Companies Act Section 378ZN — Amalgamation merger or division, etc. to form new Producer Companies

CHAPTER XXI

Commercial / Corporate

Summary

Sub-section (1) lets a Producer Company, by a resolution passed at its general meeting, decide to do one of two things: transfer its assets and liabilities, in whole or in part, to another Producer Company that agrees to the transfer through its own general meeting resolution, for any of the objects specified in section 378B; or divide itself into two or more new Producer Companies.

Sub-section (2) allows any two or more Producer Companies, by a resolution passed at any general or special meetings of their Members, to decide to amalgamate and form a new Producer Company, or to merge one Producer Company (called the merging company) with another Producer Company (called the merged company).

Sub-section (3) requires that every resolution under this section be passed at a general meeting by a majority of total Members, with the right to vote being not less than two-thirds of Members present and voting. The resolution must contain all particulars of the transfer of assets and liabilities, or the division, amalgamation, or merger, as the case may be.

Sub-section (4) states that before passing a resolution under this section, the Producer Company must give written notice, along with a copy of the proposed resolution, to all Members and creditors, who may give their consent.

Sub-section (5) provides that, notwithstanding anything in the articles or any contract to the contrary, any Member or creditor who does not consent to the resolution has, within one month of the date of service of the notice, the option to either transfer their shares with the approval of the Board to any active Member (in the case of a Member), thereby ceasing to be a Member of that Company, or to withdraw their deposit, loan, or advance (in the case of a creditor).

Sub-section (6) says that any Member or creditor who does not exercise their option within the period specified in sub-section (5) is deemed to have consented to the resolution.

Sub-section (7) states that a resolution passed under this section does not take effect until the expiry of one month, or until the assent of all Members and creditors has been obtained, whichever is earlier.

Sub-section (8) lists what the resolution must provide for, including: the regulation of the conduct of the affairs of the Producer Company in future; the purchase of shares or interest of any Members by other Members or by the Producer Company; the consequent reduction of share capital in case of purchase of shares of one Producer Company by another; termination, setting aside, or modification of any agreement between the company and its directors, secretaries, and manager, apart from terms that the majority of shareholders consider just and equitable; termination, setting aside, or modification of any agreement between the Producer Company and any person not referred to in clause (d), with the proviso that no such agreement shall be terminated, set aside, or modified except after giving due notice to the party concerned, and no such agreement shall be modified except after obtaining the consent of the party concerned; the setting aside of any transfer, delivery of goods, payment, execution, or other act relating to property made or done by or against the Producer Company within three months before the date of passing the resolution, which would, if made or done against an individual, be deemed in his insolvency to be a fraudulent preference; the transfer to the merged company of the whole or any part of the undertaking, property, or liability of the Producer Company; the allotment or appropriation by the merged company of any shares, debentures, policies, or other like interests in the merged company; the continuation by or against the merged company of any legal proceedings pending by or against any Producer Company; the dissolution, without winding up, of any Producer Company; the provision to be made for Members or creditors who make dissent; the taxes, if any, to be paid by the Producer Company; and such incidental, consequential, and supplemental matters as are necessary to secure that the division, amalgamation, or merger shall be fully and effectively carried out.

Sub-section (9) states that when a resolution passed under this section takes effect, the resolution itself serves as a sufficient conveyance to vest the assets and liabilities in the transferee.

Sub-section (10) requires the Producer Company to make arrangements for meeting in full, or otherwise satisfying, all claims of the Members and creditors who exercise the option, within the period specified in sub-section (4), not to continue as the Member or creditor.

Sub-section (11) provides that where the whole of the assets and liabilities of a Producer Company are transferred to another Producer Company in accordance with sub-section (9), or where there is a merger under sub-section (2), the registration of the first mentioned Company or the merging company, as the case may be, shall stand cancelled, and that Company shall be deemed to have been dissolved and shall cease to exist forthwith as a corporate body.

