MnA_Module_2

MODULE 2

SERIES OF STEPS INVOLVED IN MERGERS & ACQUISITIONS

2.1 Introduction

Mergers and acquisitions have witnessed substantial surges and downfalls in India. In 2014,
Indian companies were involved in transactions worth $ 33 billion whereas in 2015, the value
of M&A activity saw a drop of $ 20 billion. In 2015, the Indian M&A landscape was
dominated by inbound deals with interest coming from US, German and Canadian bidders1.
But in 2016, it touched a six-year high, sky rocketing deal values clocking $56.2 billion, the
highest since 2010. The robust M&A momentum is expected to continue through 2018,
owing to continued positive macroeconomic outlook for the country, a sustained focus on
reforms by the Government amid optimistic investor sentiment.

As scale expansion has become a critical element of Indian corporate strategy agenda,
consolidation is most likely to dominate the M&A agenda across sectors. On the inbound-
front, investments are more likely to stay healthy considering the attractiveness of the Indian
economy. In addition, the proposal to abolish the Foreign Investment Promotion Board in the
Union Budget FY17-18 has further liberalized the FDI policy and encouraged foreign
investors.

The term ‘merger’ was not defined under the Companies Act, 1956 (“CA 1956”) or, under
Income Tax Act, 1961 (“ITA”). However, the Companies Act, 2013 (“CA 2013”) explains
the concept. A ‘merger’ is a combination of two or more entities into one; the desired effect
being not just the accumulation of assets and liabilities of the distinct entities, but
organization of such entity into one business.In the case of acquisition, an 'acquisition' or
'takeover' is the purchase by one entity, of controlling interest for the share capital, or all or
considerably the greater part of the advantages and additionally liabilities, of the objective. A
takeover might be invited or unfriendly, and might be affected through agreements between
the offeror and the greater part of shareholders, buy off offers from the open market, or by
making an offer for acquisition of the objective's offers to the whole assortment of

1 Inbound domestic deals dominate Mergers and Acquisitions; less funds going abroad than inflows in M&As:
ASSOCHAM-E&Y study, Business Standard.com, https://www.business-standard.com/article/news-cm/inbound-
domestic-deals-dominate-mergers-and-acquisitions-less-funds-going-abroad-than-inflows-in-m-as-assocham-e-
y-study-115032600614_1.html (last visited Nov. 11 2018).

shareholders. Acquisitions might be by method for acquisition of offers of the objective, or
acquisition of advantages and liabilities of the objective.

2.1.1. Legal Procedure for Bringing About Merger of Companies

1. Examination of object clause of the merging company-
The Memorandum Of Association (MOA) of both the companies should be
examined to check if the power to amalgamate is available. Also, the object clause
of the merging company should be looked into to check whether it permits the
merging company to carry on the business of the merged company. In absence of
such clause, necessary approvals of the shareholders, board of directors, among
others, need to besecured.

2. Intimation to stock exchanges-
The stock exchanges should be informed about the merger proposal where
merging and / or merged companies are listed. Regularly, copies of all notices,
resolutions, and orders should be mailed to those stock exchanges.

3. Approval of the draft proposal by respective boards-
The draft copy of merger proposal is required to be approved by the respective
Board of Directors. The board of each company is required to pass a resolution
authorizing its directors/executives to pursue the matter further.

4. Application to National Company Law Tribunal (NCLT)-
Company should make an application to the respective NCLT bench where its
registered office is situated once the drafts of merger proposal are approved by the
respective boards for the purpose of convening the meetings of shareholders and
creditors for passing the merger proposal.

5. Dispatch of notice to shareholders and creditors-
After approval from the respective NCLT benches, for the purpose of convening
the meetings of shareholders and creditors, a notice and an explanatory statement
of the meeting is required to be dispatched by each company to its shareholders
and creditors as a 21 days prior intimation and it should also be published in two
newspapers.

