Documentation - Merger and Amalgamation: formula sheet

Key formulas

Fast track: notice period

Notice inviting objections or suggestions: within thirty days (section 233(1)(a))

Issued by the transferor and transferee companies to the Registrar, Official Liquidators and persons affected.

Fast track: member approval

Approval at a general meeting by members holding at least 90% of the total number of shares (section 233(1)(b))

This is by shareholding, not by a 75% value-of-votes test.

Fast track: creditor approval

Majority representing nine-tenths in value of creditors, at a meeting on 21 days' notice or by written approval (section 233(1)(d))

The scheme must accompany the notice.

Fast track: declaration of solvency

Each company files a declaration of solvency, in the prescribed form, with its Registrar (section 233(1)(c))

Required from every company in the merger.

Fast track: filing the approved scheme

Transferee company files the approved scheme with the Central Government, Registrar and Official Liquidator (section 233(2))

The Registrar or Official Liquidator may communicate objections within thirty days; silence is presumed no objection.

Fast track: Central Government's reference to Tribunal

Application to the Tribunal within sixty days of receiving the scheme (section 233(5))

Made if the scheme is not in public interest or the interest of creditors.

Cross-border merger

Prior RBI approval; consideration in cash, Depository Receipts, or partly each (section 234(2))

Applies to a foreign company merging into an Indian company or vice versa, subject to other laws.

Revised authorised capital

Transferee files application with Registrar with registered scheme, showing revised authorised capital and fees (section 233(11))

Fee paid earlier by the transferor on its authorised capital is set off.

Share exchange ratio

Exchange ratio = Value per share of transferor ÷ Value per share of transferee

Gives transferee shares to be issued for each transferor share. Value per share = value of equity ÷ number of shares.

Shares to be issued

New shares = Transferor shares held × Exchange ratio

Fractions are usually handled in the scheme, for example by rounding or a trustee mechanism.

Documents to circulate (Section 232(2))

Draft scheme + Registrar filing confirmation + directors' report + expert valuation report, if any + supplementary accounting statement, if required

Supplementary statement is needed if last annual accounts relate to a year ending more than six months before the first meeting.

Auditor's certificate (Section 232(3) proviso)

Auditor certifies accounting treatment conforms to accounting standards under section 133

Must be filed with the Tribunal before it sanctions the scheme.

Meaning of merger by absorption

Transferor company(ies) → existing transferee company

Explanation to section 232: undertaking, property and liabilities pass to an existing company.

Meaning of merger by formation of a new company

Two or more transferor companies → new company

The new company may or may not be a public company. References to merging companies mean the transferor companies.

Appointed date rule

Scheme is effective from the appointed date and not a later date (s. 232(6))

The scheme must clearly indicate the appointed date.

Filing of order

Certified copy of order to Registrar within 30 days of receipt (s. 232(5))

Default attracts penalty of ₹20,000 on the company and each officer in default, plus ₹1,000 per day after the first, subject to a maximum of ₹3,00,000 (s. 232(8)).

Documents to circulate for the meeting

Draft scheme + filing confirmation + directors' report + valuation report (if any) + supplementary accounting statement (if needed)

Section 232(2). Supplementary statement is needed if last annual accounts relate to a year ending more than six months before the first meeting.

Auditor's certificate proviso

No sanction unless auditor certifies accounting treatment conforms to accounting standards under s. 133

Proviso to s. 232(3). The certificate must be filed with the Tribunal.

Share exchange ratio (illustrative)

Shares to issue = Shares held in transferor × Exchange ratio

The ratio comes from the valuation report. Section 232(2)(c) requires the directors' report to lay out the ratio.

Voting majority for approval

Majority in number of persons voting, representing ≥ 3/4 in value of the class

Section 230(6): votes may be in person, by proxy or by postal ballot. Once the Tribunal sanctions, the scheme binds the company, all creditors or members of the class, and the liquidator and contributories in a winding up.

Time to vote on the notice

Vote within one month from the date of receipt of notice

Section 230(4): persons may vote themselves, through proxy or by postal ballot.

Right to object

Holding ≥ 10% of shares, or outstanding debt ≥ 5% of total outstanding debt per latest audited financial statement

Section 230(4) proviso: only such persons may object to the scheme.

Regulator representations

30 days from receipt of notice

Section 230(5): if no representation is made, it is presumed that the authority has none.

Dispensing with creditors' meeting

Creditors holding ≥ 90% in value agree and confirm by affidavit

Section 230(9): the Tribunal may dispense with the creditors' meeting. It is a power, not a right.

Filing the Tribunal order

File with Registrar within 30 days of receiving the order

Section 230(8): the duty is on the company.

Auditor's certificate

Certificate that the accounting treatment conforms to accounting standards under section 133

Section 230(7) proviso: the scheme cannot be sanctioned unless it is filed with the Tribunal.

Two-motion structure

First motion: company application + affidavit → directions for meetings. Second motion: petition + affidavit → sanction order

Name each motion and its purpose in an answer. The first motion does not sanction anything; it only gives directions.

Approval majority at meetings

Majority in number representing 3/4 in value of those present and voting

This is the general rule for each class. The Tribunal may dispense with a creditors' meeting in the circumstances the Act and Rules allow.