Sub-section (12) states that where two or more Producer Companies are amalgamated into a new Producer Company in accordance with sub-section (2), and the new Producer Company is duly registered by the Registrar, the registration of each of the amalgamating companies shall stand cancelled forthwith on such registration, and each of the Companies shall thereupon cease to exist as a corporate body.

Sub-section (13) provides that where a Producer Company divides itself into two or more Producer Companies in accordance with clause (b) of sub-section (1), and the new Producer Companies are registered in accordance with this Chapter, the registration of the erstwhile Producer Company shall stand cancelled forthwith, and that Company shall be deemed to have been dissolved and cease to exist as a corporate body.

Sub-section (14) states that the amalgamation, merger, or division of companies under the foregoing sub-sections shall not in any manner affect the pre-existing rights or obligations, and any legal proceedings that might have been continued or commenced by or against any erstwhile company before the amalgamation

Official Text

(1) A Producer Company may, by a resolution passed at its general meeting,—

(a) decide to transfer its assets and liabilities, in whole or in part, to any other Producer Company, which agrees to such transfer by a resolution passed at its general meeting, for any of the objects specified in section 378B;

(b) divide itself into two or more new Producer Companies.

(2) Any two or more Producer Companies may, by a resolution passed at any general or special meetings of its Members, decide to—

(a) amalgamate and form a new Producer Company; or

(b) merge one Producer Company (hereafter in this Chapter referred to as "merging company") with another Producer Company (hereafter in this Chapter referred to as "merged company").

(3) Every resolution of a Producer Company under this section shall be passed at its general meeting by a majority of total Members, with right of vote not less than two-thirds of its Members present and voting and such resolution shall contain all particulars of the transfer of assets and liabilities, or division, amalgamation, or merger, as the case may be.

(4) Before passing a resolution under this section, the Producer Company shall give notice thereof in writing together with a copy of the proposed resolution to all the Members and creditors who may give their consent.

(5) Notwithstanding anything contained in articles or in any contract to the contrary, any Member, or any creditor not consenting to the resolution shall, during the period of one month of the date of service of the notice on him, have the option,—

(a) in the case of any such Member, to transfer his shares with the approval of the Board to any active Member thereby ceasing to continue as a Member of that Company; or

(b) in the case of a creditor, to withdraw his deposit or loan or advance, as the case may be.

(6) Any Member or creditor, who does not exercise his option within the period specified in sub-section (5), shall be deemed to have consented to the resolution.

(7) A resolution passed by a Producer Company under this section shall not take effect until the expiry of one month or until the assent thereto of all the Members and creditors has been obtained, whichever is earlier.

(8) The resolution referred to in this section shall provide for—

(a) the regulation of conduct of the affairs of the Producer Company in future;

(b) the purchase of shares or interest of any Members of the Producer Company by other Members or by the Producer Company;

(c) the consequent reduction of its share capital, in case of purchase of shares of one Producer Company by another Producer Company;

(d) termination, setting aside or modification of any agreement, howsoever arrived between the company on the one hand and the directors, secretaries and manager on the other hand, apart from such terms and conditions as may, in the opinion of the majority of shareholders, be just and equitable in the circumstances of the case;

(e) termination, setting aside or modification of any agreement between the Producer Company and any person not referred to in clause (d):

Provided that no such agreement shall be terminated, set aside or modified except after giving due notice to the party concerned:

Provided further that no such agreement shall be modified except after obtaining the consent of the party concerned;

(f) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property, made or done by or against the Producer Company within three months before the date of passing of the resolution, which would if made or done against any individual, be deemed in his insolvency to be a fraudulent preference;

(g) the transfer to the merged company of the whole or any part of the undertaking, property or liability of the Producer Company;

(h) the allotment or appropriation by the merged company of any shares, debentures, policies, or other like interests in the merged company;

(i) the continuation by or against the merged company of any legal proceedings pending by or against any Producer Company;

(j) the dissolution, without winding up, of any Producer Company;

(k) the provision to be made for the Members or creditors who make dissent;

(l) the taxes, if any, to be paid by the Producer Company;

(m) such incidental, consequential and supplemental matters as are necessary to secure that the division, amalgamation or merger shall be fully and effectively carried out.

