Comprimise, Arrangement and Amalgamation Notes

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  • 8/18/2019 Comprimise, Arrangement and Amalgamation Notes

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    Companies Act 2013Chapter XV Section (230 to 240)

    Comprimises, Arrangement and Amalgamations

    Section 230 -231 Compromise or ArrangementsSection 232 Mergers and Amalgamation including

    demergersSection 233 Amalgamation of small companiesSection 234 Amalgamation with Foreign CompanySection 23 Ac!uisition of shares of dissenting

    shareholdersSection 23" #urchase of minority shareholdingSection 23$ #ower of Central %o&ernment to pro&ide

    for amalgamation of companies in #u'licinterest

    Section 23( )egistration of offer of schemes in&ol&ingtransfer of shares

    Section 23* #reser&ation of 'oo+ds and papers ofamalgamated companies

    Section 240 ,ia'ility of fficers in respect of offencescommitted prior to merger. amalgamation

    1. Meaning of Arrangement

    Arrangement includes a reorganisation of the company/s Share capital 'y the consolidation of shares of different classes or 'y the di&ision of shares into shares of different classes or 'y

    'oth of these methods t also include ta+eo&er offer made in the manner prescri'ed underS a+eo&er code

    Section 230 -231 Scheme of compromise or arrangement

    1 he company proposing a scheme of compromise or arrangement shall file anapplication to the ri'unal under Sec 230 Su' 5 Section 617 he application for compromise

    or arrangement to 'e accompanied 'y an affida&it disclosing

    a All material facts relating to the company

    ' ,atest financial statements

    c ,atest auditor/s report on the accounts of the company

    d #endency of any in&estigation or proceedings against company

    e )eduction of share capital if any

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    2 Corporate de!t restr"ct"ring#

    8efinition9 t is a process that allows a pri&ate or pu'lic company. or a so&ereign entity facing

    cash flow pro'lems and financial distress to reduce and renegotiate its delin!uent de'ts inorder to impro&e or restore li!uidity so that it can continue its operations

    :ample9 ;ingfisher de't9 Consortium of 14 'an+s that ha&e a )s $.000 crore e:posure to thetrou'led airline 8ue to continuous loss year on year. the company was not a'le to ser&ice itsde't premium to the mar+et price of ;ingfisher Airlines/ stoc+ Following this. 'an+s own 23 21> of the airline/s e!uity he promoter. too.con&erted )s "4( crore of de't into e!uity Apart from this. the 'an+ers also stretched the

    period of repayment of loans to nine years with a two-year moratorium. cut the interest rates.and sanctioned a fresh loan

    n the case of corporate de't restructuring the restricting proposal should 'e appro&ed 'y notless than $ > of the secured creditors in &alue he following are the documents to 'esu'mitted 'y the company to the ri'unal

    a Creditors responsi'ility statement in the prescri'ed form

    ' Safeguards for the protection of other secured and unsecured creditors

    c )eport 'y the Auditor confirming the li!uidity position of the company postrestructuring

    d Statement to the effect of adopting C8) guidelines specified 'y the )eser&e an+ ofndia

    e A &aluation report in respect of the shares and the property and all assets. tangi'le andintangi'le mo&a'le and immo&a'le of the company 'y a registered &aluer

    3 he ri'unal shall direct the company to call for meeting of the creditors

    4 he company shall send the notice of such meeting to all the creditors of class ofcreditors and de'enture holders he notice shall 'e accompanied 'y a statement disclosingthe following details

    a 8etails of compromise or arrangement

    ' Copy of the &aluation report

    c ;ey managerial personnel

    d #romoters and non-promoter mem'erse he effect of compromise on any material interests of the 8irectors of the company

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    he copy of notice and other documents shall also 'e placed on the we'site of the companyand shall 'e sent to the Securities and :change oard and stoc+ e:changes where thesecurities of the companies are listed

    he mem'ers who recei&ed the notice can &ote in the meetings either themsel&es orthrough pro:ies or 'y postal 'allot to the adopting of the compromise or arrangement withinone month from the date of receipt of such notice

