M&A under New Companies Act, 2013- 04.10.14 Final

BACKGROUND And M & A DRIVERSBACKGROUND And M & A DRIVERS
10/19/15 Corporate Legal Practice

Overview of EXISTING PROCESS under Old Act;Overview of EXISTING PROCESS under Old Act;
Scenario under New Regime (NEW ACT);Scenario under New Regime (NEW ACT);
Corporate Legal Practice10/19/15
Introduction of NCLT-
“Single Window Clearance” for
corporate re-structuring

Notice of Meeting
to be sent to
various regulatory
authorities
Approval of
Scheme
through Postal
Ballot
Extinguishment
of Treasury
Shares
Merger of Listed
Company with
Unlisted Company
Fast Track
Merger
Limit for
Objection to
Compromise/
Arrangement
Cross Border
Merger
NCLT
Valuation Report
by Registered
Valuer
Minority Squeeze
out
Exit options for
Dissenting
Shareholder
CDR

Point-wise Key Changes:Point-wise Key Changes:
 Approvals/ Notice of Meeting – to whom?Approvals/ Notice of Meeting – to whom?
 Approval/Objection by regulators within 30 daysApproval/Objection by regulators within 30 days
Other Sectoral
Regulators which are
likely to be affected by
the merger (like
Department of
Telecommunications
for merger of telecom
companies).
Further, Notice to be
placed on Website too.

Point-wise Key Changes (Cont.)Point-wise Key Changes (Cont.)
 Extinguishment of holding ‘Treasury Stocks’ [S 232(3)(b)];Extinguishment of holding ‘Treasury Stocks’ [S 232(3)(b)];
 M&A Scheme to be considered in aM&A Scheme to be considered in a board meetingboard meeting only (S 232);only (S 232);
 Accounting Standards [S 232(3)];Accounting Standards [S 232(3)];
 Valuation Report [S 232(2)];Valuation Report [S 232(2)];
 Approval of Scheme through postal ballot [S 230(6)];Approval of Scheme through postal ballot [S 230(6)];
 Threshold onThreshold on ObjectionsObjections by shareholders/ Creditors [S 230(4)];by shareholders/ Creditors [S 230(4)];
 Set-off of fees paid on authorised capital by transferor companySet-off of fees paid on authorised capital by transferor company
[provisio to S 232(3)][provisio to S 232(3)] {{Bombay HC -YOU Telecom India Pvt. Ltd. In re [(2008) 141 comp casesBombay HC -YOU Telecom India Pvt. Ltd. In re [(2008) 141 comp cases
43]; Madras HC -43]; Madras HC -Bysani Consumer Electronics Ltd. inBysani Consumer Electronics Ltd. in Re [(2006) 134 comp case 99]; Calcutta HC – AREVA T &Re [(2006) 134 comp case 99]; Calcutta HC – AREVA T &
D INDIA LTD.D INDIA LTD. vv. UOI [(2008) 87 CLA 58 (CAL)];. UOI [(2008) 87 CLA 58 (CAL)]; Kemira Laboratories Ltd.’s case [(2007) comp cas 817 (AP)]}Kemira Laboratories Ltd.’s case [(2007) comp cas 817 (AP)]}
 Dispensation of creditors’ meeting possible at Discretion of NCLTDispensation of creditors’ meeting possible at Discretion of NCLT
subject to receiving confirmation (by Affidavit) of at least 90%subject to receiving confirmation (by Affidavit) of at least 90%
creditors in value [S 230(9)];creditors in value [S 230(9)];
 Buy-Back to be made only in compliance with S 68 [S 230(10)];Buy-Back to be made only in compliance with S 68 [S 230(10)];
 NCLT to provideNCLT to provide exit offerexit offer to dissenting shareholders [S 230(7)(e)];to dissenting shareholders [S 230(7)(e)];
 Compulsory Purchase from minority shareholders (S 236) - (byCompulsory Purchase from minority shareholders (S 236) - (by
Shareholders who acquired 90% of equity capital)Shareholders who acquired 90% of equity capital)

