INTRODUCTION
Section 233 of the Companies Act, 2013 read with Rule 25 of The Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 provides a process of a simplified merger popularly known as Fast track merger. Merger u/s 233 as compared to 230-232 does not require court intervention i.e., the mandatory approval of the National Company Law Tribunal (NCLT). Under Companies Act, 1956 all the mergers and restructurings had to go through with lengthy proceedings, intervention of High Court was mandated thus making the process very time consuming and costly also.
With the objective of promoting the ease of doing business in India, the concept of fast-track merger was introduced under the Companies Act, 2013. Section 233 of the Act and Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 offer certain classes of companies an alternative option of merger, with fewer legal requirements and a quicker approval and registration process. The merger process set out in the Act, unlike that in the former Companies Act, 1956, is simpler and swifter. The fast-track merger mechanism offers a cost-effective solution, with no intervention of the National Company Law Tribunal (NCLT); no requirement of a special audit; and no administrative formalities.
Furthermore, the process does not require any newspaper advertisement or public advertisement announcing the merger.
Produced below is the summarised process of undertaking fast track merger.
APPLICABILITY
The following Companies only are empowered to merge via fast track process sacnctioned u/2 233 of The Companies Act, 2013-
1. Two or more Small Companies**
2. Holding Company and its wholly owned subsidiary Company
3. Two or more Start-up Companies***
4. One or more Start-up Company with one or more small Company
PROCESS FOR FAST TRACK MERGER
The following process shall be followed by both, the transferor and the transferee company/companies.
1. Check AOA for the provision of Amalgamation.
2. Prepare a scheme for the proposed Fast track merger.
3. Give notice of conducting a Board Meeting at least seven (7) days before the scheduled Board Meeting.
4. Convene the Board Meeting on the scheduled date and take approval of the draft fast merger scheme by the majority of the directors present at the Board Meeting.
(Please note that pursuant to section 175 of The Companies Act, 2013 the scheme cannot be approved through resolution by circulation.)
5. Prepare and issue a notice (Form No. CAA-9) to the Registrar of Companies by filing Form No. GNL-1, Official Liquidator, or any person affected by the proposed scheme in order to receive any objections or claim within 30 days.
6. File a declaration of solvency (Form No. CAA-10) to the Registrar of Companies in Form No. GNL-2 where the registered office of the company is situated.
7. After receiving the objections and claim from the concerned authority, prepare and issue a notice (Form No. CAA-2) along with the proposed scheme to the members/class of members and creditors at least 21 days before the scheduled meeting.
The notice calling the meeting shall be accompanied with: (A)a statement disclosing the details of Compromise or Arrangement,(B)A copy of Valuation Report, if any explaining the effect on creditors, KMP, promoters and non-promoter members;(C)Material Interest of Directors of the Company or the Debenture Trustee;(D) Declaration of Solvency in Form No. CAA. 10,(E)A copy of the Scheme.
8. Convene the Meeting of members/class of members and take the approval of respective members holding minimum ninety percent (90%) of total number of shares.
(Please note that the meeting of members/ class of members can be dispensed/done with if written consented affidavits are received from each class of member)
9. Convene the meeting of creditors and take the approval for the proposed scheme by majority representing nine tenth (9/10th) in value of total creditors/ class of creditors. (Please note that the meeting of creditors can be dispensed/done with if written consented affidavits are received from creditors to the extent of ninety percent (90%) of value.)
10. The transferee company shall file the approved scheme along with a report of the result of each of the meetings (Form No. CAA-11) within 7 days after the conclusion of meeting with the Central Govt. (RD) in Form RD-1, with the Registrar of Companies in Form GNL-1 and with the Official Liquidator through hand delivery or speed post, Income tax department.
11. Where no objection or suggestion received to the scheme from the ROC and official liquidator or suggestions or objection are not sustainable the Central Govt.(RD) shall issue a confirmation order in Form No. CAA-12.
12. File Form No. INC-28 to the Registrar of Companies within thirty days of the receipt of order of confirmation.
FORMS ASSOCIATED WITH FAST TRACK MERGER
| Form No. | Filed By | Particulars |
| GNL-1 | Transferor & Transferee Company | The notice inviting objection from ROCs in form CAA 9 is to be filed in Form GNL-1. |
| GNL 2 | Transferor & Transferee Company | The Declaration of Solvency in Form CAA 10 is be to filed with the ROC in Form GNL-2 |
| MGT-14 | Transferor & Transferee Company | Board resolution and Special resolution passed for approving the scheme. (Need not be filed for board resolution if the company is a private limited company.) |
| GNL-1 | Transferee Company | Filing of scheme and Form CAA11 with the Regional Director |
| RD-1 | Transferee Company | Report of meeting in Form CAA 11 is to be filed with the Regional Director in Form RD-1. |
| INC-28 | Transferee Company | Confirmation order to be filed with ROCs. |
RELEVANT DEFENITIONS
1.**“Small company’’ means a company, other than a public company, —
(i) paid-up share capital of which does not exceed fifty lakh rupees; and
(ii) turnover of which [as per profit and loss account for the immediately preceding financial year] does not exceed two crore rupees.
2.***“Start-up company” means a private company incorporated under the Companies Act, 2013 or Companies Act, 1956 and recognised as such in accordance with notification number G.S.R. 127 (E), dated the 19th February, 2019 issued by the Department for Promotion of Industry and Internal Trade.
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