6. Holding of meetings of shareholders and creditors-

For the purpose of passing the scheme of mergers, a meeting of shareholders is
required to be held by each company and minimum 75% shareholders (present in
person or by proxy) must approve of such scheme. Same applies to creditors as
well.
7. Petition to NCLT for confirmation and passing of NCLT orders-
As soon as the scheme of merger is passed by the shareholders and creditors, the
companies should present a petition with NCLT for confirming the scheme. A
notice about the same has to be published in 2 newspapers as well.
8. Filing the order with the Registrar of Companies (ROC)-
Certified true copies of the NCLT order have to be filed with the ROC within the
specified time limit.
9. Transfer of assets and liabilities-
After the final orders have been passed by theNCLT, all the assets and liabilities
of the merged company is required to be transferred to the merging company.
10. Issue of shares and debentures-
After all the formalities are met, the merging company should issue shares and
debentures of the merging company. The new shares and debentures issued will
then be listed on the stock exchange.

Acquisition agreements provide that the representations and warranties of the parties must be
true and correct at the closing, and that the pre-closing covenants have been performed prior
to the closing. This may be confirmed by delivering a written certificate to that effect to one
party to another.

It is common practice to include the below mentioned provisions as condition precedent in
addition to the seller covenanting the same to the buyer. This provides the buyer with an exit
option in case of non-fulfilment of the said conditions or at the very least leverage for
renegotiation of the terms of acquisition

Condition precedent constitutes an essential component of an agreement from the buyer’s
perspective in so far as it protects the interests of the buyer by putting certain conditions on
the seller. Condition precedents vary from transaction to transaction depending on the facts
and circumstances of each case.

The most essential condition precedent is to provide clear and marketable title to the
assets/shares of the target company.

➢ Foreign investment permissions- it is a determining factor in structuring any transaction
under the Indian regulatory regime. In terms of foreign investment, permission of the RBI
and/or the administrative ministry may be required for investment in several sectors
including insurance, banking, telecommunication, airlines, etc. given that India has not
permitted a full capital account convertibility and maintains sectoral restrictions on
foreign investment. In the case of a company in the financial sector, transfer from a
resident to a non-resident also requires prior permission2.

➢ Regulatory approvals- In addition to the permission of RBI and/or an administrative
ministry, permissions from various other ministries, government departments and local
authorities also become an important factor. For instance, mergers and amalgamations of
financial sector companies like banks, non-banking financial companies, etc., require the
prior permission of RBI as their sectoral regulator. Further, it is recommended to obtain a
certificate under Section 281 of the Income Tax Act confirming that there are no dues
pending.

➢ Corporate authorization-The Act permits the board of directors to take decisions for and
on behalf of the company except those which specifically require prior authorization by
the shareholders of the company. Certain shareholder approvals may be required.

➢ No Objection Certificates- Lenders and secured creditors may commonly stipulate
conditions in the loan agreements that require prior consent of such lenders to be obtained
in case of any change in control and/or transfer of substantial assets of the debtor
company. This is to ensure that no change detrimental to their interests and security
occurs without their knowledge and consent.

➢ Due Diligence Results- Prior to any merger or acquisition, the buyer may carry out a due
diligence review (which could be financial, accounting, secretarial, operational, legal and
so on) and any adverse finding found in the course of such due diligence process is
preferably removed/rectified prior to the closing of the transaction.

2 Overseas Direct Investment, Rbi.org, https://www.rbi.org.in/scripts/FS_FAQs.aspx?Id=32&fn=5 (last visited
Nov. 11, 2018).

2.2 Buyers Viewpoints in M&A

In documents and contracts and agreements, you usually see Buyer as a defined term, which
means it’s capitalized.

