This document summarizes a workshop on mergers and acquisitions presented by Babasab Patil. It discusses reasons for M&A including market intensification through horizontal integration, market extensions, and vertical integration. It also discusses diversification as a reason for M&A. The document outlines different perspectives in M&A deals including the acquirer and target company. It discusses key transaction issues for targets and acquirers. Finally, it provides an overview of the regulatory framework and transaction structures for mergers, acquisitions, spin-offs, and demergers.
The concept of Cost of capital for MNC is addressed in this ppt
Subscribe to Vision Academy for Video assistance https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
Here there is an overview of primary market in detail. Methods of raising funds, and SEBI guidelines to new issues in Primary market is the key concepts in this presentation
Ind AS - 101 "First Time Adoption of IND AS" OverviewAdmin SBS
Contents:
1. Applicability
2. Definitions
3. Opening Ind AS Balance Sheet
4. Retrospective Application of Ind AS
5. Exemption from Retrospective Application of Ind AS
The concept of Cost of capital for MNC is addressed in this ppt
Subscribe to Vision Academy for Video assistance https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
Here there is an overview of primary market in detail. Methods of raising funds, and SEBI guidelines to new issues in Primary market is the key concepts in this presentation
Ind AS - 101 "First Time Adoption of IND AS" OverviewAdmin SBS
Contents:
1. Applicability
2. Definitions
3. Opening Ind AS Balance Sheet
4. Retrospective Application of Ind AS
5. Exemption from Retrospective Application of Ind AS
Mergers and acquisitions (M&A) is a general term used to describe the consolidation of companies or assets through various types of financial transactions, including mergers, acquisitions, consolidations, tender offers, purchase of assets, and management acquisitions.
Class assignment on an introduction to corporate finance which includes the following topics-
1. What is corporate finance?
2. Finance in the organizational structure of a firm
2.1 organization of finance function
2.2 financial manager
3. Finance functions
3.1 executive finance function
3.2 routine finance function
4. Goals of corporate finance
4.1 profit maximization
4.2 limitations of profit maximization
4.3 wealth maximization
4.4 limitations of wealth maximization
5. Corporate finance and related disciplines
5.1 relationship with economics
5.2 relationship with accounting
5.3 relationship with mathematics
6. The agency problem
6.1 agency
6.2 agency problems between shareholders and managers
6.3 resolving conflicts between shareholders and managers
6.4 agency problems between shareholders and creditors
6.5 resolving conflicts between shareholders and creditors
7. Development of corporate finance
Hope you guys find it helpful.
Fixed Assets Accounting is very essential for matching costs with revenues. A fixed asset is an asset held with the intention of being used for producing goods. Check the above presentation for in-depth details.
For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/SlideshareFaccounting
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Follow us on Twitter: https://twitter.com/WeLearnIndia
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Subscribe to our Slideshare Channel: http://www.slideshare.net/welingkarDLP
This chapter included, Meaning and concepts of working capital Management , Operational environment for working capital Management and Determinants of working capital
True or False? 10 M&A assumptions private companies should be testingDeloitte Canada
The state of our economy shouldn’t be reason for private companies not to pursue mergers and acquisitions. Any deal can carry risk at any time. What matters is how you manage it.
Mergers and acquisitions (M&A) is a general term used to describe the consolidation of companies or assets through various types of financial transactions, including mergers, acquisitions, consolidations, tender offers, purchase of assets, and management acquisitions.
Class assignment on an introduction to corporate finance which includes the following topics-
1. What is corporate finance?
2. Finance in the organizational structure of a firm
2.1 organization of finance function
2.2 financial manager
3. Finance functions
3.1 executive finance function
3.2 routine finance function
4. Goals of corporate finance
4.1 profit maximization
4.2 limitations of profit maximization
4.3 wealth maximization
4.4 limitations of wealth maximization
5. Corporate finance and related disciplines
5.1 relationship with economics
5.2 relationship with accounting
5.3 relationship with mathematics
6. The agency problem
6.1 agency
6.2 agency problems between shareholders and managers
6.3 resolving conflicts between shareholders and managers
6.4 agency problems between shareholders and creditors
6.5 resolving conflicts between shareholders and creditors
7. Development of corporate finance
Hope you guys find it helpful.
Fixed Assets Accounting is very essential for matching costs with revenues. A fixed asset is an asset held with the intention of being used for producing goods. Check the above presentation for in-depth details.