(9) When a resolution passed by a Producer Company under this section takes effect, the resolution shall be a sufficient conveyance to vest the assets and liabilities in the transferee.

(10) The Producer Company shall make arrangements for meeting in full or otherwise satisfying all claims of the Members and the creditors who exercise the option, within the period specified in sub-section (4), not to continue as the Member or creditor, as the case may be.

(11) Where the whole of the assets and liabilities of a Producer Company are transferred to another Producer Company in accordance with the provisions of sub-section (9), or where there is merger under sub-section (2), the registration of the first mentioned Company or the merging company, as the case may be, shall stand cancelled and that Company shall be deemed to have been dissolved and shall cease to exist forthwith as a corporate body.

(12) Where two or more Producer Companies are amalgamated into a new Producer Company in accordance with the provisions of sub-section (2) and the Producer Company so formed is duly registered by the Registrar, the registration of each of the amalgamating companies shall stand cancelled forthwith on such registration and each of the Companies shall thereupon cease to exist as a corporate body.

(13) Where a Producer Company divides itself into two or more Producer Companies in accordance with the provisions of clause (b) of sub-section (1) and the new Producer Companies are registered in accordance with the provisions of this Chapter, the registration of the erstwhile Producer Company shall stand cancelled forthwith and that Company shall be deemed to have been dissolved and cease to exist as a corporate body.

(14) The amalgamation, merger or division of companies under the foregoing sub-sections shall not in any manner whatsoever affect the pre-existing rights or obligations and any legal proceedings that might have been continued or commenced by or against any erstwhile company before the amalgamation, merger or division, may be continued or commenced by, or against, the concerned resulting company, or merged company, as the case may be.

(15) The Registrar shall strike off the names of every Producer Company deemed to have been dissolved under sub-sections

(11) to (14).

(16) Any member or creditor or employee aggrieved by the transfer of assets, division, amalgamation or merger may, within thirty days of the passing of the resolution, prefer an appeal to the Tribunal.

(17) The Tribunal shall, after giving a reasonable opportunity to the person concerned, pass such orders thereon as it may deem fit.

(18) Where an appeal has been filed under sub-section (16), the transfer of assets, division, amalgamation or merger of the Producer Company shall be subject to the decision of the Tribunal. PART X RESOLUTION OF DISPUTES 378Z-O. Disputes.—

(1) Where any dispute relating to the formation, management or business of a Producer Company arises—

(a) amongst Members, former Members or persons claiming to be Members or nominees of deceased Members; or

(b) between a Member, former Member or a person claiming to be a Member, or nominee of deceased Member and the Producer Company, its Board of Directors, office-bearers, or liquidator, past or present; or

(c) between the Producer Company or its Board, and any director, office-bearer or any former director, or the nominee, heir or legal representative of any deceased director of the Producer Company, such dispute shall be settled by conciliation or by arbitration as provided under the Arbitration and Conciliation Act, 1996 (26 of 1996) as if the parties to the dispute have consented in writing for determination of such disputes by conciliation or by arbitration and the provisions of the said Act shall apply accordingly.

Explanation.—For the purposes of this section, a dispute shall include—

(a) a claim for any debt or other amount due;

(b) a claim by surety against the principal debtor, where the Producer Company has recovered from the surety amount in respect of any debtor or other amount due to it from the principal debtor as a result of the default of the principal debtor whether such debt or amount due be admitted or not;

(c) a claim by Producer Company against a Member for failure to supply produce as required of him;

(d) a claim by a Member against the Producer Company for not taking goods supplied by him.

(2) If any question arises whether the dispute relates to formation, management or business of the Producer Company, the question shall be referred to the arbitrator, whose decision thereon shall be final. PART XI MISCELLANEOUS PROVISIONS