FAST TRACK MERGER
WHAT IS THE FAST TRACK MERGER?
Fast Track Merger Process which introduces a simple and quickly procedure for mergers and amalgamations of certain classes of companies.
ELIGIBLE COMPANY FOR FAST TRACK MERGER
A scheme of merger or amalgamation under section 233 of the Act may be entered into between any of the following class of companies-
1. Two or more start-up companies; or
2. One or more start-up company with one or more Small Company;
3. Merger between two or more Small Companies;
4. Merger between a Holding Company and its Wholly-owned Subsidiary Company.
SMALL COMPANIES:
1. Small Company" means a company other than a public company whoes paid up share capital is upto Rs. 4cr and turnover is upto 40crore.
Above Provision shall Not apply to—
- a holding company or a subsidiary company or
- a company registered under section 8; or
- a company or body corporate governed by any special Act
PROCESS OF FAST TRACK MERGERS
In the merger process, there are two types of companies i.e. the transferor company and the transferee company.
Transferor company: A transferor company is the one that is amalgamated into the other company.
Transferee company: A transferee company, on the other hand, refers to the company into which a transferor company is amalgamated.
STEPS INVOLVED IN A FAST TRACK MERGER
The following steps are involved in a Fast Track Merger process:
A Board meeting is convened for approving the following
- To approve the Scheme of Merger
- Authorize a Director/Company Secretary to make an application to the Regional Director.r
- To fix, time, date and place of meeting of the shareholders.
- To appoint valuer for taking certificate for Fair value of share under section 247 of the Act.
- To approve latest financial statement, auditor’s report and supplementary financial statements in case the last financial statement is more than 6 months before the date of Board Meeting.
- Certificate from Statutory Auditor that the accounting treatment for the proposed Scheme is as per the Accounting Standards.
- To approve the Declaration of Solvency by the Directors.
SCHEME OF MERGER SHOULD HAVE THE FOLLOWING DETAILS
The following steps are involved in SCHEME OF MERGER:
- Name of the Parties, companies involved, Appointed Date and Effective Date.
- Share Exchange Ratio
- Details of promoters, Directors and KMPs
- Valuation Report
- Details of Capital or Debt restructuring
- Amount due to the unsecured creditors.
- Investigation or proceedings pending, if any against the company
- Disclosure of effect of merger on various KMPs and other Directors/Promoters, if applicable.
- Accounting treatment clause as per Accounting Standard 14.
- Clause relating to conduct of business by the Transferor Company as a Trustee for and on behalf of the Transferee.
- Treatment of employees and workers and other contract workers.
- Authorized Capital and consolidation of the same upon completion of merger.
- Effect of Tax and its consequences.
- Date of Board Meetings, Meeting of Member and creditors for approval and its validity.
- Dissolution of Transferor Company clause.
- Clause stating that the Scheme is conditional and will be effective only after approval.
- Provisions for modification.
- Effect of non-receipt of approval of the Scheme.
- Documents to be listed for Inspection.
- Cost of Merger.
- Any other matter to be considered for merger
- Any other matter to be considered for merger.
NOTICE IN FORM CAA-9
Notice of the proposed scheme shall be sent to ROC, official liquidator or persons affected by the scheme in form CAA-9
ROC & official liquidator may provide their objection and suggestion within 30 days from the date of issue CAA-9.
DECLARATION OF SOLVENCY
Both companies shall require to file declaration of solvency in form no. CAA-10 before the meeting of shareholder & creditor.
NOTICE OF GENERAL MEETING
Notice of the meeting of shareholder and creditor shall be accompanied
- Matter mentioned in section 230(3)
- Declaration of solvency
- A copy of scheme
GENERAL MEETING FOR APPROVAL OF SCHEME-
company shall require to conduct extra ordinary general meeting
and in meeting considered the following matter-
- declaration of solvency
- objection & suggestion received from ROC & OL
- approval of scheme
APPROVAL OF THE SCHEME-
The scheme must be approved by the following by shareholder and creditor.
- Shareholders-> by at least 90% of the total number of shares
- • Creditors - majority representing nine-tenths in value of the creditors in the meeting or otherwise approved in writing.
FILE COPY OF APPROVED SCHEME
Transferee company shall file copy of approved scheme along with report of result (Form no. CAA-11) of the meeting with central government, ROC and official liquidator within 7 days after the conclusion of the meeting
MODE OF SENDING
Copy of the scheme shall also be filed, along with Form No. CAA.11 with
- the registrar of companies in form no. GNL-1
- the official liquidator through hand delivery or by registered post or speed post.
NO OBJECTION OR SUGGESTION IS RECEIVED
If there is a no objection or suggestion is received within 30 days of receipt of copy of scheme from ROC & OL and the CG is opinion that the scheme is in public interest or in the interest of creditor
it may, within a period of 15 days after the expiry of said 30 days, issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA.12:
Provided that if the Central Government does not issue the confirmation order within a period of 60 days of the receipt of it shall be deemed that it has no objection to the scheme and a confirmation order shall be issued accordingly.
OBJECTIONS OR SUGGESTIONS ARE RECEIVED
Where objections or suggestions are received within a period of thirty days of receipt of copy of scheme from the Registrar of Companies or Official Liquidator or both by the Central Government and –
- such objections or suggestions of Registrar of Companies or Official Liquidator are not sustainable and
the Central Government is of the opinion that the scheme is in the public interest or in the interest of creditors, it may within a period of 30 days after expiry of thirty days referred to above, issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA.12.
- the Central Government is of the opinion, whether on the basis of such objections or otherwise, that the scheme is not in the public interest or in the interest of creditors, it may within sixty days of the receipt of the scheme file an application before the NCLT in Form No. CAA.13 stating the objections or opinion and requesting that NCLT may consider the scheme under section 232 of the Act:
- NOTE-
if the CG does not issue a confirmation order under clause (a) or does not file any application under clause (b) within a period of sixty days of the receipt of the scheme it shall be deemed that it has no objection to the scheme and a confirmation order shall be issued accordingly.
CONFORMATION ORDER(CAA-12)
Company shall require to file conformation order in form no. INC-28 With ROC within 30 days from the date of receipt of conformation order
