FAST TRACK MERGER (FTM) : Section 233 of Companies Act, 2013 – Merger or Amalgamation of Certain Companies

FAST TRACK MERGER (FTM)

Section 233 of Companies Act, 2013 – Merger or Amalgamation of certain companies

{Rule 25 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016}

[Effective from 15th December, 2016]

Fast Track Merger (FTM) is a new concept introduced under the Companies Act, 2013. It is unique concept because High Court approval is not required in this Merger, only Regional Directors (Powers of Central Government delegated to Regional Director vide Notification No. S.O. 4090(E) dated 19^th December, 2016), Registrar of Companies and Official Liquidator are the authorities whose approval is required. The whole process can take 3-5 months time for completion.

In Fast Track Merger, a scheme of merger or amalgamation may be entered into between

i.                    two or more small companies, or

ii.                  a holding company and its wholly-owned subsidiary company, or

iii.                Such other class or classes of companies as may be prescribed. (No such other Companies are prescribed yet)

Small Company: Section 2(85) of the Companies Act, 2013

 "Small company" means a company, other than a public company,-

(i)                 paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than five crore rupees; and

(ii)               turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees:

Provided that nothing in this clause shall apply to-

A.    A holding company or a subsidiary company;

B.     A company registered under section 8; or

C.     A company or body corporate governed by any special Act.

STEPS FOR THE FAST TRACK MERGER (FTM):

1.                  Check the Articles of Association of the respective companies involved in the merger, whether there is clause to merge the business of the Companies with the other companies, if not then, first of all, alter the AOA of the Companies.

2.                  Call the Board Meeting and Prepare the Draft Scheme of Amalgamation or Merger

3.                  Conduct Board Meeting and do the followings:

a.       Get the Draft scheme approved

b.      Authorized any director or Company Secretary or any other person to do such acts in this regard.

c.       Prepare the Statement of Assets and Liabilities of the Companies which reveals the current position of the Companies and receive the Auditor’s Report on the Statement. (Format of Statement of Assets and Liabilities is annexed)

4.                  Send a notice in Form CAA-9 of the proposed scheme inviting objections or suggestions, if any, within 30 days of issuing the notice from the Registrar and Official Liquidators where registered office of the respective companies are situated or persons affected by the scheme with the attachments are given below:

a.       Scheme of Merger or Amalgamation

b.      Pre and post Merger Shareholding of the Transferee Company

c.       Last 3 years Audited financial statements with Auditors report thereon filed to ROC

d.      MOA and AOA

e.       Board Resolution

f.       Valuations report for Share Exchange ratio from the registered Valuer, in case of WOS Company no need of Valuation report

Note: To ROC and OL, the Notice in CAA-9 shall be submitted via hand delivery. And to Person affected by the scheme (i.e. Income Tax Department, RBI, SEBI, respective Stock exchange, CCI, if necessary, or other sectoral regulators or authorities which are likely to be affected by the scheme, etc.), the notice shall be served via post or speed post or via courier.

5.                  the objection or suggestions shall be given by ROC, OL or Person affected by the Scheme within 30 days of serving notice to the RD and authorized representative of Transferor Company.

6.               each of the companies involved in the merger files a declaration of solvency in the Form CAA-10 with the ROC of the place where the registered office of the company is situated along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 before convening the meeting of members and Creditors for approval of the Scheme. The attachments are:

a.       Board Resolution

b.      Statement of Assets and liabilities

c.       Auditors report on the statement of Assets and Liabilities

Note: Currently, this form is not available as e-form, so it may be filed in GNL-2 or may be filed at the time of submission of File as an annexure of the Scheme of merger or amalgamation.

7.                  After getting objections or suggestions call a Board meeting and amend the Draft Scheme and consider the Day, Date, Time and Place for General Meeting and Creditors Meeting. If no such objections or suggestion received, then get the scheme approved without alteration and do the further proceeding for the Meeting of Members and Creditors.

