AMALAGAMATION

The term amalgamation is not defined in companies act 2013

The income tax act define its term amalgamation in income tax section 2(1B) Meaning of
"amalgamation” under the Income-tax Act [Sec. 2(IB)]- For the purpose of the 516.me-tax Act,
amalgamation of companies means either merger of one or more companies with another
company or the merger of two or more companies to form one company.

Conditions for amalgamation .

Condition 1 All the properties of the amalgamating company immediately before the
amalgamation should become the property of the amalgamated company by virtue of the
amalgamation .

Condition 2 All liabilities of the amalgamating company immediately before the amalgamation
should become the liabilities of the amalgamated company by virtue of the amalgamation

Condition 3 Shareholders holding not less than three-fourths (in value) of the shares in the
amalgamating company (other than shares already held by the amalgamated company or by its
nominee) should become shareholders of the amalgamated company by virtue of the
amalgamation.

1. Ion Exchange (India) Ltd. In re, (2001) 105 Comp Cases 115 (Bom):
○ Justice Dhananjay Y Chandrachud emphasized that courts should not impede
corporate restructuring and should respect the commercial wisdom of those
managing the restructuring process.
2. Miheer H. Mafatlal vs. Mafatlal Industries Ltd. Supreme Court, 11.09.1996 (JT
1996 (8) 205):
○ The Supreme Court ruled that the judiciary should ensure procedural compliance
and fairness without delving into the commercial merits of the scheme, respecting
the informed decisions made by the majority of stakeholders.
Merger

A merger is a business restructuring technique that allows two companies to merge and
operate as one legal entity. The companies that agree to merge are usually comparable
concerning the scope and size of activities.

Different Types of Mergers

There are several types of mergers which are as follows:

Vertical Merger

Whenever the merging and merged companies run in the same type of business but at
distinct levels of the supply chain, this is known as a vertical merger. The main reason
for this is to obtain economies of scale.

Congeneric Merger

It’s a form of a merger in which two companies operate in the same or related industry
or marketplaces but don’t sell the same items. These companies usually merge to boost
market share and extend product lines since they share common distribution networks,
production methods, or overlapping technology, among other things.

Triangular or Reverse Merger

A merger in which a parent company combines with a subsidiary or a profitable

company merges with a losing one. A triangular merger is another name for it.

Horizontal Merger
Whenever a merging and a merged company are in the same line of business and
supply chain level, they are almost always rivals. This type of merger is called a
horizontal merger. The merger is usually done to expand the client base, increase
shares in the market, and market strength, among other things.

Conglomerate Merger

The merger of companies that operate in diverse industries. This type of merger occurs
to diversify and disperse risk in the event that the current firm is not profitable.

JOINT VENTURE

Joint Venture means a contractual arrangement between two parties for the joint control of the
company assets and collectively they try to achieve their economic goal.

In Legal Terms, Joint Venture means:

A joint arrangement, entered into in writing, whereby the parties that have joint control of the
arrangement, have rights to the net assets of the arrangement.

TYPES OF JOINT VENTURES

1.Project based joint venture

2.Vertical joint venture
3.Horizontal joint venture
4.Function Based joint venture

1.Project based joint venture

This type of joint venture where the corporation enter into agreement to accomplish a particular task
that can be anything such as, execution of any particular project or for a specific service that is to be
offered together.

2. Function based joint venture

This is a type of joint venture where is the business entities common together in an agreement to mutually
benefit, that is, mutual on the account of synergy which is in terms of functional expertise in certain areas,
which together can enable them to work in an effective and efficient manner.
3. Vertical Joint Venture

This is the type of joint venture where the transaction between the buyers and the suppliers takes place .
In such joint ventures normally the maximum gain captured by the supplier side parties while buyer side
parties only get limited games.

4. Horizontal joint venture

This type of joint venture where the companies are the direct competitors of each other and are selling
similar products. They come together in a joint venture to create an output that can be sold to their
customers as well as to the competitor’s customers at the same time .

Types of a joint venture in India

JVs in India can be of two types:

Contractual Joint Venture

This is the type of joint venture that can be used when the company is not in need of a detached legal
entity or it is not feasible for the company to create one.

Equity-Based Joint Venture

Here the legal entity address independent is created when there is an agreement of two or more parties.

For this entity that is created independently, the associated parties agree to provide resources or money as
their contribution towards the assets or capital to the corporate identity

Examples- Hindustan Aeronautics Ltd, Vistara, Mahindra Renault Ltd., ICIC Lombard, ICIC prudential
life insurance company Ltd.

Law governing the joint ventures in India

There are no separate laws for Joint ventures in India.

