Chapter 12A –An Overview of Corporate Re-Organisation -Merger and Amalgamation of Companies

Company Law
Compromise:
A compromise means settlement or adjustment of claims in dispute by mutual concessions.

Arrangement
Arrangement includes a reorganization of share capital of the Company by consolidation of shares of different classes
or division of shares into shares of different classes or by both of these methods.

Reconstruction
Reconstruction’, inter alia, indicates the process which involves
(i) The transfer of undertakings of an existing company to another company, usually incorporated for the
purpose. The old company ceases to exist. However, all the assets might not pass to the new company;
(ii) The carrying on of substantially the same business by the same persons;
(iii) The rights of the shareholders in the old company are satisfied by their being allotted share in the new
company.

Amalgamation
Amalgamation is the blending of two or more undertakings (companies) into one undertaking, the shareholders of
each blending undertaking becoming substantially the shareholders of the other company which holds blended
undertakings.

Merger
Merger is a form of amalgamation where all the properties and liabilities of transferor company get merged with the
properties and liabilities of the transferee company leaving behind nothing with the transferor company except its
name, which also gets removed through the process of law. In reality, companies do not merge; only the assets and
liability merge.

Reverse Merger
Reverse Merger is the opposite of Merger. No clear definition of reverse merger has been given in the Companies Act
nor the term has been precisely defined by the Indian Courts. Reserve Merger represents a case where the loss making
company or less profit earning company extends its embracing arms to the profitable company and, in turn, absorbs it
in its fold.

Binding
The sanctioned scheme would be binding on all the concerned parties. However, in certain circumstances, the tribunal
shall not sanction a scheme of compromise and arrangement.

No Objection Certificate
In a scheme of compromise or arrangement, the tribunal is bound to seek a report of Registrar of Companies as well as
a no objection certificate from the Income Tax Authority in order to ensure that the affairs of the Company have not
been conducted in a prejudicial manner.

Explanatory Statement
An explanatory statement, as provided for in the act, would be attached to every notice calling the meeting.

CS Executive – Company Law CS Pooja Anand

Commerce Insights, Kanchan Palace, East Boring Canal Road, In front of Panchmukhi Hanuman Mandir | Contact: +91 8340274459
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Contact No.: +91 919968892

Supervise the Scheme

The Tribunal has the power to supervise the implementation of the scheme and to sanction modification of the terms
of the scheme. While sanctioning the scheme; the Tribunal also has the power to order winding up.

Cross Border Mergers

Section 234(2) states that subject to the provisions of any other law of the time being in force, a foreign company, may
with the prior approval of the Reserve Bank of India, merge into a company registered under this Act of vice versa and
the terms of conditions of the scheme of merger may provide, among other things, for the payment of consideration to
the shareholders of the merging company in cash or in Depository Receipts or partly in cash and partly in Depository
Receipts, as the case may be, as per the scheme to be drawn up for the purpose.

CS Executive – Company Law CS Pooja Anand

Commerce Insights, Kanchan Palace, East Boring Canal Road, In front of Panchmukhi Hanuman Mandir | Contact: +91 91996 88892