“Buyer” isn’t a one-size-fits-all category. A Buyer may acquire all or part of a company, the
stock of the company, or certain or all assets and even assume some of the liabilities3. Buyers
typically fall into four broad types4:

1. Strategic Buyer- These Buyers are other companies planning to combine operations of
the two companies to some extent (as opposed to buying strictly for financial
reasons). For example, when Oracle buys a company, Oracle is considered a strategic
Buyer because it buys companies that have some kind of synergy to its business.

2. Financial Buyers-Financial Buyers are funds of money that buy companies. Financial
Buyers of middle market and lower middle market companies are typically private
equity (PE) funds.
Other companies that are backed by PE funds: The Company will be the new owner
of the acquired company, but another entity (the fund) is providing the aid to do the
deal.

3. Individuals-Although it happens, an individual buying a middle market or lower
middle market company is rare. Individuals usually buy small retail shops, consulting
firms, or construction companies. Stereotypically, these companies have revenues of
less than $1 million.

2.3 Sellers in the M&A world

➢ Spin off-Spinoff is the process of creating an independent company by way of sale or
distribution of new shares of an already existing business or division of a parent
company.

➢ Taking chips off the table-Any circumstance wherein the shareholders desire to sell some
or all of their shares without any disturbance to the business particularly when the
company is neither restructuring nor refinancing. However, an owner may want to take

3 Bill Snow, Mergers and Acquisitions 13 (John Wiley and Sons, Inc) (2018).
4Akila Agarwal & Sourav Kanti De Biswas, Public Mergers and Acquisitions in India: Overview,
Thomsonreuters.com, https://uk.practicallaw.thomsonreuters.com/3-503-
1108?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1

some chips off the table without giving up its control on the company. This situation is
called a recapitalization, or recap.
➢ The growth capital-The Seller may issue more stock for raising capital for the purpose of
investment in the business. In such circumstance, the owner actually isn’t selling the
company but rather selling more stakes in the company. The money from the sale does
not go to the owner but rather the company retains the money to fund growth in the
company.

A seller seeks to structure the transaction as a sale of shares due to the following reasons:
➢ To avoid potential double taxation as taxation implications exist only at the shareholder

level on the sale of the shares;
➢ To make sure that there is no clawback of tax depreciation because the tax depreciable

assets stay within the company which claimed the capital allowances;
➢ To ensure that the position relating to contractual arrangements and consent/notification

requirements to third parties is straightforward;
➢ To ensure that the potential claims and liabilities of the target company pass to the

purchaser on acquisition, along with all duties, obligations and liabilities under contracts
entered into by the target company;
➢ To avoid the need to wind up the target company in case an asset sale occurs;

2.4 Shares in a Merger

When a merger or acquisition is conducted, there are various ways for payment of the assets
received by the acquiring company. There can be outright cash payment for all
the equity shares of the target company, paying each shareholder a specified amount for each
share or, the company’s shares can be given to the target company's shareholders according
to a specified conversion ratio (i.e. for each share of the target company, the shareholder shall
receive X number of shares of the acquiring company). Acquisitions can be made partly with
cash and partly with stock, or with all stock compensation .

In case of such a merger, the acquiring company proposes to the target firm a certain number
of its equity shares in exchange for the target company's shares. When the target company

accepts the offer (which includes a specified conversion ratio), the acquiring company may
issue certificates to the target firm's shareholders, allowing them to trade in their current
shares for rights to acquire a pro rata number of the acquiring firm's shares.

This action leads to the dilution of the current shareholders' equity, as there are more total
shares outstanding for the same company. However, the acquiring company, simultaneously,
obtains all the assets and liabilities of the target firm, thus neutralizing the effects of the
dilution. If the merger proves beneficial and provide sufficient synergy, the current
shareholders will gain from the additional appreciation provided by the assets of the target
company in the long run.5

A merger of equals, theoretically, is where two companies convert their respective stocks to
those of the new, combined company. In practice, two companies generally make an
agreement for one company to buy the other company's shareholding from the shareholders
in exchange for its own shares. In some cases, cash or other form of payment is used to
facilitate the equity transaction. Usually the most common arrangements are for share
exchange.

