Mergers and amalgamations serve as strategic tools that enable companies to foster growth, diversify their business, and achieve their underlying objectives. A merger involves the consolidation of one or more companies into another, resulting in a new identity or the continuation of one company’s business with expanded diversification.

Fast Track Merger Scheme: Simplifying the Process

Introduced in December 2016, the Fast Track Merger Scheme in India was designed to streamline and expedite the process of company mergers and amalgamations. This initiative simplifies the merger process for holding companies and their wholly-owned subsidiaries, as well as for small companies seeking to merge.

Key Benefits of Fast Track Merger:

1. Business Growth: Facilitates expansion and diversification of business activities.
2. Technology Sharing: Promotes the exchange of technological expertise.
3. Reduced Administrative Barriers: Simplifies operational complexities.
4. Cost Savings: No need for public advertisements, court-convened meetings, or mandatory NCLT approval, resulting in reduced expenses and less burden on the NCLT.

 

Procedure for Fast Track Merger:

Step 1: Review Articles of Association Ensure that the Articles of Association (AOA) of both the transferor and transferee companies allow for the merger. If the AOA restricts this, it must first be amended.

Step 2: Draft the Scheme A professional team prepares a draft scheme for the merger.

Step 3: Board Approval Both the transferor and transferee companies must convene a board meeting to approve the draft scheme of merger. Each company will pass a resolution to authorize a representative to handle all necessary actions and obligations.

Step 4: Issue Notice of Proposed Scheme The company must issue a notice to the Registrar of Companies (ROC) and relevant regulators, inviting objections or suggestions on the draft scheme. A declaration of solvency must also be filed with the ROC.

Step 5: Obtain Creditor Approval Approval from creditors is required at a meeting specifically convened for this purpose.

Step 6: Member Approval Once the authorities approve the draft scheme, the company must pass a resolution in a general meeting with a majority of members (holding at least 90% of the shares) to approve the scheme.

Step 7: File the Draft Scheme Within 7 days of the conclusion of the meetings with creditors and members, the draft scheme must be filed with the ROC. A copy should also be submitted to the Regional Director (RD) for the transferee company to secure the necessary approval. Additionally, the scheme should be filed with the official liquidators via speed post or registered post.

Step 8: Regional Director Approval If the Official Liquidator raises no objections, the scheme will be considered for approval. If there are objections, they must be addressed within 30 days; otherwise, the scheme will be deemed approved by the ROC.

Step 9: Final Filing Once approved, the order from the Regional Director must be filed with the ROC within 30 days of its communication.

By following these steps, companies can efficiently navigate the process of a fast-track merger, gaining the benefits of growth, diversification, and operational synergy.