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7/30/2019 17908procedure for Merger of Two Cos
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STANDARD OPERATING PROCEDURE
FOR THE MERGER
OF A
WHOLLY OWNED SUBSIDIARY
WITH ITS
HOLDING COMPANY
Dated : March 14th 2006
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1 LIST OF RELEVANT STATUTORY PROVISIONS
1.1 The Companies Act, 1956 ( Companies Act)
1.2 The Companies Court Rules ,1959 ( Court Rules )1.3 The Indian Stamp Act , 1899 ( Indian Stamp Act)1.4 The Listing Agreement with the Stock Exchanges ( Listing Agreement)
2 EXTRACT FROM RELEVANT LEGAL PROVISIONS
A. The Companies Act, 1956, and The Companies (Court) Rules 1959.All the Forms are given as Annexures in Exhibit A below:
2.1 Section 391
a. Section 391(1) of the Companies Act empowers the court to consider an
application for approval of scheme of compromise or arrangement between thecompany and its creditors or members. The terms compromise or arrangementbeing very wide in scope includes within its ambit amalgamation or merger of twocompanies.
b. An application for such an amalgamation is required to be made by means of asummons in Form 33 and Affidavit in Form 34.
c. Upon the hearing of the summons , the Judge shall give such directions ashe thinks fit for conducting the General Meeting of the Creditors/Membersregarding, fixing the time and date of meeting, appointing Chairman, fixing thequorum,etc. This shall be given in Form 35.
d. Sub-section (2) of section 391 says that at the meeting, the compromise orarrangement has to be approved by 3/4 th of the total number of creditors ormembers attending the meeting personally or by proxy.
e. 391(3) provides that the Courts order has to be filed with the Registrar ofCompanies within 30 days of getting courts order.
f. Sub-section (4) requires the certified Courts order to be annexed to every copy ofthe Memorandum of the Company that is issued after the courts order has beenfiled with ROC.
2.2 Section 392.g. Section 392(1) states that a High Court has the right to supervise the carrying out
of compromise or arrangement, and also to make necessary modifications for theproper working of the compromise or arrangement.
h. Subsection (2) provides that If the court is satisfied that a compromise is not fairand just, and cannot be made better even after modifying it, then it may make anorder for winding up of the company.
i. The Notice of meeting shall be in Form 36 and shall be sent to all thecreditors/members individually 21 clear days before the date of meeting. It shallbe accompanied by a Proxy form which shall be in Form 37.
j. The notice of meeting shall be advertised in such newspapers and in such manneras the Judge may direct. This advertisement shall be made in Form 38.
2.3 Section 393.
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k. Section 393(1) provides that along with the Notice of Meeting, a statementexplaining the terms of the arrangement, material interests of any director,Managing Director or any manager and the effect on those interests, should besent to the creditors/members. If the notice is given by advertisement, then astatement will be included as to when and how the aforesaid statement will bemade available to the creditors/members.
l. Where it is advertised in the above manner, the creditor/member applying for suchstatement as indicated in the notice shall be given a copy free of charge.
m. Subsection (5) says that a Director, MD, or manager, every trustee for debenture-holders shall provide all the relevant details about themselves as may be necessaryfor the purpose of this section.
n. The Chairman of the meeting shall within 7 days of the meeting shall report theresult of the meeting to the Court in Form 39.
o. Within seven days of filing the above report, the Company has to present apetition to the Court for confirmation of compromise or arrangement. This petitionshall be in Form 40.
p. The Court shall sanction the Compromise with certain modifications that he maydeem fit for the proper working of the compromise. The Order shall be in Form41.
q. Section 394(1) gives the scope of Courts order : The court may by an order makeprovisions for all or any of the following matters:-
i. Transfer of whole or part of assets and liabilities of transferor company.ii. Share allotment by the transferee company to shareholders of transferor co
iii. Continuation of legal proceedings which are currently against transferor coiv. The dissolution, without winding up, of the transferor company.v. Handling persons who dissent from the compromise.
vi. Other incidental matters as the courts thinks necessary to make thearrangement more effective.
The court shall not sanction the scheme unless the Registrar or CLB or OfficialLiquidator confirms to the Court that the affairs of the company have not beencarried on in a manner prejudicial to public or members interests.
r. An Order made under Section 394 shall be in Form 42 with such variations as thecircumstances may require.
s. Subsection (3) says that within 30 days of Courts order, such certified true copy
shall be filed with the Registrar.t. Voting by Proxy shall be permitted provided the proxy form is duly filled in by
the person entitled to vote and filed at the companys regtd office within 48 hoursbefore the meeting.
B. The Indian Stamp Act 1899.
a. Section 3 of Indian Stamp Act charges a levy of stamp duty on execution of aninstrument.Instrument includes every document by which any right or liability is, create
transferred, limited, extended, extinguished or recorded.
b. Article 23 of Schedule I of Indian Stamp Act 1899 provides for payment of stampduty on a conveyance.Conveyance includes a conveyance on sale and every instrument by whichproperty, whether movable or immovable, is transferred inter vivos and which isnot otherwise specifically provided for by Schedule I.
c. Certain States have amended the Article to pay stamp duty on Merger of twocompanies as it involves a courts order which would fall under the scope ofInstrument.