Mergers don't occur on a one-to-one basis mostly due to different inherent value of the
merging companies. Much like a split, the amount of the new company's shares received in
exchange for one’s stake in Company A is represented by a ratio. The real number might be
one for 2.25, where one share of the new company will cost 2.25 shares of Company A.

Fractional shares are dealt in one of two ways: the fraction is cashed out automatically and
one can get a check for the market value of the fraction, or the number of shares can be
rounded down6.

2.5 Acquisitions and Value Division

Acquisitions can either be

➢ Friendly or
➢ Hostile event.

5Chris Gallant, What is a stock-for-stock for merger and how does this corporate action affect existing
shareholders?, Investopedia.com,
http://www.investopedia.com/ask/answers/06/stockforstockmergerdetails.asp#ixzz4tPYyMd7c
6 Id.

In case of a friendly acquisition, the managers of the target firm welcome the acquisition and,
in some cases, seek for it. However, in a hostile acquisition, the target entity’s management
does not want to be acquired.
In the process, the entity proposing to acquire offers a higher price than the target entity’s
market price before the acquisition and invites shareholders in that entity to tender their
shares for that price. In both friendly and hostile acquisitions, the difference between the
acquisition price and the market price before the acquisition is called the acquisition
premium. With reference to mergers, the acquisition price is the price that will be paid by the
acquiring entity for each share of the targetentity. Usually negotiations between the managers
of both the entities determine this price. It is the price at which the acquiring entity receives
the shares required to gain control of the targetentity.

The breakdown of the acquisition price into different component parts.7
As a shareholder in an acquiringentity, aperson will ultimately gain or lose on an acquisition
based not upon whether the acquisition creates value or not, but upon how much is paid for
the acquired entity.
If a company invests Rs.1,000 crore in a project and gets back only Rs.900 crore in value
from the investment, its value will decrease by Rs.100 crore. If a company acquires another

7Mergers and Acquisitions: share acquisition transactions – back to basics, Deloitte.com,
https://www2.deloitte.com/ie/en/pages/finance/articles/mergers-acquisitions-share-acquisition-transactions.html

company and pays more than the amount it will get back in cash flows (inclusive of synergy,
control and other benefits listed in the last section), its value shall drop by the amount of the
overpayment.

Consider an example: Company A, with a market value of Rs.300 crore, decides to buy
company B with a market value of Rs.200 crore and it believes that it can generate Rs.50
crore in value from synergy. If company A can acquire company B for less than Rs.250 crore,
the shareholders of both companies will gain from the acquisition. If the acquisition price is
Rs.250 crore, the shareholders of company A will neither gain nor lose and company B’s
shareholders will gain the entire value of the synergy. If company A pays more than Rs.250
crore for company B, the share price in company A will drop by the amount of the
overpayment and company B’s shareholders will gain proportionately.

2.6. The most acquisitive firms in the corporate environment 8

➢ Throwing light upon the most acquisitive firms in the corporate environment of India, AV
Birla group stands first in line. AV Birla group is considered to be one of the most active
groups in M&A. It has made 17 deals worth $8.1 billion over the last 5 years.9

➢ The Tatas have done 72 M&A deals (both domestic and cross border) worth $22 billion
(announced deal value) since 2005.

➢ Tata Steel’s 2006 acquisition of UK’s Corus for $12.1 billion was the biggest. Tata house
gets the honour of the most acquisitive group because its various group entities are active
in M&A. The group comprises of 91 companies. Among them Tata Steel is the most
active which has made 14 deals. The other active companies include Tata Consultancy
Services (6 deals), Tata Communications (9 deals), Tata Chemicals, Tata Motors, the
group holding firm Tata Sons, Tata Global Beverages and Tata Coffee.

