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    Outside cp knowledge presentation               outside cp knowledge presentation               merger Outside cp knowledge presentation outside cp knowledge presentation merger Presentation Transcript

    • CORPORATE RESTRUCTURING Presentation by : Mr. Virender Ganda, Vishvas Associates New Delhi
    • CORPORATE RESTRUCTURING
      • MERGER/ AMALGAMATION
      • DEMERGER
      • SLUMP SALE
      • TAKE-OVER
      • FINANCIAL RESTRUCTURING
      • REDUCTION OF CAPITAL
      • BUY BACK OF SHARES ETC.
    • SEBI TAKE OVER CODE SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 Comprehensive Regulations governing acquisition of shares and take over of a listed Company. (Enforced w.e.f 20.02.1997)
    • SEBI TAKE OVER CODE
      • Exemptions (Regulation 3)
      • Allotment in Public Issue
      • Allotment in Rights Issue
      • Allotment to Underwriters
      • Inter-se Transfer of shares amongst:
      • - Group as defined in MRTP Act,
      • 1969
      • - Relatives
    • SEBI TAKE OVER CODE
      • - Qualifying Indian Promoters and Foreign
      • Collaborators
      • - Qualifying Promoters
      • - the acquirer and persons acting in
      • concert
      • Acquisition of shares in the ordinary course of business by stock-broker, registered market maker, Public Financial Institutions, Banks etc.
      • Acquisition of shares by way of transmission;
      • pursuant to scheme
      • - under Sec. 18 of SICA
      • - Merger/ amalgamation
      • Acquisition of shares of unlisted
      • companies
    • Threshold Limits
      • Regulation 10 - Acquisition of 15% or more of the shares or voting rights of any Company
      • No acquisition of shares or voting rights
      • taken together with shares/voting rights already held by him or by PACs
      • entitling to exercise 15% or more of
      • voting rights in a Company
      • Unless a Public Announcement to
      • acquire shares is made
    • Consolidation of Holdings
      • Regulation 11
      • (1)
      • No acquirer who together with PACs
      • has acquired 15% or more but less than
      • 55% of shares or voting rights
      • shall acquire either himself or with PACs
      • additional shares or voting rights
      • Entitling him to exercise more than 5%
      • of voting rights in any f.y. ending
      • March 31
      • Unless he makes a Public Announcement to acquire shares
      • (2)
      • No acquirer together with PACs
      • Holding 55% or more but less than 75% shares or voting rights in the Company
      • shall acquire either by himself or with PACs
      • Any additional shares or voting rights
      • unless he makes Public Announcement to acquire shares
    • Disclosure Requirements
      • Event Based Disclosures- Regulation 7
      • By the Acquirer under Regulation 7(1)
      • Every Acquirer on acquiring (including existing holding) more than 5% or 10% or 14% or 54% or 74% Shares or Voting Rights
      • Disclose his aggregate shareholding at every stage
      • to the Company
      • Within 2 days of acquisition of shares and voting rights.
      • Under Regulation 7(1A)
      • Any acquirer who has acquired shares or voting rights under creeping acquisition
      • Disclose purchase or sale aggregating 2% or more
      • To the Company and the stock exchanges
      • Within 2 days of such purchase or sale
      • By the Company
      • Every Company whose shares are acquired u/r 7(1) & (1A)
      • Disclose the aggregate number of shares held by each of such persons
      • To all the stock exchanges
      • within 7 days of receipt of intimation from the acquirer
    • Continual Disclosures -Regulation 8
      • By the persons holding more than 15% shares or voting rights
      • Every person holding more than 15% shares or voting rights in the Company
      • Make yearly disclosure of his holdings
      • to the Company
      • within 21 days from the f.y. ending March 31
      • By the Promoters
      • Promoter or person having control over the Company
      • disclose no. & % of shares held by him and by PACs
      • to the Company
      • within 21 days from the f.y. ending March 31 as well as record date of the Company
      • By the Promoters
      • Promoter or person having control over the Company
      • disclose no. & % of shares held by him and by PACs
      • to the Company
      • within 21 days from the f.y. ending March 31 as well as record date of the Company
      • By the Company
      • Every Company
      • make yearly disclosure in respect of persons holding more than 15% shares as well as of holdings of promoters and PACs.
      • to the stock exchanges
      • within 30 days from the f.y. ending March 31 and record date
      • Register in specified format shall be maintained to record the information received under this regulation.
    • MERGER/ AMALGAMATION
      • Section 2(1B) of Income Tax Act,
      • Merger of two or more companies
      • all assets and liabilities of the amalgamating
      • company
      • become
      • the assets and liabilities of the amalgamated company
      • Shareholders holding
      • not less than 3/4th in value of the shares
      • in the amalgamating company
      • become
      • shareholders of the amalgamated company
      • A Ltd. B Ltd.
