FAST TRACK MERGER

[Mr. M. GOVINDARAJAN]

Fast Track merger

Section 233 of the Act provides the procedure for fast track merger.  The procedure in this method is different from the mergers dealt with sections 230 and 232.  The fast track merger is of fewer formalities oriented than in the normal mergers which are time consuming one and cost oriented.  The mandatory requirements in these mergers are not required for short mergers. 

Eligible companies

The procedure for fast track merger is eligible only for certain companies.  The fast track merger is applicable to-

• between two or more Small companies;
• between a  holding company and its wholly owned subsidiary companies; or
• such other class or classes of companies as prescribed.

Procedure

The following is the procedure is involved in fast track merger-

• The eligible companies are to prepare a scheme of proposed merger.
• A notice of the proposed scheme inviting objections, if any, should be issued by the transferor company or companies and the transferee company.
• The notice shall be in Form No. CAA – 9.
• The said notice should be issued to the Registrar of Companies and Official Liquidators where registered office of the respective companies are situated or the persons affected by the scheme.
• The objections should be sent within 30 days from the date of issue of notice.
• The objections and suggestions received for the scheme should be considered by the companies in their respective general meetings.
•  The scheme should be  approved by the respective members or class of members at a general meeting holding at least 90% of the total number of shares.
• Each of the companies involved in the merger shall file a declaration of solvency, in Form No. CAA - 10, with the Registrar of the place where the registered office of the company is situated.
• The proposed scheme is to be approved by the creditors.
• The respective companies should convene meeting of creditors or class of creditors. The notice for such meeting should be given to the creditors 21 days before the meeting.
• The notice shall be accompanied by-

• A Statement  disclosing the details of the compromise or arrangement, a copy of the valuation report, if any, and explaining their effect on creditors, key managerial personnel, promoters and non-promoter members, etc.
• The declaration of solvency in Form No. CAA-10; and
• A copy of the proposed scheme.

• The scheme should be approved by majority of nine tenths of the value of creditors.

• If the meeting is not conducted the approval of the creditors may be got in writing.
•  The transferee company shall, within 7 days after the conclusion or the meeting of members or class of members or creditors or class of creditors, file a copy of the scheme as agreed to by the members and creditors, along with a report of the result of each or the meetings in Form No. CAA -11 with the Central Government, along with the required fees.
• The transferee company shall also file a copy of the scheme so approved with the Central Government, Registrar and the Official Liquidator where the registered office of the company is situated along with Form No. CAA – 11.
• If the Registrar or Official Liquidator has any objections or suggestions, he may communicate the same in writing to the Central Government within a period of 30 days.  If no such communication is made, it shall be presumed that he has no objection to the scheme.
• Where no objection or suggestion is received to the scheme from the Registrar of Companies and Official Liquidator or where the objection or suggestion of Registrar and Official Liquidator is deemed to be not sustainable and the Central Government is of the opinion that the scheme is in the public interest or in the interest of creditors, the Central Government, shall issue a confirmation order of such scheme of merger or amalgamation in Form NO. CAA-12.
• Where objections or suggestions are received from the Registrar of Companies or Official Liquidator and the Central Government is of the opinion, whether on the basis of such objections or otherwise, that the scheme is not in the public interest or in the interest of creditors, it may file an application before the Tribunal in Form No. CAA-13 within 60 days or the receipt or the scheme stating its objections or opinion and requesting that Tribunal may consider the scheme.
• On receipt of an application from the Central Government or from any person, if the Tribunal, for reasons to be recorded in writing, is of the opinion that the scheme should be considered, the Tribunal may direct accordingly or it may confirm the scheme by passing such order as it deems fit.
• If the Central Government does not have any objection to the scheme or it does not file any application under this section before the Tribunal, it shall be deemed that it has no objection to the scheme.
• The confirmation order of the scheme issued by the Central Government or Tribunal shall be filed, within 30 days of the receipt of the order of confirmation, in Form INC-28 along with the required fees with the Registrar of Companies having jurisdiction over the transferee and transferor companies respectively.
• The registration of the scheme shall be deemed to have the effect of dissolution of the transferor company without process of winding up.
• The registration of the scheme shall have the following effects-

• transfer of property or liabilities of the transferor company to the transferee company so that the property becomes the property of the transferee company and the liabilities become the liabilities of the transferee company;
• the charges, if any, on the property of the transferor company shall be applicable and enforceable as if the charges were on the property of the transferee company;
• legal proceedings by or against the transferor company pending before any court of law shall be continued by or against the transferee company; and
• where the scheme provides for purchase of shares held by the dissenting shareholders or settlement of debt due to dissenting creditors, such amount, to the extent it is unpaid, shall become the liability of the transferee company.

• The transferee company shall file an application with the Registrar along with the scheme registered, indicating the revised authorized capital and pay the prescribed fees due on revised capital.
• The fee, if any, paid by the transferor company on its authorized capital prior to its merger or amalgamation with the transferee company shall be set-off against the fees payable by the transferee company on its authorized capital enhanced by the merger or amalgamation.