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Mergers & Amalgamations (perspective)-Comparison between Companies Act 1956 and Companies Act 2013

January 7, 2016
S. No. Particulars Companies Act, 2013 Companies Act, 1956
1 Applicability Section  230 – 240* Section  390 -396A
2 Cross Border Mergers Inbound mergers (Foreign Company merging into Indian Company as well as outbound foreign company mergers (Indian Company merging into foreign Company with RBI approval) are allowed.

Permits only inbound foreign Company merger

(Foreign Company merging into Indian Company)
3 Fast Track Merger Fast track merger is merger between two or more small companies, holding company and its wholly owned subsidiary and such other company as may be prescribed.
  • Fast Track merger does not involve Court or Tribunal. Approval of National Company Law Tribunal is not required but both the Directors of the Company will have to approve the scheme after giving notice to the ROC and official liquidator inviting objections/suggestions to scheme.
  • Approval from atleast 90% shareholders and 90% creditors (value) would be required
  • After the approval of the scheme, notice to be given to Central Government, ROC and official liquidator. NCLT may confirm the scheme or order to go through the normal merger u/s 232 of the Companies Act, 2013
  • No requirements of sending notices to RBI or Income Tax or providing a valuation report or providing auditor certificate for complying with the accounting standards.
No provisions for exemption from court process for corporate reorganizations like amalgamation, merger etc.
4 Objection to Scheme of Amalgamation   Such scheme can be objected only by shareholders having not less than 10% shareholding or creditors whose debt is not less than 5% of total outstanding debt as per the last audited financial statement There was no such limit which stated that a person holding even 1% of shareholding in the Company can object the scheme
5 Meeting of Creditors/Shareholders to approve the Scheme  

Scheme if approved by 3/4th of creditors (value or class) or members, and if sanctioned by National Company Law Tribunal, the same shall be binding as stated under section 230(6)(1).

The 2013 Act additionally allows the approval of scheme by postal ballot and E-voting

Scheme if approved by 3/4th value of creditors or members, it will be binding if sanctioned by court as stated under section 391(2), voting in person or a proxy at meeting.

E-Voting was not permitted under 1956 Act.

6 Merger of a Listed Company into Unlisted Company   The Companies Act, 2013 requires that in case of merger between a listed transferor company and an unlisted transferee company, the transferee company would continue to be unlisted until it becomes listed. No specific provisions governing merger of listed company with unlisted company.
7 Body of approving Merger National Company Law Tribunal will deal with matters related to Mergers & Acquisitions. Scheme of arrangement to be approved by respective High Court which has jurisdiction over Acquirer and Target companies.
8 Valuation Report    It is mandatory that notice of meeting to discuss a scheme must be accompanied by valuation report prepared by an expert. The 1956 Act does not mandate disclosing the valuation report to the shareholders. Though in practice, valuation reports are included in documents shared with the shareholders and also to the Court as part of the appraisal process of the scheme by the Courts.

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