Contractual Joint Venture is governed by the Partnership Act, 1932 because it is like a partnership that is
binding by the legal agreement no separate Legal Entity is formed.

Equity-based Joint Ventures are regulated by the Companies Act 2013 because a new legal entity is
formed which are either Public or Private Sector companies.
Some other laws by which Joint Ventures in India are regulated:
● Competition Act, 2002.
● Foreign Trade (Development and Regulation) Act, 1992.
● Industrial Policy and Procedure Policy for Foreign Investment Contract Act. Foreign Exchange
Management Act.
● 1999 SEBI Guidelines, Regulations, Notifications & Circulars.
● Reserve Bank of India (RBI) Guidelines, Regulations, Notifications & Circulars.

Who can set up a joint venture?

A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which
are prohibited.

A company, trust, and partnership firm incorporated outside India and owned and controlled by NRIs can
invest in India with the special dispensation as available to NRIs under the FDI Policy

Foreign Portfolio Investors (FPI) may make investments in the manner and subject to the terms and
conditions specified in Schedule II of Foreign Exchange Management (Non-Debt Instruments) Rules,
2019.

Foreign Investment is permitted under the automatic route in Limited Liability Partnership (LLPs)
operating in sectors/activities where 100% FDI is allowed through the automatic route and there are no
FDI-linked performance conditions.

How to set up a joint venture

As an Indian company:
For registration and incorporation, an application has to be filed with the Registrar of Companies (ROC).
Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian
laws and regulations as applicable to other domestic Indian companies.

Limited Liability Partnership:

To register an Indian LLP, you need to first apply for a Designated Partner Identification Number
(DPIN), which can be done by filing eForm for acquiring the DIN or DPIN.
Then you would then need to acquire your Digital Signature Certificate and register the same on the
portal. Thereafter, you need to get the LLP name approved by the Ministry. Once the LLP name is
approved, you can register the LLP by filing the incorporation form.

As a foreign company:

Foreign Companies can set up their operations in India through

● Liaison Office/Representative Office
● Project Office
● Branch Office
Such offices can undertake any permitted activities. Companies have to register themselves with the
Registrar of Companies (ROC) within 30 days of setting up a place of business in India.

Liaison Office/Representative Office:

The liaison office acts as a channel of communication between the principal place of business or head
office and entities in India.

Approval for establishing a liaison office in India is granted by the Reserve Bank of India (RBI).

Project Office:
Foreign Companies planning to execute specific projects in India can set up temporary project/site offices
in India. RBI has now granted general permission to foreign entities to establish Project Offices subject to
specified conditions.

Branch Office:
Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch
Offices in India for Exporting and Importing goods, carrying out research work, representing a parent
company, Etc.

A branch office is not allowed to carry out manufacturing activities on its own but is permitted to
subcontract these to an Indian manufacturer.

Liabilities in Joint Ventures:

Under Partnership Act, 1932:
Each partner is liable for all acts of the business committed when he is a partner together with all the
other partners and even separately.

A retiring partner may discharge his liability to any third party before his retirement by arranging for him
and that third party.

The partner will be held liable for every act done by the firm before his retirement notice becomes public.
The firm is not dissolved by the death of a partner, the estate of a deceased partner is not liable
for any act of the firm done after his death.

All the parties are liable for every act done by the firm before the dissolution notice becomes
public.

Except for the partner who dies, or who is bankrupt, or of a partner who, not having been known
to the person dealing with the firm to be a partner, or retires from the firm.

The partner after the dissolution of a partnership may carry the unfinished business to finish it.

Provided that the firm is in no case bound by the acts of a partner:

● who had been bankrupt.
● Who has after the verdict represented himself or knowingly permitted himself to be
represented as a partner of the bankrupt.

Under the Limited Liability Partnership Act, 2008:

Every partner of LLP is for the business of the LLP, the agent of LLP, but not of another partner.

A partner is not personally liable, directly or indirectly for an organization solely because of
being a partner of a limited liability partnership

Whenever a partner acts for an LLP in the course of business, an obligation whether arising in
contract or otherwise is solely the obligation of the LLP which is to be met out of its property

Section 28(2) provides that the provisions of 27(3) and 28(1):

● shall not affect the personal liability of a partner for his wrongful act or omission,
● but a partner shall not be personally liable for the wrongful act or omission of any other
partner of the limited liability partnership.

Liability of a Foreign Partner:

A foreign partner will have liability as per the domestic laws on the liability of partners in Joint
Ventures.

The foreign partner may also have liability under Reserve Bank of India & Foreign Direct
Investment laws and regulations.