MERGER OF A LISTED COMPANY INTO ANMERGER OF A LISTED COMPANY INTO AN
UNLISTED ONE [S 232(3)(h)]:UNLISTED ONE [S 232(3)(h)]:
 The New Act requires Tribunal's order to state that merger of aThe New Act requires Tribunal's order to state that merger of a
listed company into an unlisted company will not listed company into an unlisted company will not ipso factoipso facto make make
the unlisted company listed. It willthe unlisted company listed. It will continue to be unlisted until itcontinue to be unlisted until it
comply with listing regulations and SEBI guidelinescomply with listing regulations and SEBI guidelines. Further, if the. Further, if the
shareholders of the listed company decide to exit, the unlistedshareholders of the listed company decide to exit, the unlisted
company would facilitate thecompany would facilitate the exit optionexit option with a pre-determinedwith a pre-determined
price formulaprice formula ((shall not be less than price arrived as per the relevantshall not be less than price arrived as per the relevant
SEBI regulations)SEBI regulations). Prima facie it appears that such shareholder can. Prima facie it appears that such shareholder can
exercise the exit option even if transferee company gets listed.exercise the exit option even if transferee company gets listed.
 TheThe Old Act was silentOld Act was silent on it.on it. SEBI had relaxed the normsSEBI had relaxed the norms byby
granting exemptions from complying with the listing requirementsgranting exemptions from complying with the listing requirements
u/s 19(2)(b) of SCRA u/s 19(2)(b) of SCRA on a case-to-case basison a case-to-case basis. SEBI had issued. SEBI had issued
guidelines stating that ifguidelines stating that if Scheme provides for listing of shares of anScheme provides for listing of shares of an
unlisted companyunlisted company without complying with the IPO requirements,without complying with the IPO requirements,
then, upon court’s approval to the Scheme, the unlistedthen, upon court’s approval to the Scheme, the unlisted companycompany
should file application seeking such exemption from SEBIshould file application seeking such exemption from SEBI. The. The
changes under the New Act are in line with SEBI requirements.changes under the New Act are in line with SEBI requirements.

KINDS OF M&AKINDS OF M&A

COMPROMISE OR ARRANGEMENTCOMPROMISE OR ARRANGEMENT::
Disclosure In Affidavit To NCLTDisclosure In Affidavit To NCLT

NCLT mayNCLT may dispense with holding of meetings ofdispense with holding of meetings of
creditors only if 90% in total value of creditors filecreditors only if 90% in total value of creditors file
affidavit confirming their approval to the schemeaffidavit confirming their approval to the scheme.. (new).(new).
Applicable to creditor’s meeting only. Not apply toApplicable to creditor’s meeting only. Not apply to
member’s meeting.member’s meeting.

Notice of proposed meeting required to be sent to-
All Creditors (including debenture-holders), Members, every class
of them;
Central Government,
Income Tax Authority
RBI
SEBI
ROC
Respective Stock Exchanges
Official Liquidator
CCI
Sectoral Regulators or Authorities which are likely to be affected
Notice shall also be placed on the Website of the Company, if
any. (new)
Notice is also required to be published in a news-paper, as
may be prescribed.
All these authorities will give
their representation within 30
days of receipt of notice, failing
which it shall be presumed that
they have no representation to
make on proposed compromise
or arrangement.

