Merger of Companies in

National Interest
The words ‘public interest’ were substituted for the
words ‘national interest’ by section 152 of the
Companies (Amendment) Act ,1960.
⚫The Government in order to protect the people’s
general welfare and well being amalgamate two
companies in the National Interest. Occasionally some
cases came up to the Government where such
amalgamation was clearly a necessity. The observance
of the usual procedure prescribed by the existing Act
in such cases will lead to prolonged delays which will
be detrimental to the national interest.
• Amalgamation and Merger under Companies Act 1956
Section 396: Powers of Central Government to provide for
Amalgamation of Companies in National Interest.

• The validity of such order shall depend upon the grounds showing that
the Central Government is satisfied in issuing an order being essential in
public interest.

• Any order made by the Government under this clause will be laid on the
table of both Houses of the Parliament and will be subjected to
Parliamentary Scrutiny.

• The order of Government is to be notified in the Official Gazette. The

amalgamated company shall have such constitution, property, powers,
rights, interests, authorities and privileges and shall be with such
liabilities, duties and obligations as specified in the Government order.
The order may also contain consequential, incidental and
supplementary provisions as may in the opinion of the Government, be
necessary to give effect to the amalgamation.
⚫ It has been made clear that any order made by the Government should
provide for the old shareholders, the old debenture holders and the creditors
having the same interest in the company resulting from the amalgamation as
they have in the original companies.

⚫ To the extent that he receives less than his rights and interests from the new
company, he shall be entitled to compensation. The compensation is to be
assessed by the prescribed authority.

⚫ Any member or creditor, being aggrieved by the award of compensation by the

prescribed authority under subsection (3) may file an application to Company
Law Board within 30 days of the date of publication of assessment on the
Official Gazette prefer an appeal to the [Tribunal] and thereupon the
assessment of the compensation shall be made by the [Tribunal].

⚫ The compensation so assessed shall be paid to the member or creditor

concerned by the company resulting from the amalgamation.
⚫ No order shall be made under this section, unless-

⚫ a) A copy of the proposed order has been sent in draft to each of the
companies concerned

⚫ b) The Central Government has considered, and made such

modifications in the draft order as may seem to it desirable in the
lights of suggestions and objections which may be received by it from
any such company within such period as the Central Government may
fix in that behalf, not being less than two months from the date on
which the copy aforesaid is received by that company, or from any class
of shareholders therein, or from any creditors or any class of creditors
thereof.

⚫ 5 Copies of every order made under this section shall, as soon as it has
been made, be laid before both Houses of Parliament

 
⚫ SECTION 396A: PRESERVATION OF BOOKS AND
PAPERS OF AMALGAMATED COMPANY.

⚫ The books and papers of a company which has been

amalgamated with, or whose shares have been acquired by
another company under this Chapter, shall not be disposed
of without the prior permission of the Central
Government.

⚫ Before granting such permission the Government may

appoint a person to examine the books and papers or any of
them for the purpose of ascertaining whether they contain
any evidence of the commission of an offence in connection
with the promotion or the formation, or the management
of the affairs, of the first mentioned company or its
amalgamation.