8.                  Send the notice of the meeting to the members and creditors shall be accompanied by-

a.       a statement, as far as applicable, referred to in sub-section (3) of section 230 of the Act read with sub-rule (3) of rule 6 hereof;

b.      the declaration of solvency filed in Form CAA-10

c.       a copy of the scheme.

9.                  Conduct General Meeting and get the scheme approved by the respective members or class of members at a general meeting holding at least 90 per cent of the total number of shares.

(Note: The meeting should be conducted after 30 days of the sending Notice in CAA-9, so that the objections or suggestions shall be considered)

10.              Conduct Creditors Meeting by giving a notice of 21 days along with the above attachments (point no. 6) and get the scheme approved by majority representing nine-tenths in value of the creditors or class of creditors of respective companies or otherwise approved in writing.

11.              the Transferee company shall, within seven days after the conclusion of the meeting of members or class of members or creditors or class of creditors, file a copy of the scheme as agreed to by the members and creditors, along with a report of the result of each of the meetings in Form No. CAA.11 with the

a.      Regional Directors along with the fees as provided under the Companies (Registration Offices and Fees) Rules, 2014. (file shall be submitted via hand delivery along with payment challan)

b.      Copy of the scheme shall also be filed, along with Form No. CAA. 11 with the Registrar of Companies in Form No. GNL-1 along with fees provided under the Companies (Registration Offices and Fees) Rules, 2014; and

c.       the Official Liquidator through hand delivery or by registered post or speed post.

12.              The objections or suggestions shall be given by ROC and OL to the RD within 30 days of the filing the Form CAA-11.

13.              Where no objection or suggestion is received to the scheme from the Registrar of Companies and Official Liquidator or where the objection or suggestion of Registrar and Official Liquidator is deemed to be not sustainable and the Regional Directors is of the opinion that the scheme is in the public interest or in the interest of creditors, the Regional Directors shall issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA.12.

Note: If no such communication is made, it shall be presumed that he has no objection to the scheme.

14.              Where objections or suggestions are received from the ROC and OL and the Regional Directors is of the opinion, whether on the basis of such objections or suggestions or otherwise, that such a scheme is not in public interest or in the interest of the creditors, it may file an application before the Tribunal in form CAA-13 within a period of 60 days of the receipt of the scheme stating its objections or opinion and requesting that the Tribunal may consider the scheme under section 232 of the Companies Act, 2013.

15.              On receipt of an application from the Regional Directors or from any person, if the Tribunal, for reasons to be recorded in writing, is of the opinion that the scheme should be considered as per the procedure laid down in section 232, the Tribunal may direct accordingly or it may confirm the scheme by passing such order as it deems fit.

Note: If the Regional Directors do not have any objection to the scheme or it does not file any application under this section before the Tribunal, it shall be deemed that it has no objection to the scheme.

16.              The confirmation order of the scheme issued by the Regional Directors or Tribunal shall be filed, within 30 days of the receipt of the order of confirmation, in Form INC-28 along with the fees as provided under Companies (Registration Offices and Fees) Rules, 2014 with the Registrar of Companies having jurisdiction over the transferee and transferor companies respectively.

17.              It is clarified that with respect to schemes of Merger or Amalgamation falling within the purview of section 233 of the Act, the concerned companies may, at their discretion, opt to undertake such schemes under sections 230 to 232 of the Companies Act, 2013, including where the condition prescribed in clause (d) of sub-section (1) of section 233 of the Act has not been met.

POST MERGER EFFECT:

1.      The registration of the scheme shall be deemed to have the effect of dissolution of the transferor company without process of winding-up.

2.      The registration of the scheme shall have the following effects, namely:-

a.       transfer of property or liabilities of the transferor company to the transferee company so that the property becomes the property of the transferee company and the liabilities become the liabilities of the transferee company;

b.      the charges, if any, on the property of the transferor company shall be applicable and enforceable as if the charges were on the property of the transferee company;

c.       legal proceedings by or against the transferor company pending before any court of law shall be continued by or against the transferee company; and

d.      where the scheme provides for purchase of shares held by the dissenting shareholders or settlement of debt due to dissenting creditors, such amount, to the extent it is unpaid, shall become the liability of the transferee company.