Voting and ResolutionVoting and Resolution::
 At the meeting- (Either in person or by proxy)At the meeting- (Either in person or by proxy)
 By Postal Ballot (to revert within a month)By Postal Ballot (to revert within a month)
It appears that both physical meeting and postal ballotIt appears that both physical meeting and postal ballot
process will be required and thatprocess will be required and that combined resultscombined results willwill
have to be considered.have to be considered. ObjectionsObjections can be made bycan be made by
persons holding 10% in shareholding or having o/s debt ofpersons holding 10% in shareholding or having o/s debt of
atleast 5% as per last audited financial statement.atleast 5% as per last audited financial statement.(new)(new)..
However, making proviso to section dealing with votingHowever, making proviso to section dealing with voting
suggests that negative votes can be casted only if thesuggests that negative votes can be casted only if the
members complying with the above (though seems to bemembers complying with the above (though seems to be
unintended and can be used only for argument sake).unintended and can be used only for argument sake).
Condition ofCondition of ‘present & voting’ is replaced by ‘voting’‘present & voting’ is replaced by ‘voting’..
Majority appears to be computed w.r.t. those membersMajority appears to be computed w.r.t. those members
who voted (& not of all members of that class).who voted (& not of all members of that class). ResolutionResolution
to be passed by consent ofto be passed by consent of majority of persons votedmajority of persons voted
representing 3/4representing 3/4thth
in value.in value.

Other requirements:Other requirements:
 Company needs to file aCompany needs to file a certificate from its auditorcertificate from its auditor to theto the
effect that accounting treatment is in conformity with theeffect that accounting treatment is in conformity with the
prescribed accounting standardprescribed accounting standard (new)(new)
 In case arrangement involvesIn case arrangement involves reduction of share capitalreduction of share capital, the, the
provision relating to the reduction provided in the new Actprovision relating to the reduction provided in the new Act
should not be applicableshould not be applicable (new)(new) ..
 In case the arrangement involvesIn case the arrangement involves take-over offerstake-over offers for unlistedfor unlisted
companies, an aggrieved party may apply to the Tribunalcompanies, an aggrieved party may apply to the Tribunal
(new).(new).
 In nutshell, criteria for implementing the Scheme- (a) PassingIn nutshell, criteria for implementing the Scheme- (a) Passing
of resolution(of resolution(majority of persons voted representing 3/4majority of persons voted representing 3/4thth
inin
value)value) by members, creditors and every class of them; andby members, creditors and every class of them; and
(b)(b) the Scheme is sanctioned by the order of Tribunal.the Scheme is sanctioned by the order of Tribunal. Then,Then,
it would be binding on company, all members, creditors, andit would be binding on company, all members, creditors, and
every class of them, Liquidator & contributory (in caseevery class of them, Liquidator & contributory (in case
company is under winding up).company is under winding up).

Tribunal order may includeTribunal order may include

MERGERS/ AMALGAMATIONS/MERGERS/ AMALGAMATIONS/
RECONSTRUCTION (INCLUDING DEMERGER):RECONSTRUCTION (INCLUDING DEMERGER):
 The New Act provides forThe New Act provides for entirely separate proceduresentirely separate procedures forfor
compromise or arrangement involving Amalgamation. Oncecompromise or arrangement involving Amalgamation. Once
an application u/s 230 dealing with compromise oran application u/s 230 dealing with compromise or
arrangement involving an amalgamation is made, the processarrangement involving an amalgamation is made, the process
prescribed u/s 232 needs to be followed and orders are to beprescribed u/s 232 needs to be followed and orders are to be
passed u/s 232 (and not u/s 230). Clarity still needs as to howpassed u/s 232 (and not u/s 230). Clarity still needs as to how
to deal with composite scheme involving compromise andto deal with composite scheme involving compromise and
amalgamation (i.e. whether it would be governed by both theamalgamation (i.e. whether it would be governed by both the
S 230 and 232? Or by S 232).S 230 and 232? Or by S 232).
 Now lets see the key changes in provisions of Amalgamation:Now lets see the key changes in provisions of Amalgamation:
 Amalgamation needsAmalgamation needs approval at the BOARD MEETINGapproval at the BOARD MEETING (previously, it(previously, it
was not mandatory, so the resolution could have been passed bywas not mandatory, so the resolution could have been passed by
circulation).circulation).