➢ Mahindra Group which has done 28 deals, announced deal value of $2.1 billion.
Mahindra has also done a wide range of deals ranging from Ssangyong Motor Company
of South Korea to electric car maker Reva, the troubled Satyam Computer Services, two-
wheeler maker Kinetic Motor Company, and an aircraft manufacturer Gippsland
Aeronautics of Australia.

8Sahad PV, The Most Acquisitive Business Groups in India, Vccircle.com, https://www.vccircle.com/the-most-
acquisitive-business-groups-in-india/
9The Most Acquisitive Companies of 2017 So Far, Company Valuation Services, https://www.company-
valuation-services.co.uk/acquisitive-companies-2017-far/

➢ The Essar group too is quite aggressive in this game. They have also done 22 deals worth
a total deal value of more than $7 billion. It includes the acquisition of BPL
Communications, Warid Congo, Canadian steel company Algoma and Trinity Coal.

➢ In terms of mid-sized deals, Wipro bags the highest rank. They have done 21 deals worth
$1.3 billion. Wipro’s acquisitions cover a wide range from IT companies to FMCG firms.
The other groups that are getting aggressive on the M&A front include Dabur Group
which has done 9 deals worth $500 million and Future Group which has done 10 deals.

India Inc. is definitely mastering the M&A game.

Indian Start-ups have also showed a vast rise in M&A activity in the past 5 years. According
to stats provided by VCCedge.com, a financial research platform for private markets, there
were a total of 224 mergers and acquisitions from January 2015 to December, worth
$2139.41 million (roughly Rs. 14,280 crores), out of which, the values for only 40 were
disclosed. Out of these, 157 were domestic, while 30 were inbound, that is, stake purchases in
Indian start-ups or Indian-owned foreign assets by overseas entities. Indian companies made
investments internationally in a total of 37 outbound deals.

Collaborations are more adaptable than M&As, as it can empower organizations to get to
particular aptitudes. Be that as it may, associations require an expansive key arsenal and must
be sufficiently capable to utilize the correct exchange for any circumstance

As of late, there has been fast development in joint effort as a contrasting option to mergers
and acquisitions. The development has not quite recently been in esteem, but rather in the
regularly enlarging scope of arrangements accessible.

Collaborations through a consortium or joint venture are entrenched methods for sharing high
expenses and overseeing hazard, for example, in the oil and development ventures. This
hazard sharing would not be conceivable through sole proprietorship. Joint effort is likewise
suitable where the extension is normally constrained, for example, a particular contract or
patent. The collaboration can serve its term and after that reach its characteristic decision, a
result that is not effortlessly accessible through possession. Coordinated effort is likewise

utilized widely by western organizations to enter quickly developing markets, for example,
China, India and Japan. Western items are alluring to purchasers, however the neighbourhood
accomplices have the contacts, showcase learning and social aptitudes to advertise them, and
also nearby assembling offices.

Joint effort includes low to medium hierarchical reliance, has clear objectives on the two
sides and a decent vital fit. Although the level of responsibility may be different, the terms
are intrinsically more adaptable. Conversely, mergers dispose of duplication and make a
solitary administration group.At the same time, they bring about challenges related with
social fit, income slippage, item and innovation legitimization and power battles.

Collaboration gives a chance to the gatherings to cooperate and can in the long run prompt
obtaining.

2.7 Carrying Out a Merger in India

India is a popular target for foreign investors seeking acquisition. However, inbound
acquisitions in India can be complicated. Historically, Indian economy was strictly guarded,
planned and blocked for outside investment but today, the acquisition of Indian companies by
foreign investors has become possible due to economic liberalisation and continuous policy
reforms.
In today's corporate world, mergers and acquisitions have gained significant importance. This
process is extensively used for streamlining the business organizations. By adopting the
mergers and acquisitions policies, financial organizations were able to take the necessary
steps to reform the corporate sector of India.

