Companies Act Section 233 — Merger or amalgamation of certain companies

CHAPTER XV COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS

Commercial / Corporate

Summary

Sub-section (1) allows two or more small companies, or a holding company and its wholly-owned subsidiary, or other prescribed classes of companies, to enter into a merger or amalgamation scheme without following the usual procedures of sections 230 and 232, but only if certain conditions are met.

Under clause (a) of sub-section (1), the transferor company or companies and the transferee company must issue a notice of the proposed scheme inviting objections or suggestions from the Registrar, Official Liquidators where the registered offices are located, or persons affected by the scheme, within thirty days.

Under clause (b) of sub-section (1), the objections and suggestions received must be considered by the companies in their respective general meetings, and the scheme must be approved by members or classes of members holding at least ninety per cent of the total number of shares.

Under clause (c) of sub-section (1), each company involved in the merger must file a declaration of solvency, in the prescribed form, with the Registrar of the place where its registered office is situated.

Under clause (d) of sub-section (1), the scheme must be approved by a majority representing nine-tenths in value of the creditors or classes of creditors of the respective companies, either at a meeting convened by the company with twenty-one days notice along with the scheme, or otherwise approved in writing.

Sub-section (2) requires the transferee company to file a copy of the approved scheme, in the prescribed manner, with the Central Government, the Registrar, and the Official Liquidator where the registered office of the company is situated.

Sub-section (3) states that if the Registrar or Official Liquidator has no objections or suggestions to the scheme, the Central Government shall register the scheme and issue a confirmation of it to the companies.

Sub-section (4) allows the Registrar or Official Liquidator to communicate any objections or suggestions in writing to the Central Government within thirty days, and if no such communication is made, it is presumed that there is no objection to the scheme.

Sub-section (5) provides that if the Central Government, after receiving objections or suggestions or for any reason, believes the scheme is not in public interest or in the interest of creditors, it may file an application before the Tribunal within sixty days of receiving the scheme under sub-section (2), stating its objections and requesting the Tribunal to consider the scheme under section 232.

Sub-section (6) states that on receiving an application from the Central Government or any person, if the Tribunal, for reasons recorded in writing, thinks the scheme should be considered under the procedure in section 232, it may direct accordingly, or it may confirm the scheme by passing such order as it deems fit, and if the Central Government has no objection or does not file an application, it is deemed to have no objection.

Sub-section (7) requires that a copy of the order confirming the scheme under sub-section (6) be communicated to the Registrar having jurisdiction over the transferee company and the persons concerned, and the Registrar shall register the scheme and issue a confirmation to the companies, which shall be communicated to the Registrars where the transferor company or companies were situated.

Sub-section (8) states that registration of the scheme under sub-section (3) or sub-section (7) is deemed to have the effect of dissolving the transferor company without the process of winding-up.

Under clause (a) of sub-section (9), registration of the scheme transfers the property or liabilities of the transferor company to the transferee company, so the property becomes the transferee company's property and the liabilities become its liabilities.

Under clause (b) of sub-section (9), any charges on the property of the transferor company shall be applicable and enforceable as if they were on the property of the transferee company.

Under clause (c) of sub-section (9), legal proceedings by or against the transferor company pending before any court shall be continued by or against the transferee company.

Under clause (d) of sub-section (9), if the scheme provides for purchase of shares held by dissenting shareholders or settlement of debt due to dissenting creditors, such amount, to the extent it is unpaid, shall become the liability of the transferee company.

Sub-section (10) prohibits a transferee company, on merger or amalgamation, from holding any shares in its own name or in the name of any trust either on its behalf or on behalf of any subsidiary or associate company, and all such shares shall be cancelled or extinguished on the merger or amalgamation.

Sub-section (11) requires the transferee company to file an application with the Registrar along with the registered scheme, indicating the revised authorised capital and paying the prescribed fees due on the revised capital, and any fee paid by the transferor company on its authorised capital prior to the merger or amalgamation shall be set-off against the fees payable by the transferee company on its enhanced authorised capital.

Sub-section (12) states that the provisions of this section apply, with necessary modifications, to companies specified in sub-section (1) in respect of a scheme of compromise or arrangement referred to in section 230 or division or transfer of a company referred to in clause (b) of sub-section (1) of section 232.

Sub-section (13) allows the Central Government to provide for the merger or amalgamation of companies in such manner as may be prescribed.

Sub-section (14) states that a company covered under this section may use the provisions of section 232 for the approval of any scheme for merger or amalgamation.