M&A (cont).M&A (cont).
 The Old Act provided that for Amalgamations, theThe Old Act provided that for Amalgamations, the
Transferor company can be a body corporate (whichTransferor company can be a body corporate (which
includes company). Hence, Amalgamation of certain non-includes company). Hence, Amalgamation of certain non-
company entities with a company was possible. But, incompany entities with a company was possible. But, in
absence of similar provisions in New Act,absence of similar provisions in New Act, Amalgamation ofAmalgamation of
non- company entity may not be possiblenon- company entity may not be possible..
 Provisions like disclosure under anProvisions like disclosure under an affidavit, circulation ofaffidavit, circulation of
notices, voting rights, majoritynotices, voting rights, majority approval requirements andapproval requirements and
auditors certificateauditors certificate discussed under compromise ordiscussed under compromise or
arrangementarrangement would equally apply to Amalgamationwould equally apply to Amalgamation as well.as well.
However, certainHowever, certain additional documentsadditional documents to be attached withto be attached with
notice (a) draft Scheme adopted by BOD; (b) Confirmationnotice (a) draft Scheme adopted by BOD; (b) Confirmation
that a copy of scheme is filed with ROCthat a copy of scheme is filed with ROC (new);(new); (c) Report(c) Report
adopted by BOD explaining the impact of the scheme onadopted by BOD explaining the impact of the scheme on
promoter’s and non-promoters shareholding; (d) Valuationpromoter’s and non-promoters shareholding; (d) Valuation
Report by expertsReport by experts (new)(new); (e) Supplementary account, if the; (e) Supplementary account, if the
last annual accounts relates to financial year ending 6last annual accounts relates to financial year ending 6
months before the date of first meetingmonths before the date of first meeting(new).(new).

M&A (cont).M&A (cont).
 There is no change regarding theThere is no change regarding the discretion of NCLT todiscretion of NCLT to
dispense with the meetingdispense with the meeting. Approval by 90% of creditors’. Approval by 90% of creditors’
confirmation on affidavit is not applicable to Amalgamation.confirmation on affidavit is not applicable to Amalgamation.
 New Act allowsNew Act allows offsetting of fees paid on authorized capital byoffsetting of fees paid on authorized capital by
the transferor companythe transferor company, against fees payable on authorized, against fees payable on authorized
capital by the transferee company post amalgamation.capital by the transferee company post amalgamation.
However the benefit of stamp duty paid by the transferorHowever the benefit of stamp duty paid by the transferor
company on authorized share capital is lost.company on authorized share capital is lost.
 Appointed dateAppointed date is to be specified in the scheme, and theis to be specified in the scheme, and the
scheme can not be deemed to be effective from anyscheme can not be deemed to be effective from any
subsequent date.subsequent date. (new)(new)
 CertifiedCertified copy of the Tribunal order is to be filed with ROCcopy of the Tribunal order is to be filed with ROC
within 30 days of the receipt of order copy.within 30 days of the receipt of order copy.
 Following the order and prior to the completion of the scheme,Following the order and prior to the completion of the scheme,
every company being party to the order shall file aevery company being party to the order shall file a statementstatement,,
certified by a CA/certified by a CA/ CS/CS/ICWAICWA,, that scheme is being compliedthat scheme is being complied
with as per the order of the Tribunal or notwith as per the order of the Tribunal or not.. (new)(new)

Order of NCLT to provide for the following:Order of NCLT to provide for the following:

