MERGER OR AMALGAMATION OF INDIAN COMPANY WITH FOREIGN COMPANY

MERGER OR AMALGAMATION OF INDIAN COMPANY WITH FOREIGN COMPANY

Section 234 of Companies Act 2013

As per MCA Notification No. 1/37/2013 and in exercise of the powers conferred by sub section (3) of section 1 of the Companies Act, 2013 (18 of 2013), the Central Government hereby appoints the 13^th day of April, 2017 as the date on which the provisions of section 234 of the Companies Act, 2013 shall come into force. The link to download the notification is mentioned below;

http://www.mca.gov.in/Ministry/pdf/section234Notification_14042017.pdf

Section 234 of the Companies Act, 2013 talks about the Merger and Amalgamation of Indian Company with the Foreign Company.

INDIAN COMPANY means a company as defined under section 2(20) of the Companies Act, 2013.

As per Section 2(20) of the Companies Act, 2013

“Company” means a company incorporated under this act or under any previous company law.

FOREIGN COMPANY means a company or a body corporate as defined under section 2(42) of the Act, incorporated outside India in jurisdictions as may be notified by the Central Government from time to time for the purpose of section 234 of the Companies Act, 2013.

As per Section 2(42) of the Companies Act, 2013

“Foreign company” means any company or body corporate incorporated outside India which-

(a)    Has a place of business in India whether by itself or through an agent, physically or through electronic mode; and

(b)   Conducts any business activity in India in any other manner.

This particular Section seeks to provide the mode of merger or amalgamation between the companies registered in India as per the Companies Act, 2013 and the foreign Companies that are registered as per their own country’s legislation.

The Central Government, may in consultation with the Reserve Bank of India make rules for the purpose of merger or amalgamation provided under this clause.

1)      A Foreign company, may with the prior approval of Reserve Bank of India, merge into a company registered under the Companies Act, 2013 or an Indian Company may with the prior approval of RBI merge into a Foreign Company registered outside India.

2)      For this purpose, the payment to be made to the shareholders of merging company would be in the following manner:-

a)      Cash, or

b)      Depository Receipts, or

c)      Partly in Cash, or

d)     Partly in Depository Receipts

3)      The merger or amalgamation of a company into a foreign company, or vice versa, shall comply in all respects with the Foreign Exchange Management Act, 1999 and any applicable regulations there under for which approvals from RBI and Ministry of Finance will be required.
     The Reserve Bank of India has proposed draft guidelines on cross border merger transactions pursuant to the Companies (Compromises, Arrangements and Amalgamation) Amendment Rules, 2017 on 1st May 2017 . The Central Bank has proposed these regulations under the Foreign Exchange Management Act, 1999 in order to address the issues that may arise when an Indian Company and a Foreign Company enter into Scheme of merger, demerger, amalgamation, or rearrangement. These Regulations stipulate conditions that should be adhered to by the Companies involved in the Scheme. The Regulations shall be named Foreign Exchange Management (Cross Border Merger) Regulations. The Reserve Bank of India has invited comments/ suggestions on said guidelines. The comments/ suggestions may be sent latest by 9^th May, 2017.

For more details, contact CS Neha Seth at 9871903449 or email us at csnehaseth@gmail.com or csnehaseth.cp@gmail.com