Ravi Mehta, Partner, Grant Thornton India on the notification on provisions and rules allowing merger of Foreign Co into an Indian Co and vice-versa said that “Notification of the provisions and the much-awaited Rules to allow merger of a Foreign Co into an Indian Co and vice-versa (viz., S. 234 and Rule 25A notified on 13th April 2017) is a progressive step to allow global integration of Indian businesses.
It is a welcome move that can offer restructuring opportunity to these businesses to make them cost effective, facilitate fund-raise and tap other such monetisation avenues both at business as well as shareholder level.
Having said that the Rules cast a requirement for a regulatory buy-in. Additionally, justification of bona fide purpose / commercial rationale under GAAR as well as due cognisance of BEPS/POEM remain sacrosanct from a tax perspective.”
Government of India
Ministry of Corporate Affairs
New Delhi, the 13th April, 2017
S.O. 1182(E).- In exercise of the powers conferred by sub-section (3) of section 1 of the Companies Act, 2013 (18 of 2013), the Central Government hereby appoints the 13th day of April, 2017 as the date on which the provisions of section 234 of the said Act shall come into force.
[F. No. 1/37/2013 CL.V]
(AMARDEEP SINGH BHATIA)
( Joint Secretary to the Government of India)
We are reproducing below the text of Section 234 of Companies Act , 2013 for our readers ready reference-
Merger or Amalgamation of Company with Foreign Company.
234. (1) The provisions of this Chapter unless otherwise provided under any other law for the time being in force, shall apply mutatis mutandis to schemes of mergers and amalgamations between companies registered under this Act and companies incorporated in the jurisdictions of such countries as may be notified from time to time by the Central Government:
Provided that the Central Government may make rules, in consultation with the Reserve Bank of India, in connection with mergers and amalgamations provided under this section.
(2) Subject to the provisions of any other law for the time being in force, a foreign company, may with the prior approval of the Reserve Bank of India, merge into a company registered under this Act or vice versa and the terms and conditions of the scheme of merger may provide, among other things, for the payment of consideration to the shareholders of the merging company in cash, or in Depository Receipts, or partly in cash and partly in Depository Receipts, as the case may be, as per the scheme to be drawn up for the purpose.
Explanation.—For the purposes of sub-section (2), the expression “foreign company” means any company or body corporate incorporated outside India whether having a place of business in India or not.