COMPANIES ACT, 1956

SECTION 390 TO 396A

• AMALGAMATION
• MERGER
• DEMERGER
• EXTERNAL AND INTERNAL RECONSTRUCTION

•
 SECTION 390 TO 396A
AMALGAMATION
MERGER
DEMERGER
EXTERNAL AND INTERNAL
RECONSTRUCTION
• Marriage between two artificial persons is
termed as Amalgamation.

The procedure regarding it is mentioned in the

above referred Section.
 Section 390 : Interpretation of Sections
391 and 393
• “Company” means any company liable to be
wound up under this act.

• “Arrangement” includes a reorganization of

the share capital of the company.

• Unsecured creditors who may have filed suits

or obtained decrees shall be deemed to be of
the same class as other unsecured creditors.
 Section 391: Power to compromise or
make arrangement with creditors and
members.

• Compromise and arrangement can be

between company and its creditors or its
members or any class of them.

• The persons who can apply to the court

for the above mentioned purpose:
- Application by the company itself,
any of its creditors, member of the
company, in case of the company
which is being wound up by its
liquidator.
- To be called held and conducted in
such manner as the court directs.
 Sec 391(2)
• If a majority in number, representing three-
fourth in value of the creditors/members,
or class of creditors/members as case may
be, present and voting either in person or
by proxy, at the meeting, agree to any
compromise or arrangement, the
compromise or arrangement if sanctioned
by the court be binding on all the creditors,
• members and also on the company or in
the case of a company which is being
wound up, on the liquidator and
contributories of the company.
• An order made by the court under sub-
section (2) shall have no effect until a
certified copy of the order has been filed
with ROC.
 Sec 392 : Power of H.C. to enforce
compromises and arrangement.
• HC has the power to supervise the
carrying out the compromise or
arrangement.
• May, at the time of making such order or
at any time thereafter, give such
direction in regard to any matter or make
such modification in the compromise or
arrangement as it may consider
necessary for the proper working of the
compromise or arrangement.
• If the court is satisfied that the
arrangement or compromise cannot
be worked satisfactory with or without
modification, it may either on its own
motion or on the application of any
person interested in the affairs of the
company, make an order winding the
company and such an shall be deemed
to be an order made under section
433 of this Act.
Refer the cases mentioned below:
Maddi Lakshmaiah v. Duncan Agro
Industries Ltd. : Court can modify the
scheme only for removing the difficulties
of the scheme.
Miheer H. Mafatlal v. Mafatlal and
indutries Ltd. : Court only has the
supervisory work and has to work as an
umpire in the cricket match and not as a
player in the field.
 Section 393- Information as to
compromise or arrangement with creditors
and members.
• Where a meeting of the creditors or member is
called under section 391:
• With every notice calling the meeting which is sent
to a creditor or member, there shall be sent also a
statement setting forth the terms of the
compromise or arrangement and explaining its
effect, and in particular stating any material
interest of the directors, MD, or manager of the
company
• In every notice calling the meeting which is given
by the advertisement there shall be either such a
statement as aforesaid or a notification of the
place at which and the manner in which creditors
or member entitled to attend the meeting may
obtain copies of such a statement as aforesaid.
• Where a notice given by advertisement includes
a notification that copies of a statement setting
forth the terms of the compromise or
arrangement proposed and explaining its effect
can be obtained by the creditors or members
entitled to attend the meeting , every creditor or
member so entitled to attend the meeting, every
creditor or so entitled shall, on making an
application in the manner indicated by the
notice, be furnished by the company, free of
charge, with a copy of the statement.
 Section 394: Provision for facilitating
reconstruction & amalgamation of
Companies.

• Where an application is made to the Court, the

court may either by the order sanctioning the
compromise or arrangement or by a
subsequent order, make provision for all or
any of the following matters :
- The transfer to the transferee company of the
whole or any part of the undertaking ,
property or liabilities of any transferor
company.
• The allotment or appropriation by the
transferee company of any shares,
debentures, policies, or other like interest in
that company which, under the compromise
or arrangement, are to be allotted or
appropriated by that company to or another
person.
- The continuation by or against the transferee
company of any legal proceeding pending by or
against any transferor company.
- The dissolution, without winding up, of any
transferor company.
- The provision to be made for any person who,
within such time and in such manner as the court
directs, dissent from the compromise or
arrangement.
- Such incidental, consequential and supplemental
matters as are necessary to secure that the
reconstruction or amalgamation shall be fully and
effectively carried out.
 Sec. 394A- Notice to be given to CG for
application under sec 391 and 394.
• The court shall give notice of every application
made to it under section 391 or 394 to CG,
and shall take into consideration the
representations, if any, made to it by that
Govt. before passing any order under any of
these sections.
 Section 396:
• Power of CG to provide for the
amalgamation of companies in
national interest.
 Section 395:

Power and duty to acquire shares of

shareholders dissenting from contract
or scheme approved by majority.
 Section 396 A
• Preservation of books and papers
of amalgamated company. Prior
permission of CG is required,
before disposing of the books
and papers of the amalgamated
company.