2.7.1. Preliminary Steps in Mergers
The process of screening and selecting companies for mergers should be carried out in a
systematic manner i.e. from general to specific. The process commences by identifying the

general domains of potential industries to selection of companies to be evaluated and
approached for mergers. The process generally followed is detailed out below10:

➢ Identifying Industries-First a set of industries is selected that meet the strategic
conditions outlined by the company for mergers. This may be in terms of size of the
company.

➢ Selecting Sectors- A group of acceptable selectors is then identified. For each sector
data with respect to sales, return on investment, turnover and growth, market shares,
competition and asset turnover etc. is collected for various companies and the most
desirable sector is chosen.

➢ Choosing Companies- Potential companies are carefully analysed with respect to
competitive environment in which they operate with specific attention to competitive
strengths of these companies in their sectoral environment. Comparable sizes increase
the chances of success of merger.

Generally, sales turnover and the asset level, which in turn determine the cost level of
acquisition, are used to measure the size of companies.

➢ Comparative Cost and Returns-here the financial obligations associated with mergers
and acquisitions are considered. The companies are listed and compared with respect
to their return on investment and future expected returns can also be developed on the
basis of their market scenario.

➢ Short Listing Good Companies- Generally a merger with other company can be
considered, if it will lead to an increase the overall economic value of the company.
To achieve this, it is necessary to identify the companies, which have one or more of
the following:

(i) High market share

(ii) Large sales Volume

(iii) Good Management System

(iv) Good distribution channel

10 The Process Of Mergers And Acquisitions Law Company Business Partnership, UniAssignment.com,
https://www.uniassignment.com/essay-samples/law/the-process-of-mergers-and-acquisitions-law-company-
business-partnership-essay.php

(v) Diverse Portfolio or its potential

(vi) A return of investment above benchmark
➢ Assessing the Suitability- The suitability is to be judged against three criteria i.e.

business, management fit and financial strength. Once a proposal fits into these
criteria then all relevant information is collected related to the company. Thereafter, a
SWOT Analysis is conducted for both the companies. If suitability is found after such
an analysis, then the merger may be considered.
➢ Appropriateness of Timing- The companies have to ensure that they merge in the
right time till the time they can afford to carry out all the processes properly.
➢ Negotiation Stage- A valuation is conducted after the consideration is decided with
the help of which the payment terms and / or exchange ratio of shares between the
companies will be decided.
➢ Approval of Board of Directors- Once the consideration of Deal and Terms of
Payment are worked out, the proposal is forwarded for the approval of Board of
Directors.
➢ Approval of Shareholders-Under the directions of NCLT, the shareholders of both the
companies hold a meeting to consider the merger scheme.
➢ Approval of Creditors/ Financial Institutions/ Banks- Approval from constituents for
scheme of mergers are required to be obtained as per the respective agreement/
arrangement with each of them and their interest is considered in drawing up the
merger scheme.

The regulators shall examine the request keeping in mind the statutory, regulatory and other
prudential requirements and the need for compliance with various statutory provisions and
may approve the same with or without conditions.

2.8 Approvals Required To Be Obtained in Mergers and Acquisitions
➢ Approval of Board of Directors
➢ The board shall appoint a Director or a Company Secretary or any other officer who
shall carry out necessary documentation for the scheme.

➢ Approval of the Share Holders/ Creditors
➢ Shareholders/ Creditors form a significant part of the company and their approval is

thus necessary for amalgamation. Without such an approval the NCLT cannot proceed
with the amalgamation proceedings.
➢ The shareholders give their approval at special meetings which are held as per NCLT
directions

