Amalgamation, Merger, Acquisition & Takeover - Doing Business in India MA

8/8/2019 Amalgamation, Merger, Acquisition & Takeover - Doing Business in India MA

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AMALGAMATION, MERGER,AMALGAMATION, MERGER,

ACQUISITION & TAKEOVERACQUISITION & TAKEOVERIndian Institute of Foreign TradeIndian Institute of Foreign Trade

NEW DELHINEW DELHI

1616 thth APRIL 2005APRIL 2005

bybySAMEER RASTOGISAMEER RASTOGI

Advocate AdvocateInternational Corporate Legal ConsultantInternational Corporate Legal Consultant


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Procedure for Amalgamation / Merger Procedure for Amalgamation / Merger

FF orward promptly notice and proceedings of meeting to SE sorward promptly notice and proceedings of meeting to SE s

RReport the result of the meeting to Courteport the result of the meeting to Court

MMove Court for approval of the scheme by filing petition in 7 daysove Court for approval of the scheme by filing petition in 7 days

in F orm 40in F orm 40

A Advertise the date of hearing fixed by the courtdvertise the date of hearing fixed by the court

OOn receipt of Order from High Court, file it with RoC.n receipt of Order from High Court, file it with RoC.

PProceed on effecting the scheme amalgamation / merger asroceed on effecting the scheme amalgamation / merger asapproved by High Courtapproved by High Court


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SectionSection 391391 394394 ofof thethe CompaniesCompanies Act, Act, 19561956 dealsdealswithwith Compromises,Compromises, Arrangements Arrangements and andReconstructionsReconstructions and and otherother relatedrelated issuesissues throughthroughschemesschemes of of arrangementarrangement approvedapproved byby thethe HighHighCourtsCourts.. A A resolutionresolution to to approveapprove thethe schemescheme ofofarrangementarrangement has has toto bebe passedpassed byby thethe shareholdersshareholdersinin thethe generalgeneral meetingsmeetings. . TheThe shareholdersshareholders havehave totovotevote onon thethe resolutionsresolutions on on thethe schemesschemes of ofarrangementarrangement on on thethe basisbasis ofof thethe disclosuresdisclosures in in thethe

notice/explanatorynotice/explanatory statementstatement. . SectionSection 393393 ofof thetheCompaniesCompanies Act, Act, 19561956 specifiesspecifies thethe broadbroadparametersparameters of of thethe disclosuresdisclosures whichwhich shouldshould bebegivengiven toto thethe shareholdersshareholders / / creditors,creditors, forfor approvingapprovingaa schemescheme ofof arrangementarrangement. .

Amalgamation & Mergers Amalgamation & Mergers


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A mendment in the Companies Ac t, 1956 in year 2002 gave powersto National Company Law Tribunal to review and to allow anyc ompromise or arrangement, whi c h is proposed between ac ompany and its c reditors or any c lass of them or between ac ompany and its members or any c lass of them . H owever, be c auseof non formation of National Company Law Tribunal, these powers

still lie with H igh Courts and the parties c on c erned c an makeappli c ations to high c ourts .

I f the Creditors, Members present at a General meetingrepresenting three fourth of total number agree to any c ompromiseor arrangement, it be c omes binding on the rest of the members orc reditors provided the tribunal san c tions the c ompromise orarrangement .

The order made by Tribunal will c ome in to effe c t only after thefiling of c ertified c opy with the Registrar of Companies .

S ection 391S ection 391


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S ectionS ection 391391

Court s power under the section are very wide and has dis

cretion toallow any sort of arrangement between the c ompany and members .

Sc ope and ambit of the Jurisdi c tion of the Court:

The san c tioning c ourt has to see to it that all the requisitestatutory pro c edure for supporting any s c heme has beenc omplied with along with requisite meetings .

That the s c heme put up for san c tion of the c ourt is ba c ked up bythe requisite majority vote .

That the c on c erned meetings of the c reditors or members or any

c lass of them had the relevant material to enable the voters toarrive at an informed de c ision for approving the s c heme .

That the proposed s c heme is not found to be violative of anyprovision of law and is not c ontrary to publi c polic y.


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U nder this se c tion, the c ourt has power to supervise the c arrying out of the c ompromise or an arrangement; and

may, at the time of making su c h order or at any time thereafter,give su c h dire c tions in regard to any matter or make su c hmodific ations in the c ompromise or arrangement as it may c onsider

necessary for the proper working of the arrangement

.

I f the c ourt is of the view that a c ompromise /arrangement san c tioned under se c tion 391 c annot be worked satisfa c torily with orwithout modifi c ations, it may on it own motion or on the basis of anappli c ation made by an interested party may order winding up of the c ompany under se c tion 433 of the Ac t .

S ection 392S ection 392


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S ection 393S ection 393This se c tion pres c ribes the pro c edure required for c onvening the

meeting of the members or c reditors c alled under se c tion 391 .

The noti c e for the meeting should be sent along with a statement setting forth the terms of the c ompromise and or arrangement andexplaining its effe c t and in parti c ular, the statement must state allmaterial interest of the dire c tors, managing dire c tors of thec ompany, whether in their c apa c ity as su c h or as members orc reditors of the c ompany or otherwise .

