What is merger??

 The term 'merger' isn't precisely defined in the Companies Act, 2013 ("CA 2013") or the Income Tax Act, 1961 ("ITA").

In simple terms, a merger is when two or more entities come together to form one, not just combining their assets and liabilities, but creating a single business. Mergers can have various goals, like achieving economies of scale, gaining access to new technologies, or entering different sectors and markets.

In a merger, the entities that are merging usually stop existing independently and combine to become a single surviving entity. While the CA 2013 doesn't specifically define 'merger,' it does define a similar term, 'amalgamation.' Amalgamation is described as the merger of one or more companies into another company or the merger of two or more companies to create a new one. The ITA lays down certain conditions for an 'amalgamation' to qualify for tax benefits (explained in Part VI of this Paper).

Sections 230-234 of CA 2013, known as the "Merger Provisions," deal with arrangements or compromises between a company, its shareholders, and/or its creditors.

Who are shareholders?

Shareholders, are stockholders or equity holders, who are individuals, entities, or institutions that own shares or stocks in a company. When a person or entity purchases shares of a company's stock, they become a shareholder and acquire a proportional ownership interest in that company. Shareholders are considered partial owners of the company, and their ownership stake is determined by the number of shares they hold relative to the total outstanding shares.

Shareholders have certain rights and privileges, which may include the right to vote on important company matters, receive dividends if the company distributes profits, and participate in the financial benefits of the company's success. However, they also bear the risk of potential losses if the company's performance is not favorable.

In the business world, mergers and amalgamations can take different forms, depending on what the merging entities need. Even though corporate laws might not distinguish much between these different forms, the Competition Act, 2002 pays special attention to them.