2.9 Steps Involved in Procedure of Mergers
An application for Merger & Amalgamation can be filed with NCLT. Both the transferor and
the transferee company shall submit an application in the form of petition to the NCLT under
section 230-232 of the Companies Act, 2013 for the purpose of sanctioning the amalgamation
scheme.
A joint application may be filed on the discretion of the companies. But when two different
tribunal have jurisdiction if the registered office of the companies is in two different states,
two separate petitions will have to be filed.
A draft scheme of the Merger or Amalgamation shall be prepared and presented in the board
meetings of both the companies to be approved by its members.
1. Format of Application-
Application to the tribunal for Merger & Amalgamation will be submitted in form no. NCLT-
1 along with following documents:
a) A notice of admission in Form No. NCLT-2
b) An affidavit in form no. NCLT-6
c) A copy of Scheme of C&A (Merger &Amalgamation)
d) A disclosure in form of affidavit including following points:
All material facts relating to the company, such as

i. The latest financial position of the company,
ii. The latest auditor’s report on the accounts of the company and

iii. The pendency of any investigation or proceedings against the company
– Reduction of share capital of the company, if any, included in the compromise or
arrangement.

e) Any scheme of Corporate Debt Restructuring consented to by not less than seventy five
per cent of the secured creditors in value, including

i. A Creditor’s Responsibility statement in the form No. CAA-1.

ii. Safeguards for the protection of other secured and unsecured creditors.

iii. Report by the auditor that the fund requirements of the company shall conform
to the liquidity test based upon the estimates provided to them by the Board

iv. Where the company proposes to adopt the corporate debt restructuring guidelines
specified by the Reserve Bank of India, a statement to that effect and

v. A valuation report in respect of the shares and the property and all assets,
tangible and intangible, movable and immovable, of the company by a registered
valuer.

f) The applicant shall also disclose to the Tribunal in the application, the basis on which each
class of members has been identified for the purposes of approval of the scheme.

2. Calling of Meeting by NCLT-

Upon hearing of the application NCLT shall, unless it thinks fit for any reason to dismiss the
application, give such directions / order as it may think necessary in respect meeting of the
creditors or class of creditors, or of the members or class of members, as the case may be, to
be called, held and conducted in such manner as prescribed in rule 5 of Compromises,
Arrangements, ad Amalgamations (CAA) Rules, 2016 as follow:

i. Fixing the time and place of the meeting or meetings.

ii. Appointing a Chairperson and scrutinizer for the meeting or meetings to be
held, as the case may be and fixing the terms of his appointment including
remuneration.

iii. Fixing the quorum and the procedure to be followed at the meeting or meetings,
including voting in person or by proxy or by postal ballot or by voting through electronic
means.

iv. Determining the values of the creditors or the members, or the creditors or
members of any class, as the case may be, whose meetings have to be held.
v. Notice to be given of the meeting or meetings and the advertisement of such
notice.
vi. Notice to be given to sectoral regulators or authorities as required under sub-
section (5) of section 230
vii. The time within which the chairperson of the meeting is required to report the
result of the meeting to the Tribunal and
viii. Such other matters as NCLT may deem necessary.
3. Notice of Meeting-
The Notice of the meeting pursuant to the order of tribunal is to be given in Form No. CAA-
2.
The notice shall be sent individually to each of the Creditors or Members and the debenture-
holders at the address registered with the company. (Section 230(3))
4. Other requirements-
a) Person authorized to send the notice-

➢ Chairman of the Company, or
➢ If tribunal so direct- by the Company or its liquidator or by any other person.

b) Modes of Sending of notice-
➢ By Registered post, or by Speed post, or by courier, or
➢ By e-mail, or by hand delivery, or by any other mode as directed by the
tribunal.

c) Documents to be send along with notice-
The notice of meeting along with a

➢ Copy of Scheme of C&A and

➢ Following below mentioned details of C&A if not included in the said
scheme:

(1) Details of the order of the Tribunal directing the calling, convening and conducting of
the meeting:

➢ Date of the Order
➢ Date, time and venue of the meeting.