W here the c ompromise or arrangement affe c ts the rights of debenture holders of the c ompany, the statement shall give the

information and explanation in respe c ts to the trustees of any deedfor se c uring the issue of the debentures as it is required to give inrespe c t of dire c tors .

A ny default in c omplying with the requirements under this se c tionmay lead to a fine of Rs . 50, 000 against the c on c erned offi c ial of the c ompany, who is found guilty .


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S ectionS ection 394394W here the c ourt is of the view that the proposed arrangement/s c heme is of

su c h nature that the s c heme is for the re c onstru c tion of any c ompany or for amalgamation of

any two or more c ompanies; and that under the s c heme the whole or any part of the undertaking property or

liabilities of any c on c erned c ompany is to be transferred to another c ompany;

the c ourt may make provision for all or any of the following matters .The transfer to Transferee Company of the property or liabilities of transferorc ompany .

The allotment or appropriation by the transferee c ompany of anyshares, debentures or other like interest in that c ompany whi c h,under the arrangement, are to be allotted or appropriated by that company to

.

The continuation of any legal pro c eeding against the transfereec ompany by the transferor c ompany .The dissolution, without winding up, of any transferor c ompany .The provisions for any dissenting persons . W ho are opposing su c hsc heme or any other matter, whi c h the c ourt deems fit .


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PROCEDURE (SAST,1997)PROCEDURE (SAST,1997)

RegReg--77::DisclosuureDisclosuure to to companycompany andand toto stockstockexchangeexchange by by anyany personperson whowho acquireacquire moremorethanthan 55%%,,1010%% or or 1414%% sharesshares

RegReg--1010 :: NONO acquirer acquirer shallshall acquireacquire 1515%% or or moremore sharesshares unlessunless suchsuch acquirer acquirer makesmakes a apublicpublic announcementannouncement to to acquireacquire sharesshares of of suchsuch companycompany as as per per SAST,SAST,19971997. .

Acquisitions & TakeoversAcquisitions & Takeovers


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PROCEDURE (SAST,1997).PROCEDURE (SAST,1997). continued continued

RegReg--1313 ::BeforeBefore makingmaking publicpublic announcementannouncementmerchantmerchant banker banker is is toto bebe appointedappointed

RegReg--1414 ::TimingTiming of of PublicPublic AnnouncementAnnouncement Offer Offer notnot later later thanthan 44 workingworking daysdays after after agreementagreement for for acquisitionacquisition of of sharesshares. .

RegReg--1515 :: PublicPublic AnnouncementAnnouncement of of offer offer toto bebe

mademade inin newspaper,newspaper, Hindi,Hindi, regionalregional andandmostlymostly tradedtraded areaarea. . PublicPublic AnnouncementAnnouncementshallshall bebe submittedsubmitted to to:: SEBISEBI throughthroughmerchantmerchant Banker Banker



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RegReg--1818 ::WithinWithin 1414 daysdays fromfrom thethe datedate of of PublicPublicAnnouncementAnnouncement draftdraft letter letter of of offer offer toto bebefiledfiled withwith SEBISEBI throughthrough MerchantMerchant Banker Banker. .

The letter of Offer to be dispatched toThe letter of Offer to be dispatched toshareshare- -holders not earlier than 21days.holders not earlier than 21days.

RegReg--1919 :: PublicPublic announcementannouncement shallshall specifyspecify a adatedate for for thethe purposepurpose of of determiningdetermining thethenamename of of thethe shareholder shareholder to to whomwhom Letter Letter of of Offer Offer willwill bebe sentsent shallshall notnot bebe later later thanthan 3030 thth

dayday. .



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RegReg--2121 :: MinimumMinimum number number of of sharesshares to to bebeacquiredacquired byby PublicPublic offer offer- -2020%%..

If If thethe publicpublic shareholdingshareholding goesgoes belowbelow 1010%%,,delistingdelisting of of securitiessecurities guidelinesguidelines willwill applyapply. .

RegReg--2828 :: ESCROWESCROW- - TheThe acquirer acquirer byby wayway of of securitysecurity performanceperformance of of hishis obligation,obligation,

depositdeposit in in ESCROWESCROW accountaccount sumsum asas under under For For considerationconsideration (C) (C) payablepayable under under thethe publicpublic offer offer uptoupto andand includingincluding

C=100100 cr cr -- 2525%% uptoupto RsRs..100100 cr cr &&1010%% thereafter thereafter ..



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RegReg--2929:: PAYMENTPAYMENT OFOF CONSIDERATIONCONSIDERATION77daysdays fromfrom closureclosure of of offer offer openopen specialspecialaccountaccount withwith Banker Banker toto anan issueissue andand

depositdeposit sumsum asas wouldwould together together withwith 9090%% of of lyinglying inin ESCROWESCROW makemake upup entireentire sumsum duedueandand payablepayable to to shareholdersshareholders ..


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Amalgamation, Merger, Acquisition & Takeover - Doing Business in India MA