Merger and Amalgamation of companies will bring diversification and expansion of their business, it may also lift a company from inscribed losses in the past. The tedious and time-galloping procedure of merging of two companies of The Companies Act,1956 has been simplified with a fast track merger under Companies Act 2013. Fast track merger under section 233, however, will not apply for all companies.It only applies to a specific class of companies, while other class of companies will remain opted for the older procedure.
The class of companies that can avail the benefit of fast track merger:
1. Two small companies
2. Holding company and its wholly-owned subsidiary company.
Since the fast track merger scheme only applies for small companies, it is popularly be known in the corporate world as a fast track merger of small companies. Section 285 categorize small companies on the following criteria:
Fin-bites: Fast track merger may also be obtained by other prescribed class/classes of companies. In such cases, the paid-up share capital limit is 10 crores and the turnover limit is set as 100 crores.
The Articles of Association(AOA) of both the transferor and the transferee companies must permit for mergers and amalgamations. If not, a provision has to be created for the same. A draft scheme for a fast track merger to be made.
A meeting to be convened with the board members to discuss the following :
Post the board meeting, upon agreement of all the board members, a notice of the proposed scheme must be submitted by the transferor and the transferee, along with a copy of the scheme to:
Registrar of Companies(ROC) where the registered office of the corresponding companies are located(and)Official Liquidator(or)Person affected by the scheme
Form CAA-9 must be filed by inviting any objections or suggestions from them.
Both transferor and the transferee must file the declaration of solvency to the Registrar of companies(ROC) in Form CAA-10, before convening the meeting of members and creditors.
Both transferor and transferee must host a shareholder meeting. A notice for the meeting has to be sent to the members before 21 days of the schedule and it should hold the following information:
Any other relevant information shall be added.
The scheme proposes should be approved by the respective members/class of members holding more than 90% of the shares. In some cases, a written agreement from the members holding more than 90% of the shares can be accepted without hosting the meeting.
A notice of the meeting to be issued before 21 days and the meeting to be held for the consent of the creditors. As before, the notice should contain the following:
The scheme proposes should be approved by the respective creditors/class of creditors holding more than 90% of the shares. In some cases, a written agreement from the creditors holding more than 90% of the shares can be accepted without hosting the meeting.
This provision, as governed in Rule 25(4) of the Companies Act, is only applicable to the transferee company. Form CAA-11 is to be submitted to the Regional Director within seven days of the end of members or creditors’ meeting. The following are the documents to be filed:
Additionally, a copy of the scheme and Form CAA-11 is to be submitted with the Registrar in Form GNL1 and also to the official liquidator through post or in-person delivery.
The scheme is to be approved by the regional director.
Both the transferor and the transferee must file a copy of the confirmed order of the scheme of fast track merger to the office of ROC, in form INC-28. The ROC will issue a confirmation and communicate to the ROC where the transferor is registered.