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Procedural formalities in respect of amalgamation

Procedural formalities in respect of amalgamation, compromise, arrangements, etc.

Preliminary studies on the need for amalgamation or other proposal

Where amalgamation of two companies situated in two states is contemplated, the boards of directors of the two companies would have the matter carefully studied and would have been convinced of the benefits of the proposed amalgamation and ultimately they would decide to initiate action for getting the amalgamation through. Given below is a resume of the formalities.

Board of directors of transferor-company

It will take on record the discussions that have taken place with the transferor-company and submit to the board of the transferee-company. The procedural formalities of both one person company and LLP shall discuss their formalities in these directors.

Procedural formalities in respect of amalgamation

First Board meeting – Transferee Company

Assuming that on many cases the transferee-company gives the lead and takes the initiative, its board of directors would take on record the discussions held between the two companies on the proposal of the company to merge itself with the company. The board of the company would take the following steps:

Subject to approval of the tribunal, the board will agree to the transferor-company’s proposal to merge with the company.

Subject to approval of the board of the transferor-company, the company auditors or the auditors of both the companies will be asked to value of the shares of both the companies and suggest a fair and reasonable ratio for the exchange of shares in the transferee-company to the shareholders in approval of the shares held by them in the latter company.

The company secretary and managing director will be asked to prepare a draft scheme in consultation with the company’s advocates.

The board of directors of the transferor-estimation company will be requested to take on record that consequent on the discussions with the two companies, the transferee-company has agreed with the company’s request to amalgamate itself with the transferee-company. It will be asked to confirm the appointment of auditors for the ratings of the shares of two companies.

Further action by the board of the transferee-company

The boards of directors will:

Consider the recommendation of the auditors on the fair ratio of exchange of shares in the transferee-company for the shares of the company and approve for the same.

Approve the draft scheme of combination

  • Accord approval, after receiving the approval of the board of the transferor-company to move a joint application to the tribunal.
  • Request the board of the transferor-company to approve of the exchange of shares recommended by the auditors and also the draft scheme of amalgamation, referred to above and submit a petition to the tribunal under section 391 of the act. The transferor-company will also be requested to:
  • Accord their approval in writing to the auditor’s recommendation on and the draft scheme of amalgamation.
  • Forward to the transferee-company certified copy of the petition moved in the tribunal by the transferor-company.
  • The board will also authorize the managing director and / or the company secretary to sign all necessary applications, affidavits etc. and to appoint advocates for this purpose.

Rules for moving petition before the tribunal

As the rules for moving applications to the tribunal will be notified shortly, the procedure in this matter as per the corresponding court rules and the specimen forms prescribed therein applicable till now are explained below:

Notice to members and / or creditors

Depending on the nature of the petition, the company shall get the draft notices to be sent to members or creditors or each class of members or creditors approved by the registrar of the high court.

Holding of meetings and approval by members as required

The meetings of members and/or creditors, as the case may be, will be held as directed by the court and the business of the meeting shall be to consider and approve the scheme of amalgamation or the scheme of compromise / arrangement as may be applicable. The registration office may held both these private limited company and public company shall hold their meetings by their approvals.

Meeting of creditors

Where the benefits and liabilities of a transferor-company are proposed to be transferred to the transferee-company, the creditors will have to look at the transferee-company for the payment of their debts and there is no provision in the act to enable the creditors to present their objection.

Report of the chairman

Immediately on conclusion of the meeting, the chairman will submit a report of the meeting which will indicate the names of persons who attend the meeting, the number of persons who have noted in favor and those against with the respective quantum of votes. The company registration and their incorporation details may also filed with their directors.

Petition by the company

Within 7 days of registering the report by the chairman, the company is provided a petition to the high court. The place may be taken in Bangalore and other important cities.

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