3.      A transferee company shall not on merger or amalgamation, hold any shares in its own name or in the name of any trust either on its behalf or on behalf of any of its subsidiary or associate company and all such shares shall be cancelled or extinguished on the merger or amalgamation.

4.      The transferee company shall file an application with the Registrar along with the scheme registered, indicating the revised authorised capital and pay the prescribed fees due on revised capital: Provided that the fee, if any, paid by the transferor company on its authorised capital prior to its merger or amalgamation with the transferee company shall be set-off against the fees payable by the transferee company on its authorised capital enhanced by the merger or amalgamation.

SEQUENCE OF EVENTS IN TABULAR FORM

The Merger or Amalgamation would involve the following steps:

S. No.	Steps	Transferor Company	Transferee Company	Period	Form
1	Drafting the Scheme of Amalgamation	Only one Scheme shall be drafted for all the companies	-Do-	-	-
3	Board Approval	Yes	Yes	-	-
4	Notice of Scheme of Merger to ROC, OL or person affected by the scheme	Yes	Yes	-	CAA-9
5	Declaration of Insolvency	Yes	Yes	After sending Notice in CAA-9 but before sending notice of GM	CAA-10
6	Shareholders’ approval.	Yes	Yes	-	-
7	Result of GM or creditors meeting with Approved Scheme to RD, ROC and OL	No	Yes	Within 7 days of GM or creditors meeting	CAA-11
8	Filing of Order of RD or Tribunal to ROC	Yes	Yes	Within 30 days of Order	INC-28

FORM NO. CAA.9

[Pursuant to section 233(1)(a) and rule 25(1)]

NOTICE OF THE SCHEME INVITING OBJECTIONS AND SUGGESTIONS

Notice is hereby given by M/s.............. [Transferor / Transferee Company] that a scheme of merger or amalgamation is proposed to be entered with M/s.................. [Transferor / Transferee Company] and in pursuance of sub-section (1)(a) of section 233 of the Companies Act, 2013, objections or suggestions are invited in respect of the scheme.

A Copy of the scheme of merger or amalgamation enclosed.

Objections or suggestions are invited from-

(i)                  The Registrar of Companies (mention the details of the Registrar of the area where the registered office of the Transferor /  Transferee company is situated);

(ii)                Official Liquidator (mention the details of the Official Liquidator of the area where the registered office of the Transferor /  Transferee company is situated); and

(iii)               [Any person whose interest is likely to be affected by the proposed scheme].

Any person mentioned in (i), (ii) or (iii) above, desirous of providing objections or suggestions in respect of the scheme should send their objections or suggestions within thirty days from the date of this notice to................ [The Central Government (powers delegated to RD vide notification dated 19^th December, 2016) at ................................... (Address) and to Mr.................. (Address) being Authorized representative or the Transferor Company].

Date:

Place:

SD/-

(Mention the details of the Authorized Representative of the Transferor Company).

Enclosure: A copy of the Scheme of Merger or Amalgamation

FORM NO. CAA.10

[Pursuant to section 233(1)(c) and rule 25(2)]

DECLARATION OF SOLVENCY

1.            (a) Corporate Identity Number (CIN) of the Company    :

(b) Global Location Number (GLN) of the Company         :

2.            (a) Name of Company                                                                   :

                (b) Address of the registered office of the Company       :

                (c) E-mail ID of the Company                                                      :

3.            (a) Whether the Company is listed:

               

        Yes

        No

(b) If listed, Please specify the name(s) of the Stock exchange(s) where listed:

..........................................................................................................................

..........................................................................................................................

4.            Date of Board of Director’s resolution approving the scheme.

DECLARATION OF SOLVENCY

We, the directors of M/s............................................................................do solemnly affirm and declare that we have made a full enquiry into the affairs of the Company and have formed the opinion that the company is capable of meeting its liabilities as and when they fall due and that the company will not be rendered insolvent within a period of one year from the date of making this declaration.

We append an audited statement of company’s assets and liabilities as at................................being the latest date of making this declaration.