For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/SlideshareFaccounting
Join us on Facebook: http://www.facebook.com/welearnindia
Follow us on Twitter: https://twitter.com/WeLearnIndia
Read our latest blog at: http://welearnindia.wordpress.com
Subscribe to our Slideshare Channel: http://www.slideshare.net/welingkarDLP
This chapter included, Meaning and concepts of working capital Management , Operational environment for working capital Management and Determinants of working capital
True or False? 10 M&A assumptions private companies should be testingDeloitte Canada
The state of our economy shouldn’t be reason for private companies not to pursue mergers and acquisitions. Any deal can carry risk at any time. What matters is how you manage it.
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It’s widely known that foreign companies looking to acquire strong targets are drawn to Canada’s vast resource sector. But there’s also plenty of M&A activity — and opportunity — across many other Canadian industries, such as technology, life sciences, media and communications, manufacturing and retail.
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- Determining the applicable tax rules and assessing the potential tax advantages
- An overview of competition law and the Investment Canada Act — due diligence, thresholds and the review process
This presentation provides an update on both recently issued and forthcoming pronouncements of the Financial Accounting Standards Board (FASB). Through this presentation, you should be able to identify what changes are effective for your 2015 financial statements, including changes you may choose to early adopt.
This presentation enumerates the practical aspects of merger, demerger and reduction of capital and the strategies involved therein. It also highlights certain key issues involved in corporate restructuring.
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This presentation gives complete process of corporate insolvency resolution process (CIRP) under insolvency and bankruptcy code 2016, the framework that is developed by EzResolve etc.,
This presentation was made at Achromic Point and BRICS CCI Seminar on “Insolvency and Bankruptcy Code 2016” at Mumbai on June 2, 2018.
Specialising in the training of qualified accountants for CPD he has lectured in several countries around the world as well as regular in house courses for large listed companies, SMEs and public sector entities on the subject of International Financial Reporting Standards.
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A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
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At its core, generative artificial intelligence relies on the concept of generative models, which serve as engines that churn out entirely new data resembling their training data. It is like a sculptor who has studied so many forms found in nature and then uses this knowledge to create sculptures from his imagination that have never been seen before anywhere else. If taken to cyberspace, gans work almost the same way.
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Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
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A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
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Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
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3. Why M&A?
Market Intensification:
• Horizontal Integration – Buying a competitor
Acquisition of equity stake in IBP by IOC
AT&T merger into SBC enables the latter to
access the corporate customer base and exploit
the predictable cash flows typical of this
telephony section
• Market Extensions – New markets for Present
products
Maersk – Pipavav : strategic objective of
investing in a container terminal in the west
coast
Bharat Forge’s acquisition of CDP (Germany)
S&P’s proposed acquisition of CRISIL
3
4. Why M&A?
Vertical Integration : Internalization of crucial
forward or backward activities
• Vertical Forward Integration – Buying a
customer
Indian Rayon’s acquisition of Madura
Garments along with brand rights
• Vertical Backward Integration – Buying a
supplier
IBM’s acquisition of Daksh
4
5. Why M&A?
Diversification: Overcome Barriers to Entry
• Product Extension: New product in Present
territory
P&G acquires Gillette to expand its product
offering in the household sector and smooth
out fluctuations in earning
• Free-form Diversification: New product & New
territories
Flight Centre’s proposed acquisition of
Friends Globe
Indian Rayon’s acquisition of PSI Data
Systems
5
6. Why M&A?
Advantages:
• Greater Economic Clout:
Proposed merger of Petroleum PSUs
P&G merger with Gillette expected to
correct balance of power between suppliers
and retailers.