(2) Details of the company including:

➢ Corporate Identification Number (CIN) or Global Location Number (GLN)
of the company

➢ Permanent Account Number (PAN)
➢ Name of the company
➢ Date of incorporation
➢ Type of the company (whether public or private or one person company)
➢ Registered office address and e-mail address
➢ Summary of main object as per the memorandum of association; and main

business carried on by the company
➢ Details of change of name, registered office and objects of the company

during the last five years
➢ Name of the stock exchange (s) where securities of the company are listed, if

applicable
➢ Details of the capital structure of the company including authorised, issued,

subscribed and paid up share capital and
➢ Names of the promoters and directors along with their addresses.

(3) Relationship in case of Combined Application: if the scheme of compromise or
arrangement relates to more than one company, then the fact and details of any relationship
subsisting between such companies who are parties to such scheme of compromise or
arrangement, including holding, subsidiary or of associate companies.

(4) Disclosure about effect of M&A on material interests of directors, Key Managerial
Personnel (KMP) and debenture trustee.

(5) Details of Board Meeting:

➢ The date of the board meeting at which the scheme was approved by the
board of directors.

➢ The name of the directors who voted in favour of the resolution.
➢ The name of the directors who voted against the resolution and
➢ The name of the directors who did not vote or participate on such resolution.

(6) Explanatory Statement disclosing details of the scheme of compromise or arrangement
including:

➢ Parties involved in such compromise or arrangement.
➢ Appointed date, effective date, share exchange ratio (if applicable) and other

considerations, if any.
➢ Summary of valuation report (if applicable) including basis of valuation and

fairness opinion of the registered valuer, if any, and the declaration that the
valuation report is available for inspection at the registered office of the
company.
➢ Details of capital or debt restructuring, if any.
➢ Rationale for the compromise or arrangement.
➢ Benefits of the compromise or arrangement as perceived by the Board of
directors to the company, members, creditors and others (as applicable).
➢ Amount due to unsecured creditors.
(7) Disclosure about the effect of the Merger & Amalgamation (C&A) on:

➢ Key Managerial Personnel
➢ Directors
➢ Promoters
➢ Non-Promoter Members
➢ Depositors
➢ Creditors
➢ Debenture holders
➢ Deposit trustee and debenture trustee
➢ Employees of the company
➢ Shareholders of the Company

(8) A report adopted by the directors of the merging companies explaining effect of
compromise on each class of shareholders, key managerial personnel, promoters and non-
promoter shareholders laying out in particular the share exchange ratio, specifying any
special valuation difficulties.

(9) Following below mentioned details:

➢ Investigation or proceedings, if any, pending against the company under the
Act.

➢ Details of approvals, sanctions or no-objection(s), if any, from regulatory or
any other governmental authorities required, received or pending for the
proposed scheme of compromise or arrangement

➢ A statement to the effect that the persons to whom the notice is sent may vote
in the meeting either in person or by proxies, or where applicable, by voting
through electronic means

➢ A copy of the valuation report, if any.

(10) Details of availability of documents:

Details of the availability of the following documents for obtaining extract from or for
making or obtaining copies of or for inspection by the members and creditors, namely

➢ Latest audited financial statements of the company including consolidated
financial statements;

➢ Copy of the order of Tribunal in pursuance of which the meeting is to be
convened or has been dispensed with;

➢ Copy of the scheme of Merger & Amalgamation (C&A);
➢ Contracts or agreements material to the Merger & Amalgamation (C&A);
➢ The certificate issued by Auditor of the company to the effect that the

accounting treatment, if any,
➢ Proposed in the scheme of Merger & Amalgamation (C&A) is in conformity

with the Accounting Standards prescribed under Section 133 of the
Companies Act, 2013; and
➢ Such other information or documents as the Board or Management believes
necessary and relevant for making decision for or against the scheme;

(11) Other documents:

Where an order has been made by the Tribunal under section 232(1), merging companies or
the companies in respect of which a division is proposed, shall also be required to circulate
the following:

➢ The draft of the proposed terms of the scheme drawn up and adopted by the directors
of the merging company;

➢ Confirmation that a copy of the draft scheme has been filed with the Registrar;
➢ The report of the expert with regard to valuation, if any.