We further declare that the company’s audited annual accounts including the Balance sheet have been filed up to date the Registrar of Companies.....................................

Signed for and behalf of the Board of Directors

Date:                                                                           (1)          Signature             .........................

                                                                                                   Name                    ........................

Place:                                                                                         Managing Director, if any

                                                                                    (2)          Signature             ...........................

                                                                                                   Name                    ...........................

                                                                                                   Director

(3)          Signature             ...........................

                                                                                                   Name                    ...........................

                                                                                                   Director

VERIFICATION

We solemnly declare that we have made a full enquiry into the affairs of the company including the assets and liabilities of this company and that having done so and having noted that the scheme of merger or amalgamation between...................................and..................................is proposed to be  placed before the shareholders and creditors for approval as per the provisions of sub-section of (1) of section 233 of the Companies Act, 2013, we make this solemn declaration believing the same to be true.

Verified this day the........................day of ....................................20...

                                                                                    (1)          Signature             .........................

                                                                                                   Name                    ........................

                                                                                                   Managing Director, if any

                                                                                    (2)          Signature             ...........................

                                                                                                   Name                    ...........................

                                                                                                   Director

(3)          Signature             ...........................

                                                                                                   Name                    ...........................

                                                                                                   Director

Solemnly affirmed and declared at........................the....................................day of ................, 20.... before me.

               

                                               

Commissioner of Oaths and Notary Public

Attachments:

a)      Copy of Board Resolution

b)      Statement of Assets and liabilities

c)       Auditor’s report on the statement of assets and liabilities

Statement of Assets and Liabilities as at..............................

NAME OF THE COMPANY..............................................................

ASSETS

(Amount in Rupees)

S. No.	Particulars	Book Value	Estimated Realisable Value
1	Balance at Bank
2	Cash in Hand
3	Marketable securities
4	Bill Receivables
5	Trade debtors
6	Loans and Advances
7	Unpaid calls
8	Stock-in-trade
9	Work in progress
10	Freehold property
11	Leasehold property
12	Plant and machinery
13	Furniture, fittings, utensils, etc.
14	Patents, Trademarks, etc.
15	Investments other than marketable securities
16	Other property
	Total

LIABILITIES

(Amount in Rupees)

S. No.	Particulars	Estimated to rank for payment  (To the nearest rupee)
1	Secured on specific assets
2	Secured by floating charge(s)
3	Estimated cost of liquidation and other expenses including interest accruing until payment of debts in full
4	Unsecured creditors (Amounts estimated to rank for payment) (a)   Trade accounts (b)   Bills payable (c)    Accrued expenses (d)   Other liabilities (e)   Contingent liabilities
	Total

Total Estimated value of assets                                            :           Rs...................................

Total Liabilities                                                                     :            Rs..................................

Estimated Surplus after paying debts in full                      :           Rs..................................

Remarks:

Date:                                                                           (1)          Signature             .........................

                                                                                                   Name                    ........................

Place:                                                                                         Managing Director, if any

                                                                                    (2)          Signature             ...........................

                                                                                                   Name                    ...........................

                                                                                                   Director

(3)          Signature             ...........................

                                                                                                   Name                    ...........................

                                                                                                   Director

  

FORM NO. CAA.11

[Pursuant to section 233(2) and rule 25(4)]

NOTICE OF APPROVAL OF THE SCHEME OF MERGER

(To be filed by the Transferee Company to the Central Government, Registrar and the Official Liquidator)

1.  (a) Corporate Identity Number (CIN) of the Company               :

     (b) Global Location Number (GLN) of the Company    :

2.  (a) Name of Transferee Company                                      :

     (b) Registered office Address                                                                :

     (c) E-mail ID                                                                                   :

3.  Whether the Transferor and Transferee are:

               

        Small Companies

        Holding and Wholly owned subsidiaries

4.  Details of Transferor

     (a) Corporate Identity Number (CIN) of the Company               :

     (b) Global Location Number (GLN) of the Company    :

    

    Name of the Company                                                              :

    Registered office address                                                        :

    Email ID                                                                                            :