• Economies
of
scale
and
Overheads: Size really does matter
IOC & IBP
Sharing
• Synthesized capabilities
Proposed merger of nationalized banks
6
8. M&A
TRANSACTION ISSUES: TARGET
Due Diligence – Full Disclosures
– Linked with Reps & Warranties
– Reps should be negative
– DD in case of Listed Company
– Post Closing Adjustment
Condition Precedents – Definitive
– Include as Exhibits
Survival of Reps for limited period
8
9. M&A
TRANSACTION ISSUES: ACQUIRER
Due Diligence – Risk Matrix and Value Depletor
– Material Contracts
• Any subsisting contracts granting similar or superior
rights to other investors
• Termination rights of major customers
• Approval rights of financiers
– Title to Properties & Assets: esp. where main
business is situated
– Statutory Dues
– Litigation : Contingent Liabilities
– IPR protection
– Tax Compliance (Settlement Commission)
9
10. M&A
TRANSACTION ISSUES: ACQUIRER
Mode of Acquisition
– Pure Equity (Existing or New); Equity &
Preference; Special Class (Differential voting
rights, dividends or otherwise)
– Leveraged Acquisitions
Corporate Governance
– Related Party Transactions (past & going forward)
Board Representation
- Quorum (Inclusive)
- Fiduciary Responsibility of Board v. Shareholders
10
11. M&A
TRANSACTION ISSUES: ACQUIRER
Deadlock Resolution
– Majority/ Strategic Partner
– Lenders
Return on Investment
– Cap on dividends to preference shares
– Liquidation Preference
Lock - in of Promoters
– Enforceability of transferability restrictions
11
12. M&A
TRANSACTION ISSUES: ACQUIRER
Non - Compete/ Non - Solicitation
– Payment for Goodwill to exiting partner
Exclusivity
Enforceability against Company
– Company as party to SHA
Exit Options
– Listing (Private Equity)
– Call/ Put Option
12
13. M&A
TRANSACTION ISSUES: GENERAL
Effectiveness of SHA and SPA
Indemnity
– Aggregate Liability Cap
– De Minimis
– Threshold
Participative Rights v. Protective Rights
– Strategic Partner : Participative Rights
• Control on Board
• Sharing Control
– Private Equity : Protective Rights
13
14. M&A
TRANSACTION ISSUES: GENERAL
Special Rights
– Tag – Along Rights: minority partner/ private equity
– Drag - Along Rights: majority partner
– Right to share the upside on revised valuation of
Target eg: on Merger; Listing at higher valuation
– Right of First Refusal
Earn-out Structure
– Favorable Business Projections
14
15. M&A
TRANSACTION ISSUES: GENERAL
FCPA
Arbitration v. Litigation: Effective Remedy
– Proper Law of Arbitration
– ICC v. UNICITRAL
– Group Companies Doctrine
– Place of Arbitration
– Cost Effective
15
19. Acquisitions
ISSUES: COMPANIES ACT
Sections 108A to G: Central Government approval if
in excess of threshold prescribed
• ambiguity as to ‘classification of goods’
Section 372A: Compliance by transferee company in
acquisition of shares
Section 77A: Buy Back may be used as a defense to
a hostile takeover
Used in U.S.: PeopleSoft’s attempt to thwart
Oracle
19
20. Acquisitions
ISSUES: FEMA
Acquirer - Non-Resident:
No approval required for purchase of shares (including
existing shares)
•
From R
•
From NR
Valuation prescribed in case of R-NR not less than
•
Ruling Market Price - Listed Target Company
•
Fair valuation by a CA as per CCI guidelines Unlisted Target Company
Press Note 18 replaced by Press Note 1 of 2005
Investment has to comply with FDI policy
20
21. Acquisitions
ISSUES: FEMA
Target Company is a Non-Resident
Direct investment in JV/ WOS outside India (other
than financial services) requires no approval subject to
conditions including inter alia
• Financial commitment < or = 100% networth
• Investment by way of remittance only if valuation
– If > 5 million USD: by Merchant Banker/
Investment Banker registered with SEBI/
appropriate authorities
– Other cases: by CA/ CPA
• Investment by share swap: valuation by Merchant
Banker/ Investment Banker registered with SEBI/
21
appropriate authorities
22. Acquisitions
ISSUES: TAKEOVER CODE
Definition of “Control” - Inclusive
• Ambiguous:
- TATA Sellout in ACC.
• Negative control?
S. 25(2) prohibits public offers after 21 days of the
public announcement of first public offer
In case of indirect acquisition, foreign acquirer has
three months from completion of transaction to make
open offer. Therefore, foreign transactions can be
concluded prior to open offer in India.
22
23. Acquisitions
RECENT CHANGES : TAKEOVER CODE
New thresholds of 54% and 74% in Regulation 7
55% shares cannot be allotted by preferential
allotment or market purchase – consolidation by
public offer only
Acquisition by public offer under 11(2) can be for only
so many shares as will keep float above listing
requirements.
Where any acquisition reduces public float below
Listing Agreement requirements, acquisition to
comply with delisting guidelines
Where Code is triggered by a global deal, if the public
offer will lower float to below the listing requirement,
then acquirer has 12 months to raise float either by
fresh issue or by disinvestment.
23
24. Acquisitions
ISSUES: MISC
Stamp Duty
• No stamp duty if transferred shares are
dematerialized
Industrial Disputes Act (s. 25FF)
• Workmen employed by transferor company
entitled to retrenchment benefits unless retained in
employment on same terms.
