Fast Track Mergers

Mergers and amalgamations is the process of amalgamation of two or more entities / companies through inorganic means. It is a time-consuming process for all companies irrespective of their size, net worth and turnover. This procedure was complex and time taking for all stakeholders involved in the process. The process involves:-

• Drafting a merger scheme
• Taking judicial approval for the scheme
• Getting Board and shareholders authorisation, etc.

which defeat the purpose for which mergers were entered into and discourages the companies whose looking for collaborations.

Legal Regime behind Fast Track Mergers

• The concept of fast track mergers has been introduced under Section 233 of the Companies Act, 2013.
• It provides exemption from the regular merger procedure.
• It exempted small companies, holding and subsidiary companies and other companies as may be prescribed by CG, entering into merger arrangements from the regular merger procedure as stipulated under sections 230-232 of the Companies Act, 2013.

  Benefits which a fast track merger offer under Section 233 of the Companies Act, 2013 are:

• Simplified procedure for merger
• No judicial approval required
• Separate procedures for certain type of companies would enable them to expand without any roadblocks
• Form filings required also significantly reduced
• Comparatively less cost

Section 233: Merger or Amalgamation of certain specific companies

Applicability

• small companies,
• holding and wholly owned subsidiary,
• other companies as may be prescribed by CG

Note:  prescribed by CG

A scheme of merger or amalgamation under section 233 may be entered into between any of the following companies:-

(i) 2 or more start-up companies; or

(ii) 1 or more start-up company with one or more small company.

Fast Track merger not applicable on:

• subsidiary company or a holding company;
• Non-profit organizations as per section 8; or
• company or body corporate governed by any special Act;

STEP WISE PROCEDURE:

Step 1: Both the companies should be duly authorised by their Article of Association. If not, then both the companies have to alter their Article of Association.

Step 2: A board meeting is to be conducted to approve the draft scheme of merger or amalgamation by passing board resolution by both the companies

Step 3: Once the scheme is approved in the board meeting both the companies will file the proposed scheme {in from CAA-9 is to be filed in Form GNL-1} to

• ROC (both the roc where the registered office of transferor and transferee is situated)
• Official liquidator
• Person affected by the scheme.

Step 4: ROC, Official liquidator or person affected by scheme will forward its objection or comments to RD and Companies within 30 days from the date of notice.

Step 5: Both transferor and transferee company shall file declaration of solvency with ROC in Form CAA-10 in form GNL-2.

Step 5: Both the companies will take the approval of members (holding atleast 90% of total no. of share of scheme) and the members will also consider the objection or comments received.

Step 6: In GM scheme shall be approved by

• Members holding at least 90% of value of shares.
• Creditors holding at least 90% of the outstanding debt.

           and if meeting is not conducted then the scheme to be approved in writing by majority representing the creditor of respective companies.

Both the companies will file Form MGT-14 with ROC as an when the special resolution is approved.

Step 7: Within 7 days, Transferee Company shall file the scheme with Regional director in Form CAA-11 with following documents:

• Copy of scheme as proved by members and creditor
• Result of each of the meetings.

Step 8: Copy of scheme shall be filed to

• ROC in Form GNL-1
• Official liquidator