Fast Track Merger Process under Section 233 of the Companies Act 2013

Fast Track Merger Process Under Section 233 of the Companies Act, 2013

The fast track merger process established under Section 233 of the Companies Act, 2013, facilitates mergers between small companies, start-ups, and holding and subsidiary companies with reduced regulatory demands.

Eligibility Criteria

To qualify for this expedited merger procedure, the following criteria must be met:

• Small Companies: As per Section 2(85) of the Companies Act, 2013, small companies must meet the following conditions:
  • Must not be a public company.
  • Paid-up capital must not exceed ₹4 crore.
  • Turnover must not exceed ₹40 crore.

Exceptions include:

• Holding companies and their subsidiaries.

• Section 8 companies.

• Companies governed under special acts.

• Start-ups: A start-up company must:

  • Be a private company incorporated within the last 10 years.
  • Have a turnover that does not exceed ₹100 crore.
  • Meet at least one of the following conditions:
    • Focus on innovation or improvement of products, processes, or services.
    • Operate a scalable business model with high potential for employment generation or wealth creation.

Steps in the Fast Track Merger Process

Pursuant to Section 233 and Rule 25 of the Companies (Compromise, Arrangements and Amalgamations) Rules, 2016, the following steps outline the merger process:

1. Review the MOA: Both companies should check their Memorandum of Association (MOA) to ensure compatibility for merging.

2. Board Meeting: Convene a board meeting to approve the merger and draft the proposed scheme of merger.

3. Submission to ROC: Send the proposed scheme to the Registrar of Companies (ROC) and the official liquidator using Form CAA-9. The ROC may raise objections within 30 days.

4. Declaration of Solvency: File a declaration of solvency to the ROC using Form CAA-10 from both companies.

5. Shareholder Meeting: Address any objections received, send a notice to all shareholders at least 21 days prior to the meeting, and secure 90% approval from shareholders based on value.

6. Creditor Meeting: Notify all creditors at least 21 days before the meeting and obtain at least 90% creditor approval based on value.

7. File Meeting Results: Within 7 days after the creditor or member meeting, file a copy of the scheme and the results in Form CAA-11 with the Central Government and official liquidator.

8. ROC Filing: File Forms CAA-11 and GNL-1 with the ROC.

9. ROC Objections: The Central Government will inquire if the ROC has any objections, which should be addressed within 30 days.

10. NCLT Referral: If the ROC raises objections and the Central Government deems them valid, it will communicate this to the National Company Law Tribunal (NCLT) using Form CAA-13 within 60 days. If the NCLT agrees with the objection, the merger will follow the procedure under Section 230. If there are no objections, the NCLT will approve the scheme through Form CAA-12.

11. Final Filing: Once approved by the Central Government, file Form INC-28 with the ROC within 30 days of approval.

Important Forms

• CAA-9: Proposed scheme.
• CAA-10: Declaration of solvency.
• CAA-11: Approved scheme submission to Central Government and official liquidator.
• CAA-12: Central Government's approval of the scheme.
• CAA-13: Communication of objections by Central Government to NCLT.
• GNL-1: Approved scheme submission to ROC.
• INC-28: Notice to ROC regarding the scheme's approval.

Important Timelines

• 7 Days: Board meeting
• 30 Days: Submit proposed scheme to ROC
• 21 Days: Shareholder meeting
• 21 Days: Creditors meeting
• 7 Days: Approved scheme submission to ROC, Central Government, and official liquidator
• 30 Days: ROC responses to objections
• 60 Days: Central Government responses to objections
• 30 Days: File INC-28 with ROC

Total Duration: The entire fast track merger process can take up to 206 days based on the circumstances involved.