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TMI Blog2016 (10) TMI 1371X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Counsel for the Petitioners states that the Transferor Company is a private limited company and is, inter alia, engaged in the business of delivering information technology/ information technology enabled services and primarily delivers services to other Accenture group companies outside India. The Transferee Company is a private limited company and a wholly-owned subsidiary of the Transferor Company and is, inter alia, engaged in the business of business process outsourcing (BPO) activities from India, including debt collection. 4. Learned Counsel appearing on behalf of the Petitioners states that the following is the background and the rationale of the Scheme: a. The Transferor Company is a part of the Accenture group which is a global multinational group engaged in delivering a broad range of management consulting, technology, and outsourcing services to clients in nearly all geographic areas around the globe. The Transferor Company is a subsidiary of Accenture Services Mauritius Limited ('ASML'), a company incorporated under the laws of Mauritius. b. The Accenture group of companies adopted a global entity reduction program to identify and eliminate (through liquidation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to perform such regulated debt collection activities are very complex, time-consuming and unpredictable for a non-U.S. business entity. Further, the applicable U.S. laws do not permit transfer or assignment of such licenses and in many U.S. States, such licenses would be nullified upon a change of control event where the Transferee Company does not survive. Therefore, in the event the Transferee Company is merged into the Transferor Company, the said licenses would be nullified. However, if the Transferor Company is merged into the Transferee Company, there would be no legal impediment under applicable U.S. State laws from a licensing perspective so long as the Transferee Company remains licensed, registered and/or bonded to perform regulated debt collection activities across the U.S. (except two U.S. States). Accordingly, the Board of Directors of the Transferor Company and the Transferee Company have considered and decided that in order to utilize the benefits of the licenses held by the Transferee Company without any disruption of business, operationally, it is commercially prudent to amalgamate the Transferor Company with the Transferee Company. g. In the circumstances it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ordered to be dissolved without being wound-up. 9. The Regional Director has filed an affidavit on October 7, 2016 stating therein that save and except what is stated in paragraphs 6 (a) to (i) thereof, it appears that the Scheme is not prejudicial to the interest of shareholders and public. Paragraphs 6 (a) to (i) of the said affidavit read as under:- (a) The tax implication if any arising out of the scheme is subject to final decision of Income Tax Authorities. The approval of the scheme by this Hon'ble Court may not deter the Income Tax Authority to scrutinize the tax return filed by the transferee Company after giving effect to the scheme. The decision of the Income Tax Authority is binding on the petitioner Company. (b) The petitioner in clause 16 of the has not mentioned regarding the AS that would be adopted in case of difference in accounting policy while adopting accounting treatment. Deponent prays that the Hon'ble Court may direct the company to undertake to comply applicable accounting standards including AS-5. (c) ROC has observed that from the page 309 (Exhibit-H) of the scheme paper that certified true copy of Board Resolution dated 15.12.2015 doesn't appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not obtained as at 31/3/2015 as no separate segment results for such debt collection business was reported under segment reporting in the B/S as at 31/03/2015 or segment reporting was not done. Deponent prays that the Hon'ble Court may direct the company to undertake to and comply the provisions of the Companies Act (h) Petitioner in clause 14 of the scheme inter alia has mentioned that in order to carry on the activities currently being carried on by the Transferor Company, upon coming into effect of the Scheme, the main objects in the memorandum of association of the Transferor Company shall be added to the main objects of the memorandum of association of Transferee Company, to the extent such objects are not already covered by those of the Transferee Company. Deponent prays that the Hon'ble Court may direct the company to undertake to comply with the provisions of the Companies Act for alteration of the Memorandum of Association. (i) The shareholders of Transferor Company are foreign entities & foreigners. Deponent prays that the Hon'ble Court may direct the company to undertake to comply the provisions of the RBI Act, FEMA guidelines etc. 10. In response to the affidavi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting of the Transferee Company, and no such meeting was convened or held because such meeting was not required to be convened or held under law. It is further submitted that the provisions of Section 78 of the Companies Act, 1956 deal only with the creation and utilization of the securities premium account. The Scheme of Amalgamation does not provide for any creation or utilization of the securities premium account of the Transferor Company and/or the Transferee Company. It is therefore submitted that there is no legal requirement or obligation for compliance with the provisions of Section 78 of the Companies Act, 1956 in the present case. 15. The Learned Counsel for the Petitioners, in relation to Sections 100-104 of the Companies Act, 1956, submitted that the said provisions are not applicable in the present case for the following reasons: a. The Transferor Company holds the entire share capital of the Transferee Company. Pursuant to the Scheme of Amalgamation, the Transferor Company will stand dissolved and all investments (including shares) held by the Transferor Company will be transferred to the Transferee Company. b. Section 67 of the Companies Act, 2013 (correspondi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssary to follow the prescribed procedure of sub-section (2) of section 101 of the Companies Act 1956 in cases where reduction of share capital is automatic by virtue of operation of law. 16. In view of the above, the objection of the Regional Director in paragraph 6(d) of the Affidavit is not well founded and hence does not survive. 17. In response to paragraph 6(e) of the Affidavit of the Regional Director, it is submitted that pursuant to the Scheme of Amalgamation becoming effective, the existing STPI related registrations and licenses held by the Transferor Company shall be transferred to the Transferee Company. The process prescribed by the STPI in relation to obtaining no-objection certificate for merger/transfer of STPI licenses requires submission of a copy of the High Court order approving the Scheme of Amalgamation and the relevant acknowledgement copy of the forms filed with the Registrar of Companies to make the Scheme effective. The application form to be filed with the STPI authorities evidences that the approval of the High Court to the Scheme of Amalgamation is an act which must precede the filing of the application with the STPI authorities seeking approval for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferee Company, there is no requirement to disclose separate segment reporting for the US debt collection licenses. Therefore, the objection of the Regional Director with respect to separate segment reporting is not well founded and hence does not survive. To the extent applicable, the Transferee Company undertakes to comply with the provisions of the Companies Act, 2013. The said undertaking is accepted. 20. In response to paragraph 6(h) of the Affidavit of the Regional Director, the Transferee Company undertakes to comply with the provisions of the Companies Act, 2013 for alteration of its Memorandum of Association. The said undertaking is accepted. 21. In response to paragraph 6(i) of the Affidavit of the Regional Director, the Transferee Company undertakes to comply with the provisions of the Foreign Exchange Management Act, 1999 and the guidelines issued thereunder, and other applicable laws at the time of issuance of shares by the Transferee Company to the non-resident shareholders of the Transferor Company. The said undertaking is accepted. 22. The Learned Counsel of Regional Director on instructions of Mrs. P. Sheela, Joint Director Inspection in the Office of the Regi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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