    $ho can o!%ect to the compromise or arrangement&

    Any o'?ection to the compromise or arrangement shall 'e made only 'y persons holding notless than 10 > of the shareholding or ha&ing outstanding de't amounting to not less than >of the total outstanding de't as per the latest audited financial statement

    " he company shall send the notice under Su' Section 637 along with all the documents to

    the Central %o&ernment. income ta:. ) . S . the )egistrar. the respecti&e stoc+e:changes. the fficial ,i!uidator. Competition Commission of ndia and other Sectoral)egulators

    $ he company conducts the meeting of creditors in pursuance of su' section 617 Ma?orityof persons representing $ > 63@47 in &alue of the creditors or class of creditors or mem'ersor class of mem'ers as the case may 'e. &oting in person or 'y pro:y or 'y postal 'allot mustagree to any compromise or arrangement

    ( =o compromise or arrangement shall 'e sanctioned 'y the ri'unal unless a certificate

    'y the company/s auditor has 'een filed with the ri'unal to the effect that is in conformitywith the accounting standards prescri'ed under Section 133

    )ecap

    Application to ri'unal

    =otice to 'e sent to all the Creditors

    =otice to 'e placed on the we'site

    oting of Creditors in meeting or 'y postal 'allot

    )aising of o'?ection to the scheme

    =otice to 'e sent to other authorities

    Auditors certificate with regard to accounting treatment

    rder of ri'unal

    Filing of ri'unal/s order with )egistrar

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    'erger or Amalgamation of small companies

    8efinition of small company9

    Small company9 A small company has 'een defined as a company. other than a pu'lic

    company

    6i7 #aid-up share capital of which does not e:ceed 0 la+h =) or such higher amount as may 'e prescri'ed which shall not 'e more than fi&e crore =)

    6ii7 urno&er of which as per its last profit-and-loss account does not e:ceed two crore =) or such higher amount as may 'e prescri'ed which shall not 'e more than 20 crore =)9

    #rocedures to 'e followed 'y the small companies for Merger or Amalgamation

    1 =otice of the proposed scheme in&iting o'?ections or suggestions to the )egistrar and

    fficial ,i!uidator to 'e su'mitted 'y the merging companies

    2 he scheme should 'e appro&ed 'y *0 > of the shareholders in the general meeting

    3 ach of the companies shall file a declaration of sol&ency with the )egistrar

    4 he scheme should 'e appro&ed 'y ma?ority representing *@10 in &alue of the creditorsor class of creditors of respecti&e companies

    Can the Creditors meeting !e dispensed&

    A creditors meeting can 'e dispensed if Creditors with an outstanding de't of *0 > in &alueagree and confirm 'y way of an affida&it to the scheme of compromise or arrangement

    issenting Shareholder

    he e:pression Bdissenting shareholder includes a shareholder who has not assented to thescheme or contract and any shareholder who has failed or refused to transfer his shares to thetransferee company in accordance with the scheme or contract

    he Section prescri'es the manner in which the transferee company can ac!uire shares of theshareholders dissenting from the scheme or contract as appro&ed 'y the ma?ority shareholdersholding not less than *@10 in &alue of the shares whose transfer is in&ol&ed

    he transferee company shall send a copy of the notice to the transferor company togetherwith an instrument of transfer to 'e e:ecuted and pay the consideration representing the price

    paya'le 'y the transferee company for the shares Such consideration recei&ed 'y thetransferor company shall 'e paid into separate 'an+ account and shall 'e dis'ursed to theentitled shareholders

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    ast *rac+ 'ergers

    Section 233 ena'les fast trac+ merger without the appro&al of =C, 'etween

    1 wo or more small companies

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    erfindahl irschman nde ( )