M&A Magazine

Section 232(6) of the Companies Act, 2013 states that the appointed date with respect to a scheme of merger and amalgamation means the date from which the scheme becomes effective. That means the appointed date and effective date of the scheme has to be one and same.  Since there needed some clarity on the subject, the Ministry of Corporate Affairs vide its General Circular dated - 21.08.2019 has issued clarification on the following issues: Whether it is mandatory to indicate a specific calendar date as 'appointed date' in the schemes referred to in the section. Whether the acquisition date' for the purpose of Ind-AS 103 (Business combinations) would be the 'appointed date' referred to in section 232(6). We previously looked at the importance of Appointed Date and Effective Date . Clarification provided by the Ministry Appointed date can be specific calendar date or Event based. If the appointed date is specific calendar date more than one year p...

An equity share with differential rights is like an ordinary equity share, but it provides more or fewer voting rights to the shareholder. The difference in voting rights can be achieved by increasing or reducing the degree of voting power. Companies Act, 2013 allows shares with superior and inferior voting rights. For any company planning to get listed on the stock exchanges, SEBI will allow it to continue to have DVR with superior voting rights only to technology driven companies, obviously subject to certain conditions as discussed later in the article. Issue of DVRs under Companies Act, 2013 Section 43 of the Companies Act, 2013 provides that Equity share capital can be – with voting rights or with differential voting rights as to dividend, voting or otherwise.   As regards issue of fresh DVR, a company is required to comply with the conditions contained in Rule 4 of the Companies (Share Capital & Debentures) Rules, 2014 . Pursuant to the notification dated 5 t...

Provisions of Compromises, Arrangements, Amalgamation and Reconstruction are dealt in the Companies Act, 2013 under sections 230-234. Amalgamations are also treated in the LLP Act. 2008. But there is no explicit mentions for dealing with merger of LLP into Company or other way around. We look at the decision of NCLT Chennai Bench which shall set a precedent in cases of merging of LLP into companies. M/s Real Image LLP vs. M/s Qube Cinema Technologies Pvt Ltd, NCLT Chennai Bench In a merger filing made before the Chennai Bench of NCLT, Judicial Member CH. Sharief Tariq was tasked with just one question, “...whether a Limited Liability Partnership (LLP) can be allowed to amalgamate with a private limited company under a scheme of amalgamation filed before the NCLT” Decision of NCLT, Chennai Bench shall set a precedent for such M&As going ahead. In answering the above question, Judicial Member observed that the legislative intent behind enacting both the LLP Act, 200...

Section 66 of the Companies Act, 2013 allows companies to reduce their share capital. The scheme of Reduction of share capital is undertaken by companies in the following manner: Company can extinguish or reduce its liability on its unpaid share capital. Company can extinguish or reduce its liability on its paid share capital by cancelling it which is lost or which is not representing its available assets. Company can even pay off to its shareholders excess paid-up capital received from them if that is not required to the Company. Companies opt for reduction of their share capital either to create/ increase distributable reserves for them or to reduce their accumulated losses. Sagar Soya Products Limited , a company listed on Bombay Stock Exchange has proposed reduction of its share capital under section 66 of the Act. The present equity paid up share capital of the Company is Rs. 5,85,16,890 divided into 5851689 equity shares of Rs. 10/- each. The Company is into the bus...

Capgemini India Private Limited (Petitioner Company) has filed the Petition seeking sanction of the Scheme of Arrangement (hereinafter referred to as “the Scheme”) with its Equity Shareholders (hereinafter referred to as “the Shareholders”), in accordance with the provisions of Section 391 read with Sections 100 to 103 of the Companies Act,1956 (hereinafter referred to as “the Act”) from the Court. As per the Scheme, the Petitioner Company is proposing to purchase not more than 2,21,231 Equity Shares of the Company either in physical form or dematerialised form of Rs. 100/- each fully paid up, representing 30% of the issued, subscribed and paid-up share capital. There is no compulsory purchase; an option is given to the equity shareholders under the Scheme. The manner and procedure of purchasing the equity shares are provided in the Scheme. Objection raised by Regional Director (RD): According to RD the buyback of shares must be effected only under Section 77A of the Com...

The Companies Act 2013 (New Act) , which was substantially made effective from April 1, 2014, has the potential and capability to be a historic milestone for implementing Mergers & Amalgamations (M&A) . So far, the provisions relating to M&A under the New Act are yet to be notified. These are pragmatic reforms for M&A under the New Act, which could make the process easier, faster and cleaner for companies involved in M&A. Some of the highlights include fast track mergers, mergers between Indian Companies and foreign companies and, setting up of National Company Law Tribunal (NCLT) to hear and decide on M&A proposals, cutting down on the probability and scope of objections to M&A’s and easier as well as wider participation of shareholders through postal ballot approval. Chapter XV of the New Act deals with “Compromises, Arrangements, and Amalgamations”, and consolidates the applicable provisions and related issues. The Old Act required M&A to be ...