m & a - icai checklist

MERGERS, AMALGAMATION AND ACQUISITIONS

MERGERS, AMALGAMATION AND ACQUISITIONS

The term "mergers" and "amalgamation" are practically synonymous while acquisitions usually refer to

acquisition of undertakings though all these three terms are often used interchangeably in common parlance.

However, mergers/amalgamation are referred to amalgamation of companies carried out pursuant to section

394 of the Companies Act, 1956 while acquisition are referred to acquisition of undertakings. A typical

restructuring transaction such as amalgamation or acquisition has many implications apart from the

requirements of the Companies Act, 1956 but some of such implications are referred to herein bellow:

Depending upon the type of companies, their assets and individual features, the issue and procedures

involved will be different. Some of the important steps and issues that one needs to keep in mind before and

while carrying out the amalgamation are as follows.

BUSINESS AND STRATEGIC ISSUES

1. Need and rationale for merger and preparation of cost-benefit ratio including financials.

2. Carefully evaluating implications of amalgamation under various laws including income-tax, stamp

duty, among others

3. Carefully evaluating the need, time frame and costs for various activities and approvals.

4. Deciding on date from which amalgamation is to take effect.

5. Due diligence of transferor company.

6. Valuation and exchange ratio.

INDICATIVE CHECKLIST OF SOME IMPORTANT PROCEDURES AND APPROVALS

1. Preparation of Scheme and other documents.

2. Check power in Memorandum/ Articles of Association of both companies for amalgamation and, if not,

incorporate such powers. Check also whether transferee company has powers to carry on business of

transferor company.

3. Approval at Board Meetings of both companies including related matters.

4. To intimate the Stock Exchanges where the companies are listed and also to obtain approvals and

generally carry out other compliances under the Listing Agreement.

5. Filing of petitions with Court (based on the location of the registered office of the company, there may

be application in different courts or a common high court).

MERGERS http://wirc‐icai.org/wirc_referencer/Company Law/Mergers_Am...

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6. Audit to be carried out by auditor appointed by Official Liquidator.

7. Meeting objections, if any, by Regional Director.

8. Calling and holding of general meetings of shareholders and creditors, as ordered by Court.

9. Issue of advertisements relating to the amalgamations.

10. Filing of report by Chairman of individual meetings.

11. Obtaining sanction of Court for the amalgamation.

12. Payment of stamp duty, as applicable.

13. Carry out post-merger formalities including filing of order of amalgamation within 30 days with

Registrar of Companies, transfer of employees, among others.

14. Issue of shares and/or other consideration to the shareholders of the transferor company.

15. Proper accounting of the amalgamation as per Accounting Standard 14 and generally disclosure in

Board’s report regarding the amalgamation.

ACQUISITIONS

Acquisitions of business in substantive terms is similar to an amalgamation except for legal implications and

procedures. Kindly, refer to points under "Business and Strategic Issues" for mergers/amalgamations. In

particular, a study of the undertaking and surrounding facts should reveal special features and issues that

would need consideration and compliance.


1. Check power in Memorandum/Articles of Association to carry out acquisitions and to carry on business

of seller Company.

2. Valuation of the undertaking.

3. Board approval for the acquirer company.

4. Board and shareholder approvals for the transferor company.

5. Documentation for the transfer.

6. Consideration and payment of applicable stamp duty.

7. Payment of consideration and formalities therefore, depending upon the type of consideration.

8. Post acquisition issues including accounting, disclosure, transfer of employees, among others.

DEMERGERS

Demerger happens when a company hives of or separates one or more of its industrial undertaking into

another company or to an existing company. The company to which the industrial undertaking is transferred

is the Resulting company and the company which transfers the industrial undertaking would be the Demerged

Company.

Indicative checklist of some important procedures and approvals

1. Check power in Memorandum/Articles of Association to demerge or sell or transfer the assets and

liabilities of the company.

2. Valuation of the undertaking.

3. Board approval for the demerger.

4. Obtain necessary consents/approvals, if any prior to the demerger.


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5. Prepare Scheme of Arrangement.

6. Apply to the Court/NCLT in prescribed forms. (Refer Form Nos. 33-40).

7. Shareholder’s approval at the general meeting concerned for the purpose.

8. File the approval of the Court with the ROC within 30 days.

9. Documentation for the transfer.

10. Allot the securities in the resulting company to the shareholders of the demerged company.

SLUMP SALE

Slump sale means the transfer of one or more undertakings as a result of a sale for a lump sum consideration

without values being assigned to the individual assets and liabilities in such sale.


1. Check power in Memorandum/Articles of Association to sell or transfer the assets and liabilities of the

company.

2. Valuation of the business to be sold on slump sale basis.


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m & a - icai checklist

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