24
26. Mergers
STRUCTURE 1
A = Amalgamating Company: Ceases to Exist
B = Amalgamated Company
B receives all of A’s assets and liabilities
Shareholders of A receive shares in B and maybe other
benefits like debentures, cash
A
Transfer assets and liabilities
B
26
27. Mergers
STRUCTURE 2
A, B and C = Amalgamating Companies: Cease to exist
D = Amalgamated Company: may or may not have
existed before Merger
All assets and liabilities of A, B and C transferred to D
Shareholders in A,B and C get shares in D.
A
D
B
C
27
28. Spin-Offs
STRUCTURE
X
Y
Company A
Transfer of undertaking Y
Consideration in cash
or issue of shares
Y
Company B
Consideration is usually shares of Company B but
maybe cash.
Process may or may not be Court sanctioned.
Salora spinning off Panasonic to Matsushita
under s. 391 Scheme. Consideration in cash.
28
29. Demergers
STRUCTURE
Demergers are one type of spin-offs: under s. 391
A = Demerging Company
B = Resulting Company: may or may not have existed
earlier
A transfers undertaking to B
B issues shares to shareholders of A
X Y
Company A
Transfers undertaking Y
Shareholders
of
A
Y
Company B
Issues shares
29
30. Merger & Demerger
PROCESS
Phase- I
Draft Scheme
Notice to members of Board of both companies
Determine swap ratio based on valuation report
Board approval of both companies
Prior NoCs from secured creditors and shareholders for
exemption from meeting: Reduce Time and Costs
In ICICI Ltd. merger with ICICI Bank, meeting of
preference shareholders of ICICI Ltd. was dispensed
with since sole preference shareholder furnished an
NOC
Phase- II
Draft Application under s. 391(1)
Application to HCs in respective jurisdictions of both
companies for sanction / direction to conduct meetings
– Moving registered office to one jurisdiction: Reduce
30
Time and Costs
31. Merger & Demerger
PROCESS
Phase- III
Notice of EGM to members with statement of terms of
merger, interests of directors and proxy forms: 21 days
Advertisement
Notice in 2 newspapers: 21 days
Affidavit certifying compliance with HC’s directions in
respect of notice/ advertisement
Meetings of creditors and/ or shareholders: agreed to by
majority in number representing ¾ of value present and
voting
Chairman of meetings to file report within 7 days of meeting
Resolutions and Explanatory Statements to be filed with
RoC
31
32. Merger & Demerger
PROCESS
Phase- IV (Approval of the Scheme)
HC to be moved within 7 days of Chairman’s Report for
second motion petition
10 days notice of hearing of petition in same newspapers
Notice to Central Govt. (Regional Director), and OL (if
applicable): Submit reports
Objections raised in 391 proceedings
HC Sanction
Certified copy of HC Order to be filed with RoC within 30
days of order.
32
33. Merger & Demerger
ISSUES: COMPANIES ACT
s 391 - 394: “Complete Code”, “Single Window Clearance”
• Reduction of capital- Position unclear, Predominance
of judicial view: substantial compliance with s. 100- 102
required.
Transnational Mergers: 391 - 394 mechanism operates
only where amalgamated company is Indian. E.g. of
transnational merger concluded under 391 route - Bank of
Muscat merging into Centurion Bank by order of
Karnataka HC
Alternative Mechanism: S. 494
• Through Liquidation Process
• Liquidator transfers assets to foreign company for
shares
• Process has to be “altogether voluntary”
33
• Tax benefits are unavailable under this route
34. Other Spin-Offs
ISSUES: COMPANIES ACT
Where spin-offs are outside the 391 mechanism, the
following compliances need to be ensured
• 293(1)(a) resolution
• Voting has to be by postal ballot in a public listed
company
34
35. Mergers and Demergers
ISSUES: INCOME TAX
Transfer of capital assets by amalgamating company
to amalgamated company is exempt from Capital
Gains Tax provided amalgamated company is an
Indian company
Capital Gains Exemption in respect of shares issued
to members of amalgamating/ demerging companys. 47
Exemption may not be available if members of
amalgamating company receive anything besides shares
in the amalgamated company like debentures or cashGujarat HC in Gautam Sarabhai v. CIT, 173 ITR 216.
35
36. Mergers and Demergers
ISSUES: INCOME TAX
In case of fraction shares, issue to trustee who
liquidates these and distributes money to shareholders
of amalgamating company.
