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NCLT A FORUM TO PROVE PROFESSIONAL COMPETENCE

Corporate Laws / Banking / SEBI - By: - Mr.M. GOVINDARAJAN - Dated:- 18-8-2016 - Introduction With effect from 31.05.1991 vide Companies (Amendment) act, 1988, the Company Law Board was established under of the Companies Act, 1956 to exercise and discharge such powers and functions as may be conferred on it. The Company Law Board is given power to inquire into various matters as conferred in Companies Act, 1956. However the matters such that winding up, merger, amalgamation etc., are handled by .....

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roposed that NCLT will perform all the functions vested on Company Law Board and Company Court. Judicial journey The provisions of the constitution of NCLT and NCLAT were challenged by the Madras Bar Association on the ground that the Administration tried to usurp the functions of judicial in Tribunals. The Supreme Court quashed the provisions relating to the constitution of NCLT and NCLAT but it gave directions to do suitable modifications as directed by the Supreme Court. The Companies Act, 20 .....

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rue Vide Notification NO. S.O. 1932 (E), dated 01.06.2016, the Central Government constituted the National Company Law Tribunal to exercise and discharge the powers and functions as are, or may be, conferred on it by the Companies Act, 2013 , with effect from 01.06.2016. Vide Notification No. S.O.1933 (E), dated 01.06.2016, the Central Government constituted the National Company Law Appellate Tribunal (NCLAT) for hearing appeals against the orders of the National Company Law Tribunal with effect .....

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before the Board of Company Law Administration (Company Law Board) shall stand transferred to the National Company Law Tribunal and it shall dispose of such matters or proceedings or cases in accordance with the provisions of the Companies Act, 2013 or the Companies Act, 1956. Transfer of cases to NCLT The transfer of cases to the Tribunal is being done in three phases from the existing bodies to NCLT- First Phase - All cases of Company Law Board have been transferred to NCLT; Second Phase - BI .....

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ate Tribunal, as the case may be, may either appear in person or authorize one or more- Chartered Accountants; or Company Secretaries; or Cost Accountants; or Legal practitioners; or Any other person to present his case before the Tribunal or Appellate Tribunal, as the case may be. Thus the above said professionals are eligible to appear before the NCLT as well as NCLAT. The difference between the erstwhile Companies Act, 1956 and the present Companies Act, 2013 is that before the Company Court .....

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lotments; Section 101 - Reduction of Share Capital; Section 102 - Reduction of Share capital; Section 103 - Registration of order and minutes of reduction; Section 104 - Liability of Members in respect of reduced shares; Section 107 - Rights of dissenting shareholders; Chapter V - Arbitration, Compromise and arrangements; The corresponding sections in the new Companies Act, 2013 are- Section 39(4) - Returns as to allotments; Section 48 - Rights of dissenting shareholders; Section 66- Reduction o .....

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ofessionals to exhibit their professional competence in all matters to be dealt with NCLT. As discussed there are some areas which are being dealt with by Company Court/High Court. Among them the author chose the area of Merger and Amalgamations which would be the better area for the professionals in practice to show their professional competence. Merger and amalgamations Mergers and amalgamations have become a big part of the corporate world, and are among the most strategic and tactical decisi .....

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ences, trading barriers, different national policies are some among them. Reasons for M&A The following are some of the reasons that can be considered for M&A- Size is a great advantage in relation to costs.It assists in enhancing profitability, through cost reduction resulting from economies of scale, operating efficiency and synergy; Through business combination risk is diversified, particularly when it acquires businesses whose income streams are not correlated; M&A helps to limit .....

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th other companies through M&A; A business with good potential may be poorly managed and the assets underutilized, thus resulting in a low return being achieved.Such a business is likely to attract a takeover bid from a more successful company, which hopes to earn higher returns. Types of M&A The following are the various types of M&A- Horizontal merger - two companies that are in direct competition and share the same product lines and markets; Vertical merger - a customer and compan .....

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whether this synergy is achieved. Objectives of M&A The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies. Except the obvious synergy effect, the other important motives for M&A are- Operating synergy; Financial synergy; Economic motives; Horizontal integration; Vertical integration; Tax motives. Provisions relating to M&A Section 230 - The powe .....

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237 - Power of Central Government to provide for amalgamation of companies in public interest; Section 238 - Registration of offer schemes involving transfer of shares; Section 239 - Preservation of books and papers of amalgamated companies; Section 240 - Liability of offers in respect of offences committed prior to merger, amalgamation etc., Procedure The merger and amalgamation involves the following procedure- I stage To identify industry; To select sector; To choose companies; To find compa .....

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s of Court order; Scheme to approved by 75% of the secured creditors; Scheme to be applied for sanction of the court; Court approval; To file the court order approving the scheme with Registrar of Companies; Each stage involves much work in its process. Section 232(1) of the Act provides where an application is made to the Tribunal showing that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of the company or companies i .....

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ll be required to circulate the following for the meeting so ordered by the Tribunal, namely- The draft of the proposed terms of the scheme drawn up and adopted by the directors of the merging company; Confirmation that a copy of the draft scheme has been filed with the Registrar; A report adopted by the directors of the merging companies explaining effect of compromise on each class of shareholders, key managerial personnel, promoters and non promoter shareholders laying out in particular the s .....

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o to be shown in the valuation methods. The Tribunal, after satisfying itself that the procedure specified, has been complied with, may, by order, sanction the merger or amalgamation scheme. The order of the Tribunal shall be filed with the Registrar by the company within a period of 30 days of the receipt of the certified copy of the order. The scheme shall clearly indicate an appointed date from which it shall be effective and the scheme shall be deemed to be effective from such date and not a .....

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ner, on such terms and conditions as may be prescribed and appointed by the audit committee or in its absence by the Board of Directors of that company. Duties of Valuer Section 247(2) of the Act that the valuer appointed shall- make an appeal, true and fair valuation of any assets which may be required to be valued; exercise due diligence while performing the functions as valuer; make the valuation in accordance with such rules as may be prescribed; and not undertake valuation of any assets in .....

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