Fast Track Mergers in India

Introduction

Fast Track Mergers is a scheme that has been introduced as per the Companies Act, 2013 under Section 233 read along with Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. This provision was introduced on the 15^th of December, 2016. According to recent trends, it has been noticed that the practice of Mergers and Acquisitions has seen exponential growth. A major aim of introducing such a scheme was to develop an alternative to the exceptionally time-consuming process of mergers. This provision has eliminated court intervention, and has thereby served to the ease of tending to businesses in India.

Sections 230 to 232 of the Companies Act, 2013 provides for the extremely cumbersome process and procedure of merger. These sections describe vividly that every company undergoing a merger is required to get clearances from regulatory bodies.

Some essential features of the process are enlisted below:

• This provision is applicable to amalgamate two or more than two small companies.
• This provision has encouraged restructuring of small corporate companies.
• This provision has resulted in the faster disposal of matters at a very efficient rate.
• Clearance and approval from the National Company Law Tribunal is duly avoided.
• Public Advertisements are not mandated to be required.
• This provision has made the entire process of merging very cost-effective.
• There has been a substantial reduction in the workload of the administrators.

Conventional versus Fast-track Merger

A traditional merger can be defined as a ‘corporate strategy to combine several chains of companies into a single company to alleviate the operational and financial strengths of both organizations. When there is an amalgamation of two companies, there is a new branding that makes the merged organization stronger.

Parties to the Process

The entire process of merging involves two different parties-

• Transferor- This refers to the company that is merged or amalgamated with the other company.
• Transferee- This refers to the company into which the transferor company would eventually be merged or amalgamated.

Procedure in Brief

• Memorandum of Association and Articles of Association.
• Convening of a Board Meeting.
• Filling up of draft schemes and thereby proposing the merger any comments or objections.
• Solvency Declaration to be filed with the Regional Director or the Official Liquidator.
• Holding a meeting with the Members of the company.
• A meeting that is convened with the creditors.
• The scheme copy as well as the results of the meeting is to be filed with the Regional Director.
• Approvals from the Regional Director
• Scheme Registration

Process: Analysis of Fast-track Mergers

The provision for Fast Track Mergers has definitely made the process of merging and amalgamation less cumbersome. It has helped paved the way for an alternate restructuring process. There are, however, some pressing concerns and lacunae in this regard.

This scheme does look into eliminating the involvement of the National Company Law Tribunal and vests important powers to the Registrar of Companies and the Central Government. If the Regional Director in any manner believes that the merger is not in the benefit and interest of the public or in the interest of the creditor, they would have to file an application before the National Company Law Tribunal and they must request that the merger be conducted under Section 232. The very purpose of the ‘fast track merger’ is defeated in this manner. This also increases the time taken to complete the merging process by several times.

Conclusion

The process of the Fast Track Merger scheme is indeed a welcome step because it seeks the completion process at a faster rate and has prevented the cumbersome judicial processes and legalities. This scheme has effectively excluded the involvement of the National Company Law Tribunal and has aimed for a speedier disposal. The entire process has also become increasingly cost-effective, there is minimum consumption of time and the process is almost always uninterrupted.

The role of the Central Government places a very crucial part in the success of the scheme. It is fully dependent on the support of the Central Government to generate the success and the reach of the scheme throughout the country. The passage of the scheme is dependent on the Central Government’s activeness and its enterprising nature.