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Merger and amalgamation are restructuring tool which helps companies in expansion and diversification of their business and to achieve their underlying objectives. Merger means an arrangement whereby one or more existing companies merge their identity into another to form a new entity which may or may not be one of those existing entities.

The term ‘merger’ is not defined under the Companies Act, 2013 or under the Income Tax Act, 1961 As a layman, ‘merger’ is a combination of two or more entities into one by accumulation of assets and liabilities of both the organizations. The possible objectives of mergers are – economies of scale, acquisition of technologies, access to varied sectors / markets, reduction in cost etc.

Merger between two Private Limited Companies

Under the Companies Act, every merger and amalgamation had required to go for a lengthy proceeding and approval of the respective jurisdictional High court’s which take lot of time, energy and cost. Under the new Companies Act and after constitution of National Company Law Tribunal (NCLT), powers of approving mergers and amalgamation transferred to the NCLT thereby avoiding lengthy court proceedings.

At the time of enactment of the new Companies Act, the need was felt to have a separate mechanism for mergers and amalgamation for small companies and big companies. Generally, in small private companies there is no outsider shareholders and mostly family owned businesses. So there is no requirement to have a tribunal oversight and approval on the merger between such types of small companies. As a result new Companies Act provided separate process for mergers between small companies.

Regulatory Framework of Merger and Amalgamation

Section 230 to 234 of the Companies Act, 2013 read with the Companies (Compromise, Arrangements and Amalgamations) Rules, 2016 deals with the mergers and amalgamation between the companies. Section 233 deals with the merger between two or more small companies and merger between holding company and wholly owned subsidiary popularly known as “Fast Track Merger”

Fast Track Merger

The Companies Act, 2013 has introduced the concept of ‘Fast Track Merger’ for small private companies and merger between holding companies with its wholly owned subsidiary Companies. Section 233 of Companies Act, 2013 read with Rule 25 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 deals with the procedure of fast track merger. Section 233 of the Companies Act, 2013 dispenses with the cumbersome and time consuming process for mergers and lays down a simple, fast track merger procedure for the merger of certain companies like holding and subsidiary companies, and small private limited companies.

Small Company [Section 2(85) of the Companies Act, 2013]

“Small Company” means a company, other than a public company having —

i. Paid-up share capital of which does not exceed Rs. 50 lakh or

ii. Turnover of which, as per profit and loss account for the immediately preceding financial year, does not exceed Rs. 2 Crore

Provided that nothing in this clause shall apply to—

  • A holding company or a subsidiary company;
  • A company registered under section 8; or
  • A company or body corporate governed by any special Act;

Only private limited companies fulfilling both the above conditions are regarded as “Small Company”. However, if a company is a holding company or a subsidiary company or a Section 8 company or a company or body corporate governed by any special Act does not considered to be a small company irrespective of its capital and turnover.

Procedure for Fast Track Merger

1. Check whether each Transferor and Transferee Company’s Article of Association (AOA) permits for mergers and amalgamation. If not, then alter AOA first.

2. Appoint at least 2 valuers for valuation of shares of each Transferor and Transferee Companies. (Not Mandatory Requirement)

3. Prepare draft scheme of merger, exchange ratio based on valuation.

4. Convene Board Meeting by each Transferor and Transferee Companies to get the approval of Board of Directors of each companies.

5. Notice of proposed scheme to ROC and OL

After the approval of Board of Directors of each Company, the notice of the proposed scheme inviting objections or suggestions, if any, shall be sent by each transferor and transferee company in form CAA-9 to the Registrar of Companies (ROC) and Official Liquidators (OL) where the registered office of the respective companies are situated along with a copy of the Scheme.

6. Filing Declaration of Solvency with ROC

Each of the transferor and transferee companies involved in merger must file a declaration of solvency, in form CAA-10, with the ROC where the registered office of the companies are situated, before convening the meeting of members and creditors for approval of the scheme.

