A Scheme of Compromise and Arrangement is a legal framework provided under the Companies Act, 2013 in India that allows companies to restructure their affairs in order to achieve certain objectives. It provides a mechanism for companies to enter into arrangements such as mergers, amalgamations, demergers, acquisitions, or reorganizations.
Here is a general outline of the scheme:
1. Proposal: The scheme begins with the formulation of a proposal by the company or companies involved in the arrangement. The proposal outlines the terms and conditions of the arrangement, including details of the transfer of assets, liabilities, and shareholders’ interests.
2. Board Meeting and Approval: The proposal is presented to the board of directors of each company involved, who must approve the scheme. The directors then file a petition with the National Company Law Tribunal (NCLT) for its approval.
3. NCLT Approval: The NCLT examines the scheme to ensure its compliance with legal requirements and protects the interests of shareholders, creditors, and other stakeholders. If satisfied, the NCLT grants its approval and orders the convening of meetings of shareholders and creditors.
4. Shareholders’ and Creditors’ Meetings: The scheme is presented to the shareholders and creditors of the companies involved. These meetings are conducted to obtain their approval for the proposed arrangement. The scheme must be approved by a requisite majority of shareholders and creditors, as specified by the NCLT.
5. NCLT Confirmation: Once the shareholders and creditors approve the scheme, the company applies to the NCLT for confirmation of the arrangement. The NCLT examines the scheme again to ensure fairness and reasonableness. If convinced, it issues an order confirming the scheme.
6. Implementation: After obtaining the NCLT’s confirmation order, the scheme becomes effective. The companies involved carry out the necessary actions to implement the scheme, which may involve the transfer of assets, liabilities, and shareholders’ interests as per the approved terms.
7. Filing and Compliance: The companies must file the NCLT’s confirmation order with the Registrar of Companies (RoC) within a specified time. They must also comply with other legal requirements, such as updating the company’s records, notifying regulatory authorities, and fulfilling any other obligations arising from the scheme.
It’s important to note that the above outline provides a general overview of the process, and the specific requirements and procedures may vary depending on the nature of the arrangement, the companies involved, and the applicable laws and regulations. It’s advisable to consult legal professionals and refer to the Companies Act, 2013, and related rules for precise details and guidance.