5.  Brief Particulars of Compromise or arrangement

     Involving merger                                                                         :

6.  Details of approval of the scheme of merger by the transferee company:

(a)    Approval by members

(i)  Date of dispatch of notice to members                                :

(ii) Date of the General Meeting                                   :

(iii) Date of Approval of scheme in the General

      Meeting                                                                             :

(iv) Approval by majority of                                             :

                (Members or class of members holding at least ninety percent of the total number of shares)

(b)   Approval by Creditors

(i) Date of dispatch of notice to creditors                  :

(ii) Date of the meeting of creditors                            :

(iii) Date of approval of scheme in creditors

      Meeting                                                                             :

(iv) Approved by the majority of                                   :

     (At least nine tenth in value of creditors)

7.  Details of approval of the scheme of merger by the Transferee Company:

(a)    Approval by members

(i)  Date of dispatch of notice to members                                :

(ii) Date of the General Meeting                                   :

(iii) Date of Approval of scheme in the General

      Meeting                                                                             :

(iv) Approval by majority of                                             :

                (Members or class of members holding at least ninety percent of the total number of shares)

(b)   Approval by Creditors

(i) Date of dispatch of notice to creditors                  :

(ii) Date of the meeting of creditors                            :

(iii) Date of approval of scheme in creditors

      Meeting                                                                             :

(iv) Approved by the majority of                                   :

     (At least nine tenth in value of creditors)

DECLARATION

I..........................................................the Director of the Transferee Company hereby declare that-

(i)                  Notice of the scheme as required under section 233(1)(a) was duly sent to the Registrar and Official Liquidators of the place where the registered office of the transferor and transferee companies are situated and to all other persons who are likely to be affected by the scheme and a copy of the same has been attached herewith;

(ii)                The objections to the scheme have been duly taken care of to the satisfaction of the respective persons;

(iii)               The scheme has been approved by the members and creditors of the transferee and transferor company by the requisite majority in accordance with section 233(1)(b) and (d) respectively;

(iv)              All the requirements under section 233 of the Act and the rules made there under have been compiled with; and

(v)                To the best of my knowledge and belief the information given in this application and its attachments is correct an complete.

Date:

Place:

                                                                                                                                                Signature

Attachments:

d)      Copy of the Scheme approved by both creditors and members;

e)      Notice sent in accordance with section 233(1)(a);

f)       Optional attachments, if any.

  

FORM NO. CAA.12

[Pursuant to section 233 and rule 25(5)]

Confirmation order of scheme of merger or amalgamation between

Ms……………………………..and Ms……………………………..

Pursuant to the provisions of section 233, the scheme of compromise, arrangement or merger of M/s……………………. (Transferor Company) with M/s…………………………………. (Transferee Company) approved by their respective members and creditors as required under section 233(1)(b) and (d), is hereby confirmed and the scheme shall be effective from the …………………….day of ………………20…

A copy of the approved scheme is attached to this order.

Signature with seal

Date

Place

FORM NO.CAA.13

[Pursuant to section 233(5) and rule 25(6)]

APPLICATION BY THE CENTRAL GOVERNMENT TO THE TRIBUNAL

[HEADING AS IN FORM NCLT. 4]

(Name and address of the applicant)

State the name and address of the persons who should be given opportunity of being heard in disposing of this reference.

(Note: Please enclose as many additional copies of the reference application as there are persons as above named.)

On the basis of the information available from the documents annexed hereto-

1.      The applicant hereby makes reference to the National Company Law Tribunal, -----, Bench, under section…………….. of the Companies Act, 2013

2.      The applicant states as follow :

(Here set out the brief facts of the case)

3.      The submission of the applicant is as follows :

(Submission)

4.      The applicant has annexed hereto the documents or copies thereof as specified below:

Place:

Date:                                                                                                   Signature of the applicant

List of Document

1.

2.

3.

FOR MORE ARTICLES VISIT TO:

http://csvishalsharma.blogspot.in/

For any further queries, feel free to call or mail:

VISHAL SHARMA

Company Secretary

Mob: 9716763754

Email: csvishalpbs@gmail.com