Mergers & Acquisitions

Session I
Introduction & Historical Background
• Corporate Restructuring – Before & After 1991
• Automobile Industry
• Electronic Industry
• Beverages
• Banking
 Merger of TOMCO with HLL

• First Big Merger

• Brooke Bond – Lipton
• Lakme – Ponds
• Brooke Bond Lipton – HLL
• Lakme Ponds - HLL
 Meaning & Types of
Corporate Restructuring
• Organic & Inorganic
• Merger & Amalgamation
• Demerger
• Slump Sale
• Joint Venture
• Acquisition
 Need for Corporate Restructuring
• Diversification [HLL]
• Core Competencies [Colgate, Infosys]
• Risk Reduction
• Deploying Surplus Cash
• Technological Development
• R & D Activities [M&M]
• Enlarging Market Share
 Need for Corporate Restructuring
• Economies of Scale
• Revival of Sick Industries
• Constant Supply of Raw Materials
Mergers & Amalgamations – Legal & Procedural Aspects
 What is Covered
• Section 230 [Compromise or Arrangements]
• Section 231 [Power of Tribunal]
• Section 232 [Merger & Amalgamation]
• Section 233 [Merger & Amalgamation of certain
companies]
• Section 234 [Merger & Amalgamation with Foreign
company[Yet to be notified]
• Companies (Compromises, Arrangements
and Amalgamations) Rules, 2016
 What is Defined
• Arrangement
• Merger By Absorption
• Merger By Formation of New Company
• Merging Companies
• Property
• Liabilities
 What is Not Defined
• Compromise
• Amalgamation
• Demerger
• Reconstruction
Compromise or Arrangement
Section 230 envisages
Compromise or Arrangement
Between
Company
And
A] any Creditors or Class of Creditors
or
B] any Members or Class of Members
 Merger or Amalgamation
Two parties to Merger or Amalgamation :

• Transferor Company

• Transferee Company
Merger by Absorption [Sec. 232]

Existing Existing
Company Company
[Transferor] [Transferee]

Existing Existing
Company Company
[Transferor] [Transferor]

Existing
Company
[Transferee]
Merger By Formation of New Company [Sec.
232]

Existing Existing
Company Company
[Transferor] [Transferor]

New
Company
[Transferee]
 Merging Companies [Sec. 232]
On Analysis of the Explanation it can be
concluded that:
Only
EXISTING COMPANIES
are referred to as
MERGING COMPANIES
 Who Can Be The Applicant
As per Section 230 (1) only following can apply
for Compromise or Arrangement :

• Company
• Creditor
• Member
• Liquidator [In case of Winding up]
 Facts To Be Disclosed To NCLT
• All Material Facts such as :
• Latest Financial Position
• Latest Auditor’s Report
• Pending Investigations / Proceedings
• Reduction of Share Capital, if any
• Details of the Scheme of Corporate Debt
Restructuring
 Notice of The Meeting
• To All Creditors
• To All Members
• To be placed on website of the Company
• To be placed on website of SEBI / SE
• To be published in the Newspapers
• To Central Government ; SEBI ; Stock
Exchanges ; Income Tax ; RBI ; ROC ; OL ;
Competition Commission ; Sectoral Regulator
 Meeting
• NCLT :
• To determine the classes members and
creditors whose meetings to be held
• To fix time and place of the meetings
• To appoint Chairman / scrutinizers
• To fix quorum
• To decide procedure to be followed
 Documents to be Circulated
• Draft Terms of the Scheme
• Fact that the Scheme is filed with the ROC
• Report of Directors explaining effect of
Compromise or Arrangement on members,
promoters, KMP etc.
• Share Exchange Ratio
• Valuation Report
 Voting
• By Poll ; or
• By Postal Ballot

• In Person or Through Proxy

• Majority in Number representing Three-

Fourth in Value of those who are PRESENT &
VOTING
 Voting
No. of Members Value [Rs.]
Total 1000 10,00,000
(-) Absent 200 1,00,000
Present 800 9,00,000
(-) Abstain 200 1,00,000
Present & Voting 600 8,00,000
FOR APPROVAL 301 6,00,000
 Objections to the Scheme
• Persons holding not less than 10% of the
shareholding ; or
• Having outstanding debt amounting to not
less than 5% of the total outstanding debt

AS PER LATEST AUDITED BALANCE SHEET

 Order of the Tribunal
• Transfer of undertaking, property and
liabilities of transferor co. to transferee co.
• Allotment of Shares, Debentures etc.
• Continuation of Legal Proceedings against
Transferee Company
• Dissolution without winding up of Transferor
Company
 Order of the Tribunal
• Provision to be made for Dissenting persons
• Issue of shares to non-resident shareholders
• Transfer of Employees of Transferor companies
• Fees paid by Transferor Company on its
Authorised Capital to be set off against fees
payable by Transferee Company
 Order of the Tribunal
If Transferor Company is listed and Transferee
Company is unlisted :
• Transferee company will remain unlisted till it
is listed
• Provision for payment to be made to the
shareholders of Transferor who decide to opt
out of Transferee Company
 ROC

Order of the Tribunal

to be filed with
the ROC
in 30 days