Rule 19 - Merger or demerger or amalgamation of Indian companies - Foreign Exchange Management (Non-debt Instruments) Rules, 2019

19. Merger or demerger or amalgamation of Indian companies .- 1 [ (1) Where a scheme of compromise or arrangement or merger or amalgamation of two or more Indian companies or a reconstruction by way of demerger or otherwise of an Indian company, or transfer of undertaking of one or more Indian company to another Indian company, or involving division of one or more Indian company, has been approved by the National Company Law Tribunal (NCLT) or other authority competent to do so by law, the transferee company or the new company, as the case may be, may issue equity instruments to the existing shareholders of the transferor company resident outside India, subject to the following conditions, namely:- (a) the transfer or issue is in compliance with the entry routes, sectoral caps or investment limits, as the case may be and the attendant conditionalities of investment by a person resident outside India : Provided that where the percentage is likely to breach the sectoral caps or the attendant conditionalities, the transferor company or the transferee or new company may obtain necessary approval from the Central Government; (b) the transferor company or the transferee company or the new company is not engaged in any sector prohibited for investment by a person resident outside India. Note: Government approval shall not be required in case of mergers and acquisitions taking place in sectors under automatic route. ] (2) where a scheme of 2 [ compromise or arrangement or ] merger or amalgamation of two or more Indian companies or a reconstruction by way of demerger or otherwise of an Indian company where any of the companies involved is listed on a recognised stock exchange in India, then the scheme of arrangement shall be in compliance with the SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015. ************ NOTES:- 1. Substituted vide Notification No. S.O. 1802(E) dated 12-04-2022 before it was read as, (1) Where a scheme of merger or amalgamation of two or more Indian companies or a reconstruction by way of demerger or otherwise of an Indian company, has been approved by the National Company Law Tribunal (NCLT) or competent authority, the transferee company or the new company, as the case may be, may issue equity instruments to the existing holders of the transferor company resident outside India, subject to the following conditions, namely:- (a) the transfer or issue is in compliance with the entry routes, sectoral caps or investment limits, as the case may be, and the attendant conditionalities of investment by a person resident outside India : Provided that where the percentage is likely to breach the sectoral caps or the attendant conditionalities, the transferor company or the transferee or new company may obtain necessary approval from the Central Government. (b) the transferor company or the transferee company or the new company shall not engage in any sector prohibited for investment by a person resident outside India. 2. Inserted vide Notification No. S.O. 1802(E) dated 12-04-2022