In modern business era, the Companies who seek to expand their business, opt for Mergers and Acquisitions as one of the options. The landscape of Indian Mergers and Acquisitions (M&A) has gained significant importance in recent times and we have witnessed several big deals in the past few years such as Arcelor Mittal; Vodafone Idea; Walmart Acquisition of Flipkart; Tata and Corus Steel; Vodafone Hutch-Essar, etc.
MERGERS AND ACQUISITIONS IN INDIA
In legal sense, merger is a combination of two or more entities which results into accumulation of not just the assets and liabilities but also the ownership and business organization of distinct business entity into one.
Ministry of Corporate Affairs (MCA) has notified section 230 to 240 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016, which deals with the matters relating to Compromises, Arrangements, and Amalgamations.
The legal framework relating to Compromises, Arrangements, and Amalgamations are as follows:
- Companies Act, 2013 (Section 230-240) read with the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016
- Income Tax Act, 1961
- Competition Act, 2002
- Foreign Exchange Management Act, 1999
- Indian Stamp Act, 1899 and other state stamp acts
- Central Goods & Services Act, 2017 and other state GST acts
- SEBI (Listing Obligation & Disclosure Requirements), 2015
- SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
- Accounting Standards
- Industry Specific Laws
- Rules, regulations, circulars, directions, notifications issued under the above.
BROAD COMPLIANCES FOR MERGERS AND ACQUISITIONS IN INDIA
- Ensuring the Memorandum of Association of the Company has the power to undergo amalgamation. Drafting and finalisation of scheme of amalgamation and petition for according approval of the Hon’ble National Company Law Tribunal;
- Convening of Meeting of Board, Members and Creditors and other committee (if any) for according approval tothe proposed scheme of amalgamation.
- Intimation to Stock Exchange(s), Reserve Bank of India, Income Tax Department, Registrar of Companies, Official Liquidator, Regional Director and other sectoral regulators, if any, for No-Objection Certificate\Observations on the proposed scheme.
- Liaising with the statutory authorities to obtain No-Objection Certificate and address to the observations, if any, raised by the statutory authority(ies).
- Filing of approved scheme of amalgamation with the Hon’ble National Company Law Tribunal for sanctioning and representations
- Post receipt of final order of amalgamation or merger, the Companies are required to do filings of forms with the Register of Companies, Allotment and credit of Shares to shareholders pursuant to the Scheme, Compliances like Stamp duty Adjudication as per the State Stamp Duty Acts, Filing of revised financials with the Register of Companies and comply with the taxation, accountingand other legal implications of M&A.
Some companies find great success and growth post-merger, while others fail spectacularly. A proper deal structure and a due diligence process will more likely to a successful merger or acquisition deal.