Fast Track Merger Process (Section 233)

Introduction

This provision suggests a simplified procedure for the merger or amalgamation of two or more companies including small companies, holding and subsidiary companies, and such other classes of companies as may be prescribed.

Section 233 of the Companies Act 2013

This provision of The Companies Act, 2013 suggests the concept of the Fast Track Merger Process which is a comparatively simpler procedure for merger or amalgamation of certain classes of companies which including small companies, and holding and wholly-owned subsidiary companies.

Advantages of Fast Track Merger Process:

1. Simple and fast procedure.

2. No judicial approval is required.

3. Separate procedures for certain small companies will ease the burden of the Tribunal.

4. Less form filling formalities.

5. No role of Nation Company Law Tribunal.

6. No need to get a special audit conducted for the transferor company.

7. No need for the issuance of public advertisements.

8. Economical and less time-consuming.

Procedure under the Fast Track Mergers & Amalgamation

Step 1:

• Conduct a meeting of the Board of Directors for approval of Fast Track Merger and draft Scheme of the merger.

• The company invites objections/ suggestions in Form CAA 9 from ROC, the Official Liquidator, and the person affected by the scheme within 30 days

Step 2:

• Conduct a general meeting of all the members of the company. The scheme shall be approved by 90% of the members.

• Each of the companies is to file a declaration of solvency in Form CAA 10 with the ROC of the place where the registered office of the company is situated along with a copy of board resolution, statement of assets and liabilities, and auditor's report on the statement of assets and liabilities.

Step 3:

• Conduct a general meeting of all the creditors of the company. The scheme shall be approved by all the creditors by 9/10th value.

• A copy of approval shall be sent by the transferee company within 7 days after the conclusion of the meeting.

Sept 4:

• A report of the result of the meeting in Form CAA 11 with the Central Government for their approval as well as to ROC, or the Official Liquidator for any objection or suggestion.

• The registrar or the Official Liquidator will have to file an objection or suggestion within 30 days directly to the Central government.

Step 5:

• If no objection is raised by the ROC or the Official Liquidator, the scheme will be registered by the Central Government and a confirmation will be issued to the companies.

Step 6:

• In consideration of the objection and suggestions (if any), if the government is of the opinion that the scheme is not in the public interest or in creditor interest then the government will refer the company to the tribunal (Scheme under Section 232) in Form CAA 13 and such application to the tribunal is to be made within 60 days.

Note: The whole motive of Section 233 is to make the process of merger or amalgamation fast, when the tribunal is involved then the procedure of Section 232 with Section 230 will be followed for such merger or amalgamation.

Post Merger Effects

The registration of the scheme shall have the following effects:

1. Transfer of property or liabilities of the transferor company to the transferee company.

2. The charges on the property of the transferor company shall be applicable and enforceable as if the charges were on the property of the transferee company.

3. Legal proceedings by or against the transferor company pending before any court of law shall be continued by or against the transferee company.

4. Surrender of PAN, IEC, GST, ESI, PF of the transferor company to the concerned Authorities.