Corporate Legal Practice
THE NEW KINDS OF MERGERS :THE NEW KINDS OF MERGERS :
FAST TRACK MERGER (S 233):FAST TRACK MERGER (S 233):
 Unlike the Old Act where merger of all companies requiredUnlike the Old Act where merger of all companies required
court approval, the New Act provides separate procedure forcourt approval, the New Act provides separate procedure for
“small companies” and “the holding- WOS”. It requires“small companies” and “the holding- WOS”. It requires
consent of shareholders holding 90% in value and creditorsconsent of shareholders holding 90% in value and creditors
representing 90% of debt in value + approval of the Schemerepresenting 90% of debt in value + approval of the Scheme
by the CGby the CG in case no objections are received from the OL andin case no objections are received from the OL and
ROC.ROC. NCLT order is not required for such mergersNCLT order is not required for such mergers. But,. But, if CGif CG
is of the opinion that the Scheme is not in the interest of theis of the opinion that the Scheme is not in the interest of the
stakeholders, he may approach the NCLTstakeholders, he may approach the NCLT who could followwho could follow
the normal merger procedure prescribed under the New Act.the normal merger procedure prescribed under the New Act.
 S 2(85) of New Act defines "Small Companies" as a privateS 2(85) of New Act defines "Small Companies" as a private
company, with acompany, with a paid-up capital of maximum Rs. 50 lacspaid-up capital of maximum Rs. 50 lacs or aor a
prescribed amount up to Rs. 5 crores prescribed amount up to Rs. 5 crores OROR with with a turnover ofa turnover of
maximum Rs. 2 croremaximum Rs. 2 crore or a prescribed amount up to Rs. 20or a prescribed amount up to Rs. 20
crores. It excludes (i) holding & subsidiary companies; (ii) acrores. It excludes (i) holding & subsidiary companies; (ii) a
company governed by Special Act or (iii) charitablecompany governed by Special Act or (iii) charitable
companies formed u/s 8.companies formed u/s 8.10/19/15

Process for Fast Track MergerProcess for Fast Track Merger
 The New Act provides an option of simplified and fast trackThe New Act provides an option of simplified and fast track
process of merger /demerger in cases of specified Smallprocess of merger /demerger in cases of specified Small
Companies and between holding and its wholly-ownedCompanies and between holding and its wholly-owned
subsidiary.subsidiary.
 TheThe scheme approved by the boards of directors ofscheme approved by the boards of directors of
companies will need to be sent to ROC and OL for theircompanies will need to be sent to ROC and OL for their
suggestions or objections within 30 dayssuggestions or objections within 30 days. The scheme will. The scheme will
then bethen be considered in the meetings of shareholders orconsidered in the meetings of shareholders or
creditors, along with their suggestions or objections of ROC/creditors, along with their suggestions or objections of ROC/
OLOL, and will have to be approved by – (a) Shareholders, and will have to be approved by – (a) Shareholders
holdingholding 90% of the total number of shares90% of the total number of shares at a generalat a general
meeting; (b)meeting; (b) Majority creditors (representing 90% in value)Majority creditors (representing 90% in value) inin
a meeting convened with 21 days’ notice.a meeting convened with 21 days’ notice.
 The concept of members ‘present and voting’ is not included.The concept of members ‘present and voting’ is not included.
No distinction is made between fully paid & party paid shares.No distinction is made between fully paid & party paid shares.

 Each company involved in merger has to file declaration of
solvency with the ROC; (timing not specified)
 Only Transferee Company shall file the approved schemes with
the CG (i.e. RD), ROC and OL;
 ROC and OL shall communicate their objections / suggestions to
the scheme to CG within 30 days from the receipt of notice;
 If no communication is received from ROC and OL or they have
communicated that they have ‘no objection’ to the scheme or CG
has not formed an opinion, the CG shall register the scheme and
issue the confirmation to the companies;
 However, if CG has opinion that scheme is not in public interest
or creditors, then within 60 days of the receipt of the scheme, CG
may file an application to NCLT and requesting NCLT to consider
the scheme under normal merger provisions.
 Out of intense complexities, intense simplicities emerge.
Fast Track Process (Cont.)

Fast Track Process (Cont.)Fast Track Process (Cont.)
 If Scheme is approved, theIf Scheme is approved, the order should be communicated toorder should be communicated to
ROC of transferee companyROC of transferee company who should register the samewho should register the same
and issueand issue confirmationconfirmation to the companies, which should beto the companies, which should be
communicated to the ROC of transferor companiescommunicated to the ROC of transferor companies..
 Registration of Scheme by CG/ROC should beRegistration of Scheme by CG/ROC should be deemed todeemed to
have the effect of the dissolution of transferor companyhave the effect of the dissolution of transferor company
without winding upwithout winding up..
Effect of Registration of Scheme-Effect of Registration of Scheme-
(a) TRANSFER OF ASSETS & LIABILITIES to transferee(a) TRANSFER OF ASSETS & LIABILITIES to transferee
CompanyCompany
(b) enforceability of CHARGES against the transferee company;(b) enforceability of CHARGES against the transferee company;
(c) LEGAL PROCEEDINGS shall continue in the name of the(c) LEGAL PROCEEDINGS shall continue in the name of the
transferee company;transferee company;
(d) PURCHASE OF SHARES OF DISSENTING(d) PURCHASE OF SHARES OF DISSENTING
SHAREHOLDERS or settlement of creditors, if provided, shallSHAREHOLDERS or settlement of creditors, if provided, shall
become the liability of the transferee company.become the liability of the transferee company.

