A SNAPSHOT OF MERGER PROVISIONS NOW EFFECTIVE:

• NCLT: National Company Law Tribunal (NCLT) to now have the power to enforce compromise or arrangements with creditors and/ or members, merger and amalgamation instead of High Courts and to transfer all proceedings relating to compromise, arrangements, reconstruction to NCLT.
• Short Form Merger: The 2013 Act now provides for an option to follow the route of a short form process for merger between small companies and/ or merger between holding company/ wholly owned subsidiary company.
• Dissent Handling: Provisions relating to acquisition of shares of shareholders dissenting from Scheme approved by majority.
• Regulatory/Third party approvals: With a view to reduce post merger roadblocks, service of the notice of the merger along with documents (such as copy of the Scheme and valuation report) not only upon the shareholders and creditors but also on various regulators.
• Approval of the Scheme through postal ballot: Shareholders and creditors to also have the option to cast vote through postal ballot while considering a Scheme. This right will ensure wider participation of the shareholders and creditors, particularly for those who are scattered all over the country and who find it difficult to be either physically present or provide a proxy.
• Valuation Report: Mandatory to annex valuation report to the notices for the meetings to enable ready access to the shareholders and creditors.
• Objections: Objections can be raised by shareholders holding 10% or more equity and creditors whose debt represent 5% or more of the total debt as per the last audited financial statements. By raising the bar, the new law aims to ensure that the frivolous objections/ litigation can be avoided.
• Accounting Standards: The 2013 Act now makes prior certification from an auditor mandatory for both listed and unlisted companies.
• Merger of a listed company to an unlisted one: The 2013 Act specifically provides for the Tribunal’s order to state that the merger of a listed company into an unlisted company will not ipso facto make the unlisted company listed until the applicable listing regulations and SEBI guidelines are complied with.

The simplification of laws and fast tracking of restructuring proceedings, as above, will immensely improve investors confidence of MNCs engaged in business in India through wholly owned or downstream subsidiaries, apart from small and medium enterprises (SMEs) and startups being saved from the detailed process relevant to large enterprises. India now stands at par or ahead of many first world legal regimes in terms of ameliorating a transparent and efficient process under the new Merger Provisions.

All eyes are on NCLT now to ensure a fast track handling to enable India to move up the list in the global ease of doing business index.