Carry forward of losses and unabsorbed depreciation
provided the amalgamated company carry on the
business of the amalgamating company for at least 5
years – s. 72A
•
Use of Reverse merger to meet above condition
Spin-off receives tax benefits under Income Tax Act
only if it is a demerger
36
37. Slump Sale
ISSUES: TAXATION
Slump Sale = Transfer of undertaking without
itemizing individual assets and liabilities- s.2(42C)
Income Tax Act
Treated as capital gains
If undertaking is older than 3 years, long term capital
gains rates apply even if individual assets are new
Carry forward of losses and unabsorbed depreciation
unavailable
37
38. Merger & Demergers
ISSUES: SALES TAX
No Sales tax on Amalgamation or demerger.
Where effective date is retrospective, any transfers
between amalgamating company and amalgamated
company retrospectively cease to be liable to sales
tax- Mad HC Castrol Oil v. State of TN, 114 STC 468
Some Sales Tax enactments contain specific
provisions to tax such transactions eg. S.33C,
Bombay Sales Tax Act. No such provision in Central
Sales Tax Act.
38
39. Merger
ISSUES: STAMP DUTY
Divergences between states: Shopping for beneficial rates
usually pointless
Duty to be imposed on value of shares transferred not on
individual assets transferred: Bom HC in Li Taka AIR 1997
Bom 7
States with Specific entries: Maharashtra, Karnataka,
Rajasthan and Gujarat
39
40. Merger
ISSUES: STAMP DUTY
States without specific entries: Unclear if duty leviable.
• Cal HC in Madhu Intra Ltd. v. ROC, 2004 (3) CHN 607 394 Order is not an instrument chargeable to duty
• Supreme Court in Ruby Sales v. State of Maharashtra
(1994) 1 SCC 531 - specific inclusion of civil court
decrees in Bombay Stamp Act only abundant caution
1937 Notification under Indian Stamp Act, 1899 remits
duty when merger is of a 90% subsidiary: Remission
not available in states with own legislations eg. Kerala,
Karnataka, Maharashtra, Gujarat and Rajasthan
Gujarat and Maharashtra have limits on stamp duty for
mergers and demergers at Rs.10 crore and Rs. 25
crore.
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41. Merger
ISSUES: SEBI
Acquisition of shares pursuant to a scheme of
arrangement or reconstruction under any law, Indian
or foreign – exempt from SEBI Takeover Code.
Exemption claimed unsuccessfully by Luxottica in the
acquisition of Ray Ban Sun Optics India
Listing Agreement:
• Scheme before the Court/ Tribunal must not violate,
override or circumscribe the securities laws or stock
exchange requirements
• Disclosure required
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42. Merger
ISSUES: SEBI
Shares allotted by unlisted transferee company to
shareholders of listed transferor company under a
HC sanctioned scheme – can be listed without an
IPO subject to conditions (DIP).
− Eg. Dabur Pharmaceuticals
Constitutes ‘Price Sensitive Information’ in terms of
Insider Trading Regulations.
Compliance with Delisting Guidelines
shareholding below prescribed limit.
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if
public
43. Mergers
MISCELLANEOUS ISSUES
Foreign Exchange Management Act, 1999
• Where the amalgamated company is Indian, non
resident
shareholders
of
the
foreign
amalgamating company require RBI approval to
receive shares.
•
Where the amalgamated company is foreign, the
issue of its shares to Indian shareholders
requires RBI approval.
•
Automatic route available where non residents
have to be issued shares in a merger of Indian
companies.
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44. Mergers
MISCELLANEOUS ISSUES
Human Resources
• Workmen entitled to retrenchment benefits
unless retained in employment on same terms.
• Adjustments of pay scale needs to be resolved.
Global Trust employees were retained on same
terms in OBC. Pay packages of former GTB staff
could be altered only after 3 years. OBC
management had to contend with GTB’s complex
salary structure.
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45. Mergers & Acquisitions
COMPETITION LAW
Monopolistic and Restrictive Trade Practices Act,
1969
• Status: Repealing provision in Competition Act,
2002 not notified.
• No Central Government approval required for a
merger or acquisition under the MRTPA
• Act attracted only if amalgamated company
discovered to be monopolistic in its working not at
stage of amalgamation- Hindustan Lever, 1995
Supp (1) SCC 499
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46. Mergers & Acquisitions
COMPETITION LAW
Competition Act, 2002 (Partially notified)
• Merger or Acquisition = “Combination” if stipulated
thresholds respecting aggregate asset or turnover
are exceeded
• Prior approval of combination is not mandatory
• Test – “Cause or likely to cause an appreciable
adverse effect on competition within the relevant
market”
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