BENEFITS OF FAST TRACK MERGER:
 Approval of NCLT is not required (so Company may not be required to file documents
required to fined under clause 24(f) of the listing agreement, in case of listed companies).
 Notice is not required to be given to various authorities (and shorter timelines)
 No Need of separate RBI/ Income Tax approval/ Registered Valuer.
 Auditor’s certificate of compliance with applicable accounting standard is not required.
Discouraging argument-
 CG’s power to transfer the Scheme to NCLT;
 Approval of shareholders and creditors holding 90% share/debt value is needed.
 Benefit of this fast track merger is not available to small public companies. But, in merger
between a holding and its WOS, these provisions are applicable for both public and private
companies.
FAST TRACK MERGER
SMALL CO.SMALL CO.
SMALL CO.SMALL CO.
HOLDING CO.
WHOLLY OWNED
SUB CO.
Central Government has the power to sanction the scheme, no requirement to approach NCLT
In nutshell,

CROSS BORDER MERGER
UNDER OLD ACT
Foreign Company
(can be only
Transferor Co.)
Indian Company
(Only can be
Transferee Co.)
UNDER S 234 OF NEW ACT
Foreign CompanyForeign Company Indian CompanyIndian Company
Notified by
CG
Notified by
CG
 Now Indian Co. can be transferor as well as transferee co.
(but only for the CG notified jurisdictions).
CG may make the Rules, in consultation with RBI
Prior approval of RBI is also required. Other approvals or
process- same as merger or demerger discussed earlier.
The scheme may provide for payment in cash or in depository
receipts or in both.
 Now Indian Co. can be transferor as well as transferee co.
(but only for the CG notified jurisdictions).
CG may make the Rules, in consultation with RBI
Prior approval of RBI is also required. Other approvals or
process- same as merger or demerger discussed earlier.
The scheme may provide for payment in cash or in depository
receipts or in both.
CROSS BORDER MERGER

 Cross-border mergers (S 234):Cross-border mergers (S 234): The Old Act permits The Old Act permits
cross-border mergers only where the transferor is a foreigncross-border mergers only where the transferor is a foreign
company. The New Act permits mergers between an Indiancompany. The New Act permits mergers between an Indian
and a foreign company located in a jurisdiction notified by theand a foreign company located in a jurisdiction notified by the
CG in consultation with RBI. Such a merger would be subjectCG in consultation with RBI. Such a merger would be subject
toto RBI approvalRBI approval and Scheme may provideand Scheme may provide payment in cash orpayment in cash or
depository receipts or both to facilitate exit to the shareholdersdepository receipts or both to facilitate exit to the shareholders
of the merging entity who do not want to be a part of theof the merging entity who do not want to be a part of the
merged entity.merged entity.
 Income Tax Act presently grants tax exemptions on mergers ifIncome Tax Act presently grants tax exemptions on mergers if
the transferee is an Indian company and does not recognize athe transferee is an Indian company and does not recognize a
situation where the transferee will be a foreign company, assituation where the transferee will be a foreign company, as
contemplated under the New Act.contemplated under the New Act. The introduction of cross-The introduction of cross-
border mergers under the 2013 Act may, therefore, requireborder mergers under the 2013 Act may, therefore, require
corresponding changes in other laws, including FEMAcorresponding changes in other laws, including FEMA
(relating to ownership of real estate in India, sectoral caps,(relating to ownership of real estate in India, sectoral caps,
definitions of overseas holdings etc.), security related lawsdefinitions of overseas holdings etc.), security related laws
(change in rules regarding dual listings), tax laws etc(change in rules regarding dual listings), tax laws etc..
10/19/15