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d. Irrespective of the above, a Merger of a holding company with its wholly ownedsubsidiary company invokes Notification 1 given on 16-1-1937 provides that:Instruments evidencing transfer of property between companies limited by sharesas defined in the Indian Companies Act 1913 in cases:-
i. Where at least 90% of the issued share capital of the transferee company isin the beneficial ownership of the transferor company, or
ii. Where the transfer takes place between a parent company and a subsidiarycompany one of which is the beneficial owner of not less than 90% of the
issued share capital of the other, oriii. Where the transfer takes place between two subsidiary companies of eachof which not less than 90% of the share capital is in the beneficialownership of a common parent company:
Provided that in each case, a certificate is obtained from the officers appointed bythe Government , that the above conditions are fulfilled.
e. The above notification was designed to facilitate reconstruction of a company oramalgamation of two companies which are more or less under the same ownershipso that they should be able to re-arrange the affairs of the company easily withoutbeing over-burdened with the responsibility of paying stamp duty.
f. From the above explanations, it is clear that when a merger takes place between aholding company and its subsidiary wherein more than 90% of the share capital isheld by the parent company, they are exempt from paying stamp duty.
C. The Listing Agreement with the Stock Exchanges (Listing Agreement)
a. Clause 36 of the Listing Agreement requires the Company to keep the StockExchange informed of any kind ofmaterial events that take place in theCompany, in order to enable the public and the shareholders to evaluate theposition of the company.
b. An event that has to do with the performance of the company and any pricesensitive information will also have to be intimated to the Stock Exchange.One of the items being Merger, Acquisition, de-merger, amalgamation,restructuring, scheme of arrangement, spin-off or setting divisions of thecompany, etc.
c. The above information should be made public immediately.d. Other than the above, the company should also provide all the relevant
information that is asked for by the Stock Exchange.
3. SEQUENCE OF EVENTS
3.1 The Merger of a Wholly Owned Subsidiary Company with its holding Companywould involve the following steps :
STEP NO. STEPS TO BE FOLLOWED
1 Getting in-principle approval of the Board.
2 Drafting the Scheme of Amalgamation.
3 Board Approval.
4 Approval of High Court.
5 Approval of notice by Registrar of High Court.
6 Shareholders approval.
7 High Courts Order.
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8 Post-Merger Activities.
9 Exemption from payment of stamp duties.
10 Withdrawal of scheme not permissible.
3.2 The tasks and Processes under every step is given as Exhibit A below.
EXHIBIT A:
1. Getting In-Principle approval of the Board.
1.1 Give notices to Directors then present in India and to all other directors to their
Indian postal address, reasonable time before the date of Board meeting.
Annexure-A
1.2 On the fixed day, hold the Board meeting and pass a Board Resolution approving
the proposed Merger. Annexure-B
1.3 Immediately after passing the Board Resolution, the stock exchange has to beinformed about the proposed merger and the approval of the Board for the
same. Annexure-C
1.4 A press release about intimation to the Stock exchange has to be given. A
copy of the letter to Stock Exchange should be attached.
2. Drafting of the Scheme of Amalgamation.
2.1 A rough draft scheme of amalgamation has to be prepared. Normally, it is
prepared by the Asst.Company Secretary or any person who is entrusted bythe Company Secretary for this purpose. Basic information of the transferor
company should be collected in order to prepare this rough draft scheme.
2.2 Preparation of final scheme of amalgamation.A final scheme of Amalgamation has to be prepared by the companies.
Annexure-DIn order to Prepare a scheme of amalgamation, the following points will have
to be taken into account.
1. Particulars about transferee and transferor companies.
2. Appointed Date.3. Main terms of transfer of assets and liablities from transferor to
transferee company .4. Effective date when the scheme will come into effect.
5. Conditions as to carrying on the business activities by transferor
between the appointed date and effective date.6. Share Capital of the Transferor and Transferee Companies.
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7. Status of employees of the transferor company from effective
date and the status of PF, Gratuity fund, super annuity fund orany other fund existing for the benefit of employees.
8. Misc Provisions covering Income-tax dues, contingencies, Sales
tax, Central Excise, Customs, Service tax,etc.9. Enhancement of borrowing limits of the transferee company
upon the scheme coming into effect.
10. Transferor and Transferee companies give assent to change in thescheme by the court or other authorities.
11. Qualification attached to the scheme which require approval of
different agencies,etc.
12. Statement to bear costs,etc in connection with the scheme by thetransferee company.
3. Boards Approval.
3.1 The Directors have to be intimated about the forth coming Board Meeting
wherein final approval of the merger will be given. The final scheme ofamalgamation should be sent to all the Directors along with the Agenda,
reasonable time before the board meeting.
3.2 On the fixed date and time, Hold the Board Meeting and pass the Board
resolution approving the merger. Annexure-E.
4. Approval of High Court.
4.1 Both the companies have to file an application to the High Court to fix the
date, time and venue for holding the General meeting of the
Shareholders/Creditors. The Court may dispense with the meeting of thetransferor company since its entire shareholding is held by the Transferee
company itself.
4.2 Where the number of creditors are few in number, a written consent from
them approving the merger can be obtained. In that case, the creditors meeting
of the transferor company may also be dispensed with, if so ordered by the
High Court.
4.3 The Companies (or