The merger is a combination of two or more entities into one, it is not just the accumulation of assets and liabilities of the distinct entities, but the organization of entity into one business. It is done as a method of acquiring cash resources, eliminating competition, saving on taxes or influencing the economies of large-scale operations. it increases shareholders’ value, reduces risk by diversification, improves Managementerial effectiveness and helps achieve company growth and financial gain.
Basic Procedure
An amalgamation’s terms are finalized by the companies’ board of directors. The scheme is prepared and submitted to the High Court for approval. The High Court and Securities and Exchange Board of India (SEBI) approve the shareholders of the new company. The new company officially becomes an entity and issues shares to shareholders of the transferor company. The transferor company is liquidated, and all assets and liabilities are taken over by the transferee company.
Documents required
- Updated copies of MOA & AOA of all the transferor & the transferee companies
- Complete set of annual accounts alongwith the notice, directors' report and compliance certificate for preceding five years
- List of shareholders along with their consents of all the transferor & the transferee companies
- List of directors of all the transferor & the transferee companies
- List of un-secured creditors with their consents along with chartered accountant certified (including the un-secured loans, sundry creditors, expenses payable, trade creditors etc) of all the transferor & the transferee companies with amounts
- List of secured creditors with their consents along with chartered accountant certified of all the transferor & the transferee companies with amount due
- Details of director who shall sign the application, affidavit, vakalatnama etc., on behalf of each of the company
- Draft valuation report from chartered accountant giving the valuation of shares of each of the company and the swap ratio
- Name of the chartered accountant firm who shall certify the list of the creditors in each of the company