 Where acquirer becomes registered holder of 90% or more of the
issued shares due to scheme or contract involving transfer of
shares or by virtue of an amalgamation, shares exchange,
conversion of securities, then ;
 Acquirer have to buy the minority shares as per following formula
for price determination :-
 In Case Of Listed Company
 Price as per SEBI Regulations;
 Registered valuer to provide valuation report to the Board of
Directors justifying the methodology of arriving at such price.
 In Case Of Unlisted Co. (Including Pvt Co.)
 The highest price paid by the acquirer, person or group of persons
for acquisition during last 12 months;
 fair price of shares of the company to be determined by the
registered valuer after taking into account valuation parameters.
MINORITY SQUEEZE OUT [U/S 235 / 236]

TAKEOVER THROUGH
COMPROMISE
ARRANGEMENT SCHME
LISTED COMPANY
UNLISTED
COMPANY
AS PER SEBI
TAKEOVER
CODE
DRAFT RULE -15.11
acquisition of control of a
company other than a listed
company pursuant to a scheme
of compromise or arrangement
under section 230; or
acquisition of fifty percent or
more of the total share capital
of a company other than a
listed company pursuant to a
scheme of compromise or
arrangement under section 230
TAKEOVER through Compromise / Arrangement
And its Strategies:
Defensive Strategies for Take Over- (a) Golden Parachute; (b)
Poison Pills; (c) Staggered Board; (d) Pac Men defense.

POSITION UNDER STAMP ACT:POSITION UNDER STAMP ACT:
 Order sanctioning scheme of amalgamation/ demerger etc isOrder sanctioning scheme of amalgamation/ demerger etc is
anan “instrument”“instrument” as defined under Section 2(l) of the Bombayas defined under Section 2(l) of the Bombay
Stamp Act, 1958 and is covered within the definition ofStamp Act, 1958 and is covered within the definition of
“Conveyance”“Conveyance” under Section 2(g) of the said Act andunder Section 2(g) of the said Act and
accordingly liable to stamp duty underaccordingly liable to stamp duty under Article 25(da)Article 25(da) of theof the
said Act.said Act.
 The Old Act had been in force for almost 57 years, duringThe Old Act had been in force for almost 57 years, during
which may other laws were created/enacted (where crosswhich may other laws were created/enacted (where cross
references were being used or references being made aboutreferences were being used or references being made about
S 391/394 etc) The same should be considered to include theS 391/394 etc) The same should be considered to include the
provision of New Act. For e.g. Bombay Stamp Act (definitionprovision of New Act. For e.g. Bombay Stamp Act (definition
of term, “conveyance” is defined with reference to S 394 ofof term, “conveyance” is defined with reference to S 394 of
the 1956 Act. Stamp duty is essentially linked to M&A section.the 1956 Act. Stamp duty is essentially linked to M&A section.

M&A UNDER COMPETITION ACT:M&A UNDER COMPETITION ACT:
 Objective of the Competition ActObjective of the Competition Act ::
 This Act was enacted toThis Act was enacted to prevent practices having adverseprevent practices having adverse
effect on competition, to promote and sustain competition ineffect on competition, to promote and sustain competition in
markets, to protect the interests of consumers and to ensuremarkets, to protect the interests of consumers and to ensure
freedom of trade carried on by other participants in markets, in Indiafreedom of trade carried on by other participants in markets, in India
 A Competition Commission (CCI) was set up under this Act toA Competition Commission (CCI) was set up under this Act to
ensure healthy competition and freedom of trade.ensure healthy competition and freedom of trade.
 Section 6 of Competition Act:Section 6 of Competition Act:
(1) No person or enterprise shall enter into a combination which(1) No person or enterprise shall enter into a combination which
causes or is likely to cause an appreciable adverse effect oncauses or is likely to cause an appreciable adverse effect on
competition within the relevant market in India and such acompetition within the relevant market in India and such a
combination shall be void.combination shall be void.
(2) …….. any person or enterprise, who or which proposes to enter(2) …….. any person or enterprise, who or which proposes to enter
into a combination, shall give notice to the Commission……..into a combination, shall give notice to the Commission……..