7. Members’ Approval

Each of the transferor and transferee companies involved in merger must take an approval of their members holding 90% of shares in number, by holding a General Meeting. If all the shareholders give their consent in writing then ROC may dispense the need to convene physical general meeting.

8. Creditors Approval

Both Transferor and Transferee Company are required to take approval from creditors representing 9/10th in value either by way of written approval or at a meeting of creditors specifically called for these purpose.

9. Filing of the Scheme

The final scheme involving merger including form CAA 11 and report of each of the meetings of members and creditors, must be filled within 7 days of conclusion of meeting of members and creditors to the following:

> The Regional Director (R.D) having jurisdiction of Transferee Company.

> ROC in Form GNL 1;

> Official Liquidator through hand delivery or by registered post or speed post.

10. Approval of Scheme by R.D

On the receipt of the scheme, if the ROC or the OL has no objections or suggestions to the scheme, the RD shall register the same and issue a confirmation thereof to the companies. If the ROC or OL has any objections or suggestions, he may communicate the same in writing to RD within a period of 30 days. If no such communication is made, it shall be presumed that he has no objection to the scheme. If the RD after receiving the objections or suggestions or for any reason is of the opinion that such a scheme is not in public interest or in the interest of the creditors, it may file an application before the NCLT in Form No. CAA.13 within a period of 60 days of the receipt of the scheme stating its objections and requesting that the NCLT may consider the scheme under Section 232. On receipt of an application from the RD or from any person, if the NCLT, for reasons to be recorded in writing, is of the opinion that the scheme should be considered as per the procedure laid down in section 232, the NCLT may direct accordingly or it may confirm the scheme by passing such order as it deems fit. If the RD does not have any objection to the scheme or it does not file any application under this section before the NCLT, it shall be deemed that it has no objection to the scheme. Where no objection or suggestion is received to the scheme from the ROC and OL or where the objection or suggestion of ROC and OL is deemed to be not sustainable and the RD is of the opinion that the scheme is in the public interest or in the interest of creditors, the RD shall issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA. 12.

11. Filing of confirmation order with the ROC

A copy of the order confirming the scheme by the RD shall be filled with the ROC, within 30 days, in form INC-28, having jurisdiction over the Transferor and Transferee Company and the ROC shall register the scheme and issue a confirmation to the companies and such confirmation shall be communicated to the ROC where transferor company or companies were situated.

Effect of Registration of Scheme

The registration of the scheme shall have the following effects:

Dissolution of transferor Companies

Upon The registration of the scheme, Transferor Company shall be deemed to have the effect of dissolution without process of winding-up.

Transfer of property or liabilities

Assets and Liabilities of the Transferor Company will be transferred to the Transferee Company. Any charge created on the properties of Transferor Company will be transferred to Transferee Company and Transferee Company is liable for repayment of any loans.

Legal Proceeding

Legal proceedings by or against the transferor company pending before any court of law shall be continued by or against the transferee company.

Additional Liability

Where the scheme provides for purchase of shares held by the dissenting shareholders or settlement of debt due to dissenting creditors, such amount, to the extent it is unpaid, shall become the liability of the transferee company.

Authorized Capital of Transferee Company

The Transferee Company shall file an application with the Registrar along with the scheme registered, indicating the revised authorized capital and pay the prescribed fees due on revised capital. The fee paid by the transferor company on its authorized capital prior to its merger with the transferee company shall be set-off against the fees payable by the transferee company on its enhanced authorized capital due to merger or amalgamation.


The simplification of process will encourage corporate entities to undertake corporate restructuring activities and help them in achieve their underlying objectives. The time taken to complete the merger through court process and the cost involved in it is saved substantially through these route.

CS Dhaval Gusani is a founder of DVG & Associates, Practicing Company Secretaries, Mumbai. He can be reached at

Author Bio

CS Dhaval Gusani is a founder of DVG & Associates, Company Secretaries and Corporate Law Professionals. He is a Commerce and Law Graduate and an Associate Member of the Institute of Company Secretaries of India (ICSI). He has cumulative experience of more than 8 years with Listed Company, Charte View Full Profile

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April 2024