The fast-track merger process under Section 233 of the Companies Act, 2013, offers a streamlined and efficient route for mergers involving small companies, start-ups, holding companies, and their wholly-owned subsidiaries. This procedure, governed by the Companies (Compromise, Arrangements and Amalgamations) Rules, 2016, simplifies the merger process by reducing the regulatory burden and shortening the timelines. In this article, we outline the eligibility criteria, detailed step-by-step procedure, and key forms and timelines involved in executing a fast-track merger.
Eligibility: Section-233 of the companies act, 2013 read with Rule-25(1)(1A) of the Companies (CAA) Rules, 2016
a) Between 2 or more small company
b) Between 2 or more start-ups
c) Between Holding company & it’s WOS
d) Between 1 or more small company with 1 or more start-ups
Small company:- {SECTION-2 (85) OF THE COMPANIES ACT, 2013) (Notification no: CG-DL-E-15092022-238857}
a) Not a Public company
b) Paid up not exceed 4 Crore. Rupee
c) Turnover not exceed 40 Crore. Rupee
Except,
> Holding company & it’s Subsidiary
> Section-8 Company
> Company or body corporate governed under special act
Start-up company:-
a) Private company not been incorporated 10 years ago
b) Turnover not exceed 100 Crore. Rupee
c) It satisfies any of the following conditions:
> It is working towards: Innovation of new products/processes/services or Development of new products/processes/services or Improvement of existing products/processes/services
> It is a scalable business model with a high potential of: Employment generation or Wealth creation.
Pursuant to section 233 of the companies act,2013 read with Rule 25 of Companies (Compromise, Arrangements and Amalgamations) Rules, 2016
1. Step 1:- Check MOA of Both company whether it allows to merge or not and object of another company is allowed to the another company or not
2. Step 2:- Hold Board meeting and pass BR to approve the merger & prepare proposed scheme of merger & approve it.
3. Step 3:– Send proposed scheme of merger to ROC & Official liquidator in Form CAA-9 & they shall send objections if any within 30 days of receipt of scheme
4. Step 4:– File declaration of solvency to ROC in CAA-10 by both companies.
5. Step 5:– Consider objections received from ROC/OL if any, and send a notice to all the shareholders of the company at least 21 days before the meeting and get approval of at least 90% shareholders in value.
6. Step 6:- Send notice to all creditors of the company at least 21 days before the meeting and get approval of at least 90 %creditors in value.
7. Step 7:– Transferee Company shall within 7 days of conclusion of meeting of creditor or member file copy of scheme and result of meeting in Form CAA-11 to Central Government & Official Liquidator.
8. Step 8:– File form CAA-11 & GNL-1 to ROC.
9. Step 9:– Central Government will ask to ROC that if there is any objection or not which ROC has to reply in 30 days.
10. Step 10:– If ROC gives any objections and Central Government is at the opinion that there is objection in the scheme then CG shall communicate to NCLT in CAA-13 within 60 days of receipt of objection from ROC.
> If NCLT is at the opinion that scheme shall not go with section 233 and have to follow procedure given in section-230.
- If NCLT does not have any objection then it shall approve the scheme in Form CAA-12
11. Step 11:– Once the scheme has been approved by the Central Government then company shall file Form INC 28 to ROC in 30 days of approval of scheme.
IMPORTANT FORMS:
1. CAA 9:- Copy of proposed scheme
2. CAA 10:- Declaration of solvency
3. CAA 11:- Copy of approved scheme to CG & OL
4. CAA 12:- Approval of scheme by CG
5. CAA 13:- Objection by CG to NCLT
6. GNL 1:- Copy of approved scheme to ROC
7. INC 28:- Intimation to ROC about approval of scheme
Important timeliness
- 7 days: Board meeting
- 30 days: proposed scheme to ROC
- 21 days: Member’s meeting
- 21 days : creditors meeting
- 7 days : Approved scheme to ROC,CG & OL
- 30 days: Objection by ROC
- 60 days : Objection by CG
- 30 days: INC-28 to ROC
Total: 206 days.
Navigating a fast-track merger under Section 233 of the Companies Act, 2013, involves a series of well-defined steps aimed at ensuring a smooth and efficient consolidation process. By adhering to the prescribed procedures, companies can achieve mergers more swiftly while maintaining compliance with regulatory requirements. Understanding the eligibility criteria, crucial forms, and timelines is essential for successfully executing a fast-track merger, thereby enabling businesses to benefit from streamlined operations and enhanced growth opportunities.
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