M&A under Competition Act (cont)M&A under Competition Act (cont)
 Procedure of making application by persons/Procedure of making application by persons/
enterprises which propose to enter into combination:enterprises which propose to enter into combination:
1.1. File Form I with prescribed fees. (Rs. 15, 00, 000).File Form I with prescribed fees. (Rs. 15, 00, 000).
2.2. File Form II with prescribed fees (Rs. 50, 00, 000) and FormFile Form II with prescribed fees (Rs. 50, 00, 000) and Form
III if necessaryIII if necessary
3.3. Once, forms are submitted, CCI will deal with the notice inOnce, forms are submitted, CCI will deal with the notice in
accordance with the power conferred upon it by the provisionsaccordance with the power conferred upon it by the provisions
of the Act.of the Act.
4.4. Considering the nature of combination and taking otherConsidering the nature of combination and taking other
factors into consideration, the CCI will pass an order as it mayfactors into consideration, the CCI will pass an order as it may
deem fit.deem fit.
5.5. Exemptions where notice is not requiredExemptions where notice is not required

M&A under Competition Act (Cont).M&A under Competition Act (Cont).
 Procedure followed by the commission while dealingProcedure followed by the commission while dealing
with inquiries and notices:with inquiries and notices:
1.1. CCI to conduct enquiry suo- moto orCCI to conduct enquiry suo- moto or by notice receivedby notice received
under section 6(2) of the Actunder section 6(2) of the Act
2.2. Power of CCI to inquire and pass necessary order forPower of CCI to inquire and pass necessary order for aa
combination has taken place outside India or any party tocombination has taken place outside India or any party to
combination is outside Indiacombination is outside India
3.3. Factors to be taken into consideration by CCI whileFactors to be taken into consideration by CCI while
determining appreciable adverse effect on competition.determining appreciable adverse effect on competition.
4.4. CCI may pass order as it deems fitCCI may pass order as it deems fit
5.5. Order can be rectifiedOrder can be rectified
6.6. Order is appealableOrder is appealable

CONCLUSION:CONCLUSION:
““A journey of a thousand miles begins with aA journey of a thousand miles begins with a
single step.”single step.”
 One also needs to look into various other laws applicableOne also needs to look into various other laws applicable
to M&A such as Tax, Insider Trading Regulations, Listingto M&A such as Tax, Insider Trading Regulations, Listing
Agreement, FEMA etc, we could not cover due to timeAgreement, FEMA etc, we could not cover due to time
curtailment on this presentation.curtailment on this presentation.
 The exact time frame that the entire merger processThe exact time frame that the entire merger process
would involve will be known once it is tested after thewould involve will be known once it is tested after the
Tribunal is constituted and the rules implemented.Tribunal is constituted and the rules implemented.
 ““The people who get on in this world are the people whoThe people who get on in this world are the people who
get up and look for the circumstances they want and, ifget up and look for the circumstances they want and, if
they can't find them, make them.”they can't find them, make them.”
10/19/15

Corporate Legal
Practice
BY:BY:
HARSHUL SHAHHARSHUL SHAH
ADVOCATE & SOLICITORADVOCATE & SOLICITOR
Mob: +91 9867129866/ Tel: +91 022 26840267Mob: +91 9867129866/ Tel: +91 022 26840267
Email:Email: harshul.shah@corporatelegalpractice.comharshul.shah@corporatelegalpractice.com
Facebook: https://www.facebook.com/harshul1979Facebook: https://www.facebook.com/harshul1979
10/19/15

M&A under New Companies Act, 2013- 04.10.14 Final

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