      • merged with
      • C Ltd.
      • A Ltd & B Ltd. to get wound up
      • Shareholders of A Ltd. & B Ltd. to
      • become shareholders of C Ltd.
    • DE-MERGER Section 2(19AA) of the Income-tax Act ‘ Demerger’ transfer, pursuant to a scheme of arrangement under Section 391 to 394 of the Companies Act, 1956 by a demerged company of its one or more undertakings to the resulting company in such a manner that-
    • Demerger Contd.
      • all the property and liabilities of the undertaking becomes the property of the resulting company;
      • the property and the liabilities are transferred at book values
      • the resulting company issues its shares to the shareholders of the demerged company on a proportionate basis;
    • Demerger Contd.
      • (iv) the shareholders holding not less than 3/4 th in value of shares in the demerged company (other than shares already held therein immediately before the demerger, or by a nominee for, the resulting company or, its subsidiary) become shareholders of the resulting company or companies;
      • (v) the transfer of the undertaking as an on going concern.
    • UNDERTAKING Explanation 1 to Section 2(19AA) of Income Tax Act Undertaking shall include any part of an undertaking, or a unit or division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination thereof not consulting a business activity.
      • A Ltd.
      • Undertaking I Undertaking III
      • demerged
      • to Undertaking II
      • B Ltd.
      • Shareholders of A Ltd. to be issued shares by
      • B Ltd. on proportionate basis.
      • - Share capital of A Ltd. to be reduced
      • proportionately
    • SLUMP SALE Section 2(42C) of the Income-tax Act Slump Sale means- the transfer of one or more undertakings as a result of the sale for a lump consideration without values being assigned to individual assets and liabilities in such case.
    • SUBSTANTIVE ISSUES
      • Valuation
      • - Undertaking
      • - Exchange Ratio
      • Promoters’ Equity
      • 0
      • Reduction/ Cancellation of Capital
      • Authorised Share Capital
      • Stamp Duty on
      • - Fixed Assets
      • - Scheme
      • Sales Tax
      • Capital Gains
      • Merger of Foreign Company with an Indian Company
    • STAMP DUTY ON MERGER State of Maharashtra Rate of Stamp Duty 10% of aggregate of market value of shares issued in exchange & amount of consideration paid for amalgamation Maximum limit 7% of market value of immovable property located in Maharashtra “ or” 0.7% of aggregate of mkt. value of shares issued & amt. paid for merger, whichever is higher
    • State of Gujarat If Aggregate amount (Mkt. value or face value of shares, (whichever is higher) + amt. of consideration for merger: (i) > Rs. 100 crores- 2% of aggregate amount (ii ) <100 crores> Rs. 500 crores - Rs. 2 crores + 1% of amt. which exceeds Rs. 100 crores (iii) > Rs. 500 crores - Rs. 6 crores + 0.5% of amt. which exceeds Rs. 500 crores
    • State of Karnataka 10 rupees for every Rs. 1000 or part thereof, on market value of the property of the transferor Company located in Karnataka State of Rajasthan 10% of the market value of the property
    • CASE STUDY Case I Listed Companies:- A Ltd B Ltd Shareholding in Both Companies: Promoters’ – 15.65% Public - 84.35% Object: To enhance the Promoters’ Equity in each Company
      • Options Available:
      • Acquire from the market under Take
      • Over Regulations
      • Creeping Acquisition without triggering
      • take over code
      • Buy-Back of shares under Section 77A
      • of the Companies Act.
      • - Restructuring through Scheme of
      • Arrangement
    • Incorporation of two new Companies X Ltd. Y Ltd. 50% 50% 50% 50% B Ltd. Y Ltd. A Ltd. X Ltd. X Ltd. merged with A Ltd. (post merger shareholding) 10.39% 22% 22% 45.61% Promoters A Ltd. X Ltd. Y Ltd. Promoters- 54.39% Similarly, Y Ltd. merged with B Ltd. (post merger shareholding) 10.39% 22% 22% 45% P romoters B Ltd X Ltd. Y Ltd. Promoters- 54.39%
    • Case II A Ltd. B Ltd 40% 60% 70% 30% Promoters Public A Ltd. Others (Holding Co.) Incorporation of 2 new Companies X Ltd. Y Ltd. A Ltd. Y Ltd. A Ltd. X Ltd. 50% 50% 50% 50%
      • A Ltd’s share in B Ltd. (transferred)
      • X Ltd. Y Ltd.
      • 35% 35%
      • B Ltd. merged with A Ltd.
      • As a result of merger:
      • - X Ltd. and Y Ltd. being shareholder of B Ltd.
      • become shareholder of A Ltd.
      • Shareholding of A Ltd.
      • Promoters X Ltd Y Ltd Public
      • Promoters 65% 35%
      • Thank You