Procedure for Amalgamation of Companies (Section 237)
Updated: Oct 7, 2022
What is the Amalgamation of Companies?
Amalgamation is a combination of two or more entities forming into a new entity. It is different from merger as neither of the entities involved survives as a legal entity but there is formation of an entirely new entity. Assets and liabilities of both the entities are combined into this one entity. For amalgamation, a company can subject itself from refraining to amalgamate with other company; however, this must be conducted in a manner which is not prejudicial to the interest of its member or to the public interest. A scheme of amalgamation is beneficial to every shareholders and creditors of the company and also the welfare and interest of public is taken into utmost consideration before entering into such scheme.
Section 237: Procedure for Amalgamation of Companies
[Power of Central Government to Provide for Amalgamation of Companies in Public Interest]
Central Government may by order provide for amalgamation in public interest:
Where the Central Government is satisfied that it is essential in the public interest that two or more companies should amalgamate.
The Central Government may by order notified in the Official Gazette, provide for the amalgamation of those companies into single company.
With such constitution, with such property, powers, rights, interests, authorities and privileges, and with such liabilities and duties and obligations as may be specified in the order.
Continuation by or against the transferee company of any legal proceedings:
The order may also provide for the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company and such consequential, incidental and supplemental provisions as may, in the opinion of the Central Government, be necessary to give effect to the amalgamation.
Same Interest Rights or Compensation:
Every member including a debenture holder, of each of the transferor companies before the amalgamation shall have the same interest in or rights against the transferee company as he has in the company of which he was originally a member or creditor.
In case the interest or rights of such creditor in or against the transferee company are less than his interest in or rights against the original company, he shall be entitled to compensation to that extent, which shall be assessed by such authority.
Every such assessment shall be published in the Official Gazette, and the compensation so assessed shall be paid to the creditor concerned by the transferee company.
Appeal by aggrieved person on assessment of compensation:
Any person aggrieved by any assessment of compensation made by the prescribed authority under sub-section (3).
Within a period of thirty days from the date of publication of such assessment in the Official Gazette, prefer an appeal to the Tribunal and thereupon the assessment of the compensation shall be made by the Tribunal.
Requirements for passing an order:
A copy of the proposed order has been sent in draft to each of the companies concerned.
The time for preferring an appeal under sub-section (4) has expired, or where any such appeal has been preferred, the appeal has been finally disposed off.
The Central Government has given time limit of minimum 2 months to each of the companies for sending their modifications or draft order.
Copies to be presented to parliament:
The copies of every order made under this section shall be laid before House of Parliament.