Official Text

(1) Notwithstanding the provisions of section 230 and section 232, a scheme of merger or amalgamation may be entered into between two or more small companies or between a holding company and its wholly-owned subsidiary company or such other class or classes of companies as may be prescribed, subject to the following, namely:—

(a) a notice of the proposed scheme inviting objections or suggestions, if any, from the Registrar and Official Liquidators where registered office of the respective companies are situated or persons affected by the scheme within thirty days is issued by the transferor company or companies and the transferee company;

(b) the objections and suggestions received are considered by the companies in their respective general meetings and the scheme is approved by the respective members or class of members at a general meeting holding at least ninety per cent. of the total number of shares;

(c) each of the companies involved in the merger files a declaration of solvency, in the prescribed form, with the Registrar of the place where the registered office of the company is situated; and

(d) the scheme is approved by majority representing nine-tenths in value of the creditors or class of creditors of respective companies indicated in a meeting convened by the company by giving a notice of twenty-one days along with the scheme to its creditors for the purpose or otherwise approved in writing.

(2) The transferee company shall file a copy of the scheme so approved in the manner as may be prescribed, with the Central Government, Registrar and the Official Liquidator where the registered office of the company is situated.

(3) On the receipt of the scheme, if the Registrar or the Official Liquidator has no objections or suggestions to the scheme, the Central Government shall register the same and issue a confirmation thereof to the companies.

(4) If the Registrar or Official Liquidator has any objections or suggestions, he may communicate the same in writing to the Central Government within a period of thirty days:

Provided that if no such communication is made, it shall be presumed that he has no objection to the scheme.

(5) If the Central Government after receiving the objections or suggestions or for any reason is of the opinion that such a scheme is not in public interest or in the interest of the creditors, it may file an application before the Tribunal within a period of sixty days of the receipt of the scheme under sub-section (2) stating its objections and requesting that the Tribunal may consider the scheme under section 232.

(6) On receipt of an application from the Central Government or from any person, if the Tribunal, for reasons to be recorded in writing, is of the opinion that the scheme should be considered as per the procedure laid down in section 232, the Tribunal may direct accordingly or it may confirm the scheme by passing such order as it deems fit:

Provided that if the Central Government does not have any objection to the scheme or it does not file any application under this section before the Tribunal, it shall be deemed that it has no objection to the scheme.

(7) A copy of the order under sub-section (6) confirming the scheme shall be communicated to the Registrar having jurisdiction over the transferee company and the persons concerned and the Registrar shall register the scheme and issue a confirmation thereof to the companies and such confirmation shall be communicated to the Registrars where transferor company or companies were situated.

(8) The registration of the scheme under sub-section (3) or sub-section (7) shall be deemed to have the effect of dissolution of the transferor company without process of winding-up.

(9) The registration of the scheme shall have the following effects, namely:—

(a) transfer of property or liabilities of the transferor company to the transferee company so that the property becomes the property of the transferee company and the liabilities become the liabilities of the transferee company;

(b) the charges, if any, on the property of the transferor company shall be applicable and enforceable as if the charges were on the property of the transferee company;

(c) legal proceedings by or against the transferor company pending before any court of law shall be continued by or against the transferee company; and

(d) where the scheme provides for purchase of shares held by the dissenting shareholders or settlement of debt due to dissenting creditors, such amount, to the extent it is unpaid, shall become the liability of the transferee company.

(10) A transferee company shall not on merger or amalgamation, hold any shares in its own name or in the name of any trust either on its behalf or on behalf of any of its subsidiary or associate company and all such shares shall be cancelled or extinguished on the merger or amalgamation.

(11) The transferee company shall file an application with the Registrar along with the scheme registered, indicating the revised authorised capital and pay the prescribed fees due on revised capital:

Provided that the fee, if any, paid by the transferor company on its authorised capital prior to its merger or amalgamation with the transferee company shall be set-off against the fees payable by the transferee company on its authorised capital enhanced by the merger or amalgamation.

(12) The provisions of this section shall mutatis mutandis apply to a company or companies specified in sub-section (1) in respect of a scheme of compromise or arrangement referred to in section 230 or division or transfer of a company referred to clause (b) of sub-section (1) of section 232.

(13) The Central Government may provide for the merger or amalgamation of companies in such manner as may be prescribed.

(14) A company covered under this section may use the provisions of section 232 for the approval of any scheme for merger or amalgamation.