Filing the order with the Registrar

Certified copy of order → Form INC-28 → within 30 days of receipt

Time runs from receipt of the certified copy, not from the date of the order. Check the facts for the receipt date.

Fast-track contrast (section 233)

Notice inviting objections from Registrar/OL and persons affected: 30 days; members: at least 90% of total shares; creditors: majority representing 9/10 in value; Registrar/OL may communicate objections to the Central Government within 30 days (s.233(4)); Central Government may apply to the Tribunal within 60 days of receipt of the scheme (s.233(5))

Use this only to contrast. It applies to small companies, a holding company and its wholly-owned subsidiary, and other prescribed classes, and a company covered may still choose section 232. If the Registrar/OL does not communicate any objection in 30 days, no objection is presumed.

Effect of order

Order sanctioning scheme + filing certified copy with Registrar → scheme effective as the order provides; transferor dissolved without winding up

The effective date and the appointed date are different. State both when the facts give them.

Core rule of section 240

Offence under the Act by officer in default of transferor company before merger, amalgamation or acquisition → liability continues after it

It applies notwithstanding anything in any other law for the time being in force.

Conditions to test

(1) Offence under the Companies Act, 2013 (2) Committed before the transaction (3) By an officer in default (4) Of the transferor company (5) Merger, amalgamation or acquisition

All five must be present for section 240 to apply.

Related rule for Producer Companies

Section 378ZN(14): merger, amalgamation or division does not affect pre-existing rights or obligations; proceedings may be continued against the resulting or merged company

This is a separate provision for Producer Companies. Do not confuse it with section 240.

Quick revision

• Section 232 applies when a Section 230 application is made for a scheme involving merger or amalgamation, and Section 230(3) to (6) apply mutatis mutandis to the meetings.
• Merger by absorption: transfer to an existing company. Merger by formation of a new company: transfer to a new company.
• Section 232(2) circulation: draft terms adopted by directors, confirmation of filing with the Registrar, directors' report, expert valuation report if any, and supplementary accounting statement.
• Supplementary accounting statement is needed if the last annual accounts relate to a year ending more than six months before the first meeting.
• The directors' report must explain the effect on each class of shareholders, KMP, promoters and non-promoter shareholders, including the share exchange ratio and any special valuation difficulties.
• No sanction unless the company's auditor certifies that the accounting treatment follows the accounting standards under Section 133.
• The scheme must state an appointed date and is effective from it, not from a later date.
• The transferee company cannot hold its own shares as a result of the scheme; such shares are cancelled or extinguished.
• A certified copy of the order must be filed with the Registrar within thirty days of receipt. Default attracts a penalty of ₹20,000, plus ₹1,000 per day after the first, capped at ₹3,00,000.
• Until the scheme is complete, a yearly statement certified by a CA, cost accountant or company secretary in practice must be filed with the Registrar.
• Section 234: merger with a foreign company needs prior Reserve Bank of India approval, and consideration may be cash, Depository Receipts or both.
• Section 240: liability of officers in default of the transferor company for offences under the Act continues after the merger.

Common mistakes

• Listing documents without stages. Fix: Always group by the five stages so the answer shows sequence and logic.
• Applying the 75% approval test to fast track mergers. Fix: For section 233, remember ninety per cent. of total shares for members and nine-tenths in value for creditors.
• Saying an MOU is fully binding or fully non-binding. Fix: Say that an MOU is generally non-binding on the deal, but clauses such as confidentiality, exclusivity and costs may be made binding.
• Treating the directors' report and the expert's valuation report as the same document. Fix: Section 232(2) lists them separately. The directors adopt their report. The expert's report is a separate item.
• Treating appointed date and effective date as the same. Fix: Appointed date is the date the scheme is deemed effective from. Effective date is when the certified order is filed with the Registrar. State both, and say the Act requires only the appointed date.
• Saying the appointed date can be any date after sanction. Fix: Section 232(6) says the scheme is effective from the appointed date and not from a later date. It is a date chosen in the scheme.
• Stating the vote as three-fourths of all members, not of those voting. Fix: Write the exact words: majority in number of persons representing three-fourths in value of those voting, in person, by proxy or by postal ballot.
• Skipping the board resolution and starting with the Tribunal. Fix: Open every answer with the board approval, and say it authorises a person to file and swear the affidavits.
• Treating the Tribunal petition as a single filing Fix: Always describe two motions. The first obtains directions for meetings; the second seeks sanction after the meetings are held and reported.
• Counting the thirty days for INC-28 from the date of the order Fix: Count from receipt of the certified copy. Circle the receipt date in the question before computing.

Exam tips

• Answer in the order: route, stage-wise documents, facts, conclusion.
• Quote the exact fast track thresholds: thirty days, ninety per cent., nine-tenths, twenty-one days, sixty days.
• In cross-border questions, state prior RBI approval and the notified-jurisdiction condition first.
• Use the case facts to say which document is missing and what the company must do next.
• Do not cite section numbers you are unsure of; describe the rule in words instead.
• For a case question, name the document, say what it contains, then link it to the facts and conclude.
• In ratio problems, show value per share for both companies before the ratio, since marks go for steps.
• Remember that section 232(2) separates the directors' report from the expert's valuation report. Cite it.