Chapter XV of the Companies Act 2013 (CA 2013) deals with “Compromises, Arrangements and Amalgamations”. As per section 232 of the CA 2013, a scheme involving a merger, where the undertaking, property and liabilities of one or more companies, including the company in respect of which the compromise or arrangement is proposed, are to be transferred to another existing company, is known as a merger by absorption.
Where the undertaking, property and liabilities of two or more companies, including the company in respect of which the compromise or arrangement is proposed, are to be transferred to a new company (whether or not a public company), it is a merger by formation of a new company. A scheme of merger/amalgamation can also be entered into between two or more small companies or between a holding company and its wholly owned subsidiary company, subject to some conditions.
Further, a foreign company may, with the prior approval of the Reserve Bank of India, merge into a company registered under the CA 2013 or vice versa. A foreign company means any company or body corporate incorporated outside India whether or not it has a place of business. An amalgamation for public interest is also possible, if the central government is satisfied that it is essential for public interest that two or more companies should amalgamate into a single company.
DivisionA scheme of compromise, arrangement and amalgamation involves a division where, under the scheme, the undertaking, property and liabilities of the company in respect of which the compromise or arrangement is proposed are to be divided among and transferred to two or more companies, each of which is either an existing company or a new company. Property for this purpose includes assets, rights and interests of every description and liabilities include debts and obligations of every description.
