Company Law (Merger & acquisition)

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Meaning of Merger and Acquisition-

 

Mergers and acquisitions (M&A) are described as the incorporation of companies. Separating the two terms, Mergers is the union of two companies to form one, while Acquisitions is one company taken over by the different. M&A is one of the major features of the corporate finance world. The logic behind M&A usually given is that two separate companies mutually create more value linked to being on an original stand. With the objective of revenue maximization, companies have evaluated different possibilities through the way of mergers or acquisitions.

 

Legal Formation-

Corporate acquisitions can be identified for legal purposes as either "asset purchases" in which the seller sells company assets to the customer, or "equity purchases" in which the buyer purchases equity shares in a target company from one or more selling shareholders. Asset purchases are accepted in technology transactions where the buyer is most involved in careful intellectual property rights but does not need to acquire responsibilities/liabilities or other contractual bonds. An asset purchase structure may also be applied when the buyer wants to buy a special part or unit of a company that is not a separate legal object. There are various difficulties appropriate to this kind of activity, including separating the particular assets and liabilities that concern to the part, determining whether the unit uses services from different units of the selling company, transferring assistants, giving grants and permits, and assuring that the seller does not play with the buyer in the same business sector in the future.

Structuring the sale of a financially distressed company is uniquely challenging due to the treatment of non-compete agreements, advising agreements, and business goodwill in such activities.

 

Revelation about Merger & Amalgamation-

 

Chapter XV (―Compromises, Arrangements, and Amalgamation) of Companies Act, 2013 contains sections 230 to 240 that deal with mergers and acquisitions.

Companies Act, 2013: It gives supplementary disclosures if there is any decrease of the share capital or the case is of corporate debt restructuring where 75% creditors must have agreed. Also, if the auditor doesn‘t give a certificate as proof of the finances of the company, the tribunal is not responsible to confirm the arrangement, according to Section 133 of the Companies Act. Unlike, the earlier act, not only the central government has to be notified about the deal but many others like Income Tax Authorities, Reserve Bank, Official Liquidator, Securities Exchange Board of India, Registrar of Companies, Stock Exchange, Competition Commission of India, etc. If there is any objection by these authorities, it should be filed within thirty (30) days of the report, both the method would go on trouble-free. 

 

The regard of the Merger-

Companies Act, 2013: With-holding the situations wherein not every shareholder is ready to be started at the voting, e-voting is allowed under section 230(6)(1) of Companies Act, 2013. Here a member can cast his vote through messenger vote. This enables all the shareholders to give their votes and hence affect the settlement. The system would have to be supported by three fourth members and approved by National Company Law.

 

Jurisdiction of Company Law-

The Companies (IInd Amendment) Act 2002, brought out a new forum namely "National Company Law Tribunal and National Company Law Appellate Tribunal" to get a complete jurisdiction of the present then Company Law Board and to a rather large area that of the Civil Courts and High Courts. The Act gives for the work of similar forums where the National Company Law Tribunal ("NCLT") has been vested with skills that are far-reaching in honour of the organization and administration of companies. The provisions were supported by the constitutional bench of the Supreme Court in Union of India v R. Gandhi5. The laws of the NCLT combine powers as broad as "regulation of the conduct of affairs of the company" under Section 242(2)(a), and also various other specific powers. It is relevant to note that the jurisdiction of the Civil Court over the company law matters has always been a debatable subject. The main explanation put forth opposite the Civil Court's jurisdiction is that the area of Company Law Board has been put at par with that of the Civil Court because of which the appeal against any judgment or order of Company Law Board is to be filed before High Court.

 

Procedure for filing a case before “National Company Law Tribunal”(NCLT)-

  • The document to be recorded before NCLT shall be in English and if in some other language, it shall be completed with a copy of Translation in English.
  • It shall be typewritten, printed in dual space, on one side of legal paper, with margins: Top 4 cm, Right-2.5 cm and left- 5 cm
  • It shall be duly paginated, recorded and joined together in paper book form.
  • Every petition, application, appeal or document shall be recorded in Triplicate.
  • All the papers filed shall be followed by an index in triplicate including their details and the amount of fee paid thereon.
  • Copy of petition, application or appeal shall also be filed to the opposing party.
  • True Copy of Judgment for authorization to sign, verify and institute on behalf of the company shall also be included.
  • Every petition, application or appeal shall be recorded in Form No. NCLT.1 along with the attachment of Notice of charge in Form NCLT-2.
  • Title Heading for Process shall be in Form No. NCLT.4
  • Every petition or application shall be tested by an Affidavit in Form No. NCLT.6.
  • Notice of Action shall be listed in Form No. NCLT.3.
  • Where any petition or application is expected to be advertised, it shall be advertised in Form No. NCLT-3A in domesticated language and in English Newspaper. Advertisements if published shall also be placed on the website of the company if any.
  • Every Party may appear either in person or through an authorized representative, who shall make an appearance through filing Vakalatnama or Memorandum of Appearance in Form No. NCLT.12 representing the respective parties.
  • No intern employed by Authorized Representative shall appear, access to the records or obtain copies of the order unless his name is entered in Register of intern maintained by a bench. Authorized Representative shall make an application in Form NCLT.10 for registering his intern.
  • Special Procedure has also been defined from Rule 66 to Rule 88 defining the procedures or supplementary requirement for the applicant to be followed while filing an application under several provisions of Companies Act, 2013. Additional requirements inter alia cover accompanying papers as mentioned in Annexure-B (which includes a copy of Memorandum and Articles, copy of balance sheet, Resolution, Bank Draft for filing fees, etc.), content of an application, Advertisement of application, etc.
  • An application for rectification of the Final order shall be filed within two years in Form No. NCLT.9.
  • The certified copy of the rule of NCLT shall be recorded with ROC in Form NO. INC-28 along with the fees of Rs.500/- within 30 days.

 

Benefits of Company Amalgamation-

  1. Operating Economics
  2. Diversification
  3. Financial economics
  4. Growth
  5. Managerial Effectiveness
  6. Helps to face competition
  7. Revival of sick units
  8. Tax Advantages
  9. Increase in market share
  10. Increases in goodwill

 

For Related Action= “Thelegalbank” Jaipur, Rajasthan, India, 302021.

 

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