The document summarizes key aspects of amalgamation, mergers, acquisitions, and takeovers under Indian law. It outlines the procedures for amalgamation/mergers according to the Companies Act, including drafting schemes of arrangement, holding shareholder meetings, applying to courts for approval, and filing with the registrar of companies. It also describes major laws governing acquisitions and takeovers, such as SEBI regulations on substantial acquisitions and takeovers. The procedures under SEBI regulations include public announcements, letters of offer to shareholders, minimum share acquisition levels, and escrow account requirements.

1. AMALGAMATION, MERGER, ACQUISITION & TAKEOVER Indian Institute of Foreign Trade NEW DELHI 16 th APRIL 2005 by SAMEER RASTOGI Advocate International Corporate Legal Consultant

2. Amalgamation & Mergers AMALGAMATION "blending together of two or more undertakings into one undertaking, the shareholders of each blending company, becoming, substantially, the shareholders of the blended undertakings. There may be amalgamations, either by transfer of two or more undertakings to a new company, or to the transfer of one or more companies to an existing company”. Amalgamation, Mergers & Takeovers X Y + Example = Z X Y + = X

3. Procedure for Amalgamation / Merger " MERGER " its an arrangement, whereby the assets of two companies become vested in, or under the control of, one company (which may or may not be one of the original two companies), which has as its shareholders all, or substantially all, the shareholders of the two companies . Amalgamation, Mergers & Takeovers Amalgamation & Mergers C heck MoA (change accordingly). D raft Scheme of Arrangement ( Amalgamation / Merger). C onsider it in Board Meeting. A pply to Court direction to call General Meeting. S ent copy of application made to High Court to Central Gov. S end notices of General Meeting to with scheme N otice Period shall not be less than 21 days N otice can be way of Advertisement also A t General Meeting approve scheme, increase authorized share capital and to issue further shares, as required

4. Procedure for Amalgamation / Merger Amalgamation, Mergers & Takeovers F orward promptly notice and proceedings of meeting to SE’s R eport the result of the meeting to Court M ove Court for approval of the scheme by filing petition in 7 days in Form 40 A dvertise the date of hearing fixed by the court O n receipt of Order from High Court, file it with RoC. P roceed on effecting the scheme amalgamation / merger as approved by High Court

5. Section 391 – 394 of the Companies Act, 1956 deals with Compromises, Arrangements and Reconstructions and other related issues through schemes of arrangement approved by the High Courts. A resolution to approve the scheme of arrangement has to be passed by the shareholders in the general meetings. The shareholders have to vote on the resolutions on the schemes of arrangement on the basis of the disclosures in the notice/explanatory statement. Section 393 of the Companies Act, 1956 specifies the broad parameters of the disclosures which should be given to the shareholders / creditors, for approving a scheme of arrangement. Amalgamation, Mergers & Takeovers Amalgamation & Mergers

6. Section 391 Amendment in the Companies Act, 1956 in year 2002 gave powers to National Company Law Tribunal to review and to allow any compromise or arrangement, which is proposed between a company and its creditors or any class of them or between a company and its members or any class of them. However, because of non formation of National Company Law Tribunal, these powers still lie with High Courts and the parties concerned can make applications to high courts. If the Creditors, Members present at a General meeting representing three fourth of total number agree to any compromise or arrangement, it becomes binding on the rest of the members or creditors provided the tribunal sanctions the compromise or arrangement. The order made by Tribunal will come in to effect only after the filing of certified copy with the Registrar of Companies. Amalgamation, Mergers & Takeovers

7. Section 391 Court’s power under the section are very wide and has discretion to allow any sort of arrangement between the company and members. Scope and ambit of the Jurisdiction of the Court: The sanctioning court has to see to it that all the requisite statutory procedure for supporting any scheme has been complied with along with requisite meetings. That the scheme put up for sanction of the court is backed up by the requisite majority vote. That the concerned meetings of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme. That the proposed scheme is not found to be violative of any provision of law and is not contrary to public policy. Amalgamation, Mergers & Takeovers

8. Section 392 Under this section, the court has power to supervise the carrying out of the compromise or an arrangement; and may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the arrangement. If the court is of the view that a compromise /arrangement sanctioned under section 391 cannot be worked satisfactorily with or without modifications, it may on it own motion or on the basis of an application made by an interested party may order winding up of the company under section 433 of the Act. Amalgamation, Mergers & Takeovers

9. Section 393 This section prescribes the procedure required for convening the meeting of the members or creditors called under section 391. The notice for the meeting should be sent along with a statement setting forth the terms of the compromise and or arrangement and explaining its effect and in particular, the statement must state all material interest of the directors, managing directors of the company, whether in their capacity as such or as members or creditors of the company or otherwise. Where the compromise or arrangement affects the rights of debenture holders of the company, the statement shall give the information and explanation in respects to the trustees of any deed for securing the issue of the debentures as it is required to give in respect of directors. Any default in complying with the requirements under this section may lead to a fine of Rs. 50, 000 against the concerned official of the company, who is found guilty. Amalgamation, Mergers & Takeovers

10. Section 394 Where the court is of the view that the proposed arrangement/scheme is of such nature that • the scheme is for the reconstruction of any company or for amalgamation of any two or more companies; and • that under the scheme the whole or any part of the undertaking property or liabilities of any concerned company is to be transferred to another company; the court may make provision for all or any of the following matters. The transfer to Transferee Company of the property or liabilities of transferor company. The allotment or appropriation by the transferee company of any shares, debentures or other like interest in that company which, under the arrangement, are to be allotted or appropriated by that company to. The continuation of any legal proceeding against the transferee company by the transferor company. The dissolution, without winding up, of any transferor company. The provisions for any dissenting persons. Who are opposing such scheme or any other matter, which the court deems fit. Amalgamation, Mergers & Takeovers

11. Acquisitions & Takeovers Major Laws Involved S EBI (substantial Acquisition of shares &Takeovers) Regulations 1997. T he Securities and Exchange Board of India Act,1992 . S ecurity Contract Regulation Act ,1956 . T he Depositories Act,1956. S EBI Disclosure and Investor Protection Guidelines 2000. S ecurities and Exchange Board of India (Prohibition of Insider Trading Regulation ),1992. S ecurities and Exchange Board of India (Merchant Bankers) Rules/Regulation 1992. S EBI (Delisting of Securities )Guidelines,2003. F oreign Exchange Management Act,1999. C ompanies Act,1956. Amalgamation, Mergers & Takeovers

12. Acquisitions & Takeovers PROCEDURE (SAST,1997) Reg-7 :Disclosuure to company and to stock exchange by any person who acquire more than 5%,10% or 14% shares Reg-10 : NO acquirer shall acquire 15% or more shares unless such acquirer makes a public announcement to acquire shares of such company as per SAST,1997. Amalgamation, Mergers & Takeovers

13. Acquisitions & Takeovers PROCEDURE (SAST,1997)……. continued Reg-11 : If (15%-75%) shares acquired as per Law then no acquirer can acquire additional shares which entitle him to exercise 5% or more in any financial year, unless public announcement is made. Acquisition :- * Direct Acquisition in a listed company to which the Regulation apply. * Indirect acquisition by virtue of acquisition of companies, whether listed or unlisted, whether in India or aboard . Amalgamation, Mergers & Takeovers

14. Acquisitions & Takeovers PROCEDURE (SAST,1997)……. continued Reg-13 :Before making public announcement merchant banker is to be appointed Reg-14 :Timing of Public Announcement Offer not later than 4 working days after agreement for acquisition of shares. Reg-15 : Public Announcement of offer to be made in newspaper, Hindi, regional and mostly traded area. Public Announcement shall be submitted to: SEBI through merchant Banker Amalgamation, Mergers & Takeovers

15. Acquisitions & Takeovers PROCEDURE (SAST,1997)……. continued Reg-18 :Within 14 days from the date of Public Announcement draft letter of offer to be filed with SEBI through Merchant Banker. The letter of Offer to be dispatched to share-holders not earlier than 21days. Reg-19 : Public announcement shall specify a date for the purpose of determining the name of the shareholder to whom Letter of Offer will be sent shall not be later than 30 th day. Amalgamation, Mergers & Takeovers

16. Acquisitions & Takeovers PROCEDURE (SAST,1997)……. continued Reg-21 : Minimum number of shares to be acquired by Public offer-20%. If the public shareholding goes below 10%, delisting of securities guidelines will apply. Reg-28 : ESCROW- The acquirer by way of security performance of his obligation, deposit in ESCROW account sum as under For consideration (C) payable under the public offer upto and including C=<100 cr - 25% C>100 cr - 25% upto Rs.100 cr &10% thereafter . Amalgamation, Mergers & Takeovers

17. Acquisitions & Takeovers PROCEDURE (SAST,1997)……. continued Reg-29: PAYMENT OF CONSIDERATION 7days from closure of offer open special account with Banker to an issue and deposit sum as would together with 90% of lying in ESCROW make up entire sum due and payable to shareholders . Amalgamation, Mergers & Takeovers