The terms merger and amalgamation have not been defined in the Companies Act, 1956 (hereinafter referred to as the Act) though this voluminous piece of legislation contains 69 definitions in Section 2. 

The terms merger and amalgamation are synonyms and the term ‘amalgamation, as per Concise Oxford Dictionary, Tenth Edition, means‘to combine or unite to form one organization or structure’. 

The provisions relating to merger and amalgamation are contained in sections 390 to 396A in Chapter V of Part VI of the Companies Act, 1956. Any proposal of amalgamation or merger begins with the process of due diligence, as the proposal for merger without due diligence is like entering a tunnel with darkness growing with each step. The due diligence process makes the journey see the light at the end of the tunnel – the light of wisdom to amalgamate or not. Presently, the High Court enjoys powers of sanctioning amalgamation matters under section 394 of the Act though it is a matter of time when this power will be exercised by National Company Law Tribunal, a forum where Chartered Accountants shall be authorized to appear.

Mergers ——— M ——— Marriages

De-mergers —–D ——— Divorces

The beginning to amalgamation may be made through common agreements between the transferor and the transferee but mere agreement does not provide a legal cover to the transaction unless it carries the sanction of High court for which the procedure laid down under section 391 of the Companies Act should be followed for giving effect to amalgamation through the statutory instrument.

Merger Means: Merger of two or more companies in such a manner that all assets and liabilities of the amalgamating company immediately before the amalgamation, become the assets and liabilities of the amalgamated company


Shareholders holding not less than 3/4th in value of the shares in the amalgamating company become shareholders of the amalgamated company by virtue of the amalgamation.

Procedure for merger and amalgamation is different from takeover. Mergers and amalgamations are regulated under the provisions of the Companies Act, 1956 whereas takeovers are regulated under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations.

Applicable Indian Laws

  1. Companies Act, 1956 – [Sec 391-394]
  2. Listing Agreement
  3. Accounting Standard – 14
  4. SEBI Takeover Code (in case of acquisition by/of a listed company)
  5. Company Court Rules
  6. FEMA (in case of merger of companies having foreign capital)
  7. Competition Act, 2002
  8. Income Tax Act, 1961
  9. Indian Stamp Act


  • Compromise & Arrangement between a company and its creditors or any class of them; or
  • Compromise & Arrangement between a company and its members or any class of them;

„ Who can apply:

  • Company itself
  • Creditors
  • Members
  • In the case of a company which is being wound-up, the liquidator.

„ Approvals and sanctions required from:

  • Dual criteria for approval from members- more than a special resolution„
    • majority of members/creditors, as the case may be, in number
    • representing three-fourth in value
  • Sanction from the High Court

STEPS for Merger & Amalgamation:

♠ To prepare the draft scheme of amalgamation/arrangement.

♠  To get the valuation report for the purposes of Shares Exchange Ratio

♠  To hold Board Meeting for

  • Taking note of the valuation report
  • Taking note of the share exchange ratio,
  • Taking note of the draft scheme of amalgamation
  • Authorizing someone to sign all the application, petition, affidavits etc. on behalf of the company.

♠ Filing of application before the Hon’ble High Court under section 391 of the Act for convening/dispensing with the meetings of shareholders and creditors of the applicant companies.

♠  Order of the High Court for convening of the meetings of the shareholders/creditors and appointment of Chairman. The Judge gives directions (Form No. 35) in respect of the following matters:-

  • Determining the class or classes of creditors and/or of members whose meeting or meetings have to be held
  • The time and place of such meeting
  • Appointing a chairman for the meeting(s)
  • Fixing the quorum and the procedure to be followed at the meeting(s)
  • Notice of the meeting and the advertisement of such notice
  • The time within which the chairman of the meeting is to report to the Court the result of the meeting
  • Such other matters as the Court may deem necessary
  • Such other matters as the Court may deem necessary.

♠  To finalize the draft notice of meetings of the creditors/shareholders (Form No 36).

♠  To get the notice of the meeting & Explanatory Statement approved from the Chairman appointed by the Court & Registrar of the High Court

♠ To send the notice (Form 36) individually to the shareholders / creditors along with copy of the Scheme, Explanation Statement, Form of Proxy (Form No. 37) at least 21 clear days before the date fixed for the meeting.

♠ To give advertisement in the newspaper at least 21 clear days before the date of the meeting (Form No 38)

♠  Chairman to file affidavit stating that the directions regarding the issue of notice of advertisement & dispatch of notices have been complied with (at least 7 days before the date of the meeting).

♠  To convene meetings of the shareholders/creditors – Pass the Resolution with requisite majority

♠  File Form MGT-14 with ROC within 30 days of passing of resolution.

♠  The chairman of the meeting(s) shall submission its Report within 7 days after the conclusion of the meeting to the Court in after the conclusion of the meeting to the Court in Form No 39.

♠  To file petition for obtaining sanction of the Court for the scheme along with all Annexure at the High Court for confirming compromise/arrangement Form No. 40 within 7 days of filing the Chairman’s Report.

♠  Notice of the hearing shall be advertised in the same papers in which the notice of the meeting was advertised, or in such other papers as the Court may direct, not less than 10 days before the date fixed for the hearing.

♠  To follow up with the RD, ROC and OL for submitting their reports that affairs of the Transferor Company and Transferee Company are not prejudicial to the interest of the members or to public interest

♠  To ensure that RD and OL submit the report with the High Court before the final date of hearing (Guidelines by MCA in next slide).

♠  To file certified true copy of the order within 30 days with the Registrar of Companies (e-form- INC-28).

♠  To annex copy of the order of every copy of the Memorandum of the transferee company.

The Post Merger Secretarial Obligations

There are various formalities to be complied with after amalgamation of the

Companies is given effect to and allotment of shares to the shareholders of the

Transferor Company is over. These formalities include filing of the returns with Registrar of Companies, transfer of investments of transferor company in; the Name of the transferee, intimating banks and financial institutions, creditors and debtors about the transfer of the transferor company’s assets and liabilities in the name of the transferee company, transfer of employees, gratuity, PF and Pension funds etc.


  2. Approval of Board of Directors for the Scheme
  3. Approval of Scheme by Special Finance Institution
  4. Application to Court for directions
  5. High Court directions for members’ meeting
  6. Dispatch of notices to members/ shareholders
  7. Holding the shareholders’ general meeting and passing
  8. the resolutions
  9. Filing of resolutions of general meeting with Registrar of Companies
  10. Submission of report of the chairman of the general meeting to Court
  11. Issue of notice to Regional Director, Company Law
  12. Board under section 394 – A
  13. Hearing of petition and confirmation of scheme
  14. Filing of Court order with ROC by both the companies
  15. Transfer of the assets and liabilities
  16. Allotment of shares to shareholders of transferor company



  • Particulars about transferee and transferor companies;
  • Appointed Date (controversy as regards Appointed Date was set to rest by the Supreme Court in Marshall Sons & Co case)
  • Effective Date
  • Capital Structure Capital Structure
  • Objective of Amalgamation
  • Vesting of property form the Appointed Date
  • Share Exchange ratio Share Exchange ratio
  • Manner of conduct of business of Transferor Companies between the Appointed Date and Effective Date
  • Effect of amalgamation on contracts/litigations of the Transferor Companies
  • Service of Employees of Transferor Companies
  • Dissolution of Transferor Companies
  • Main terms of transfer of assets from transferor to transferee with power to execute on behalf or for transferee the deed or documents being given to transferee
  • Conditions as to carrying on the business activities by transferor between ‘appointed date’ and ‘effective date’
  • Description of happenings and consequences of the scheme coming into effect on effective date
  • Share capital of transferor company specifying authorized capital, issued capital and subscribed and paid-up capital ;
  • Surrender of shares by share-holder of transferor company for exchange into new share certificates ;
  • Conditions about payment of dividend, ranking of equity shares pro-rata dividend declaration and distribution ;
  • Status of employees of the transferor companies from effective date and the status of the provident fund, gratuity fund, super annuity fund or any special scheme or funds created or existing for the benefit of the employees;
  • Treatment on effective date of any debit balance of transferor company balance sheet ;
  • Miscellaneous provisions covering income-tax dues, contingencies and other accounting entries deserving attention or treatment ;
  • Commitment of transferor and transferee companies towards making applications/ petitions U/s-391 and 394 and other applicable provisions of the Companies Act, 1956 to their respective High Courts ;
  • Enhancement of borrowing limits of the transferee company upon the scheme coming into effect ;
  • Transferor and transferee companies give assent to change in the scheme by the court or other authorities under the law and exercising the powers on behalf of the companies by their respective Boards ;
  • Description of powers of delegatee of transferee to give effect to the scheme;
  • Qualification attached to the scheme, which require approval of different agencies, etc ;
  • Description of revocation/ cancellation of the scheme in the absence of approvals qualified in Clause-XX above not granted by concerned authorities;
  • Statement to bear costs etc, in connection with the scheme by the transferee company ; 


  • File the scheme with the SE, for approval, at least a month before it is presented to the Court
  • Explanatory statement u/s 393 should contain
    • pre and post pre and post-arrangement or amalgamation (expected) capital arrangement or amalgamation (expected) capital structure
    • shareholding pattern
  • Obtain “fairness opinion” from an Independent merchant bankers on valuation of assets/shares done by the valuer.
  • While submitting the scheme with the SE, also submit an auditors’ certificate to the effect that the accounting treatment contained in such schemes is in compliance with all the applicable Accounting Standards.

CS Divesh Goyal(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at [email protected])

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  1. madhu sudan das says:


    A company has merged with 100 % holding company from 1st April 2015 , whether the subsidiary need to be audited for the year 2015-16 and get merged with FS of holding company.Or Un-audited TB of Subsidiary merged with FS of Holding company, then Holding company audit to be done

  2. ajay says:

    Hi Divesh

    Your article is with reference to Companies Act 1956. Can you revise this based on Companies Act 2013 as amended till date.


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June 2021