly reduced.

5. No requirement to apply to the National Company Law Tribunal.

6. No requirement to get a special audit conducted for the transferor company.

7. No requirement to issue public advertisements announcing the merger.

8. Less cost intensive and less time consuming.

Relevant Provisions for Fast Track Merger:

1. Section 230 of the Companies Act 2013.

2. Rule 25 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016]

Fast Track Merger refers to a merger or amalgamation for specified class of Companies as prescribed under the Act:

• Merger between 2 or more Small Companies.
• Merger between holding & and its wholly-owned subsidiary Company.
• Such other companies as may be prescribed.

Recent Amendments: –

1. Effective from 01^st February, 2021 the following were inserted through Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2021:

A scheme of merger or amalgamation under section 233 of the Act may be entered into between any of the following class of companies, namely: –

(i) two or more start-up companies; or

(ii) one or more start-up company with one or more small company.

Start-up Companies: – An entity shall be considered as start-up if:

• It is a Private Limited company incorporated under Companies Act up to a period of 10 years.
• Turnover of such company stated above is less than Rs. 100 Crore.
• Entity is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.

2. Effective From 01^st April 2021in the definition of Small company paid up capital and turnover of the small company has been increased thereby now it states that:

• • Paid-up Share capital shall not exceed rupees two crores and;
  • Turnover shall not exceed rupees twenty crores.

Procedure for Fast Track Merger: –

First Motion Proceeding:

1. Convene Meeting of Board of Directors for approval of Fast Track Merger and Draft scheme of Merger.

2. Send notice of Proposed Scheme for inviting Objection or suggestion in Form CAA.9 within 30 days by both transferee or transferor Company to the

• • ROC
  • Official Liquidator (Place of Reg. Office of Company) or,
  • Person Affected by the Scheme.

3. Declaration of Solvency in Form CAA.10 (to be notarized) shall be filed by both transferee or transferor Company with the Registrar along with following Attachments:

a) Copy of board resolution.

b) Statement of assets and liabilities.

c) Auditor’s report on the statement of assets and liabilities.

Second Motion Proceeding:

1. Convene General Meeting of the members of the company where the notice to be sent shall include:

• • Statement as per section 230(3) of the Act including Valuation Report.
  • Declaration of Solvency in Form 10.
  • Copy of Scheme.

The Scheme in the meeting shall be approved by at least 90% of members.

2. Convene General Meeting of the creditors of the company by giving a notice of twenty-one days to all creditors along with:

• • Statement as per section 230(3) of the Act including Valuation Report.
  • Copy of Scheme approved by members.
  • Declaration of Solvency in Form 10

The Scheme in the meeting shall be approved by at least 9/10^th in value of creditors.

*Note: Calling for meeting of creditors can be avoided if 90% or 9/10^th in value of creditors approve in writing the scheme of merger.

3. The Transferee Company shall within 7 days after conclusion of meeting of members and creditors file a copy of approved scheme along with a report of the result of each of the meetings in Form CAA.11 with: –

• • Central Government (i.e., Regional Director).
  • ROC in Form GNL-1 along with fees as provided under the companies (Registration offices and fees) Rules, 2014.
  • the official liquidator through hand delivery or by registered post or speed post.

4. When no objection is received to the scheme or objection or suggestion received are not sustainable then Central Government (i.e., Regional Director) shall issue confirmation order of Scheme in Form CAA.12.

5. Confirmation order under 12 received by the Company shall be filed with ROC in Form INC-28 within 30 days of Confirmation.

6. In case of Objection or suggestion received from ROC or Official Liquidator or if C.G. is of opinion that scheme is not in public interest or public interest of creditors, it shall file in Form CAA.13 within 60 days of it receiving the scheme to Tribunal requesting to consider the scheme under Section 232.

Various Forms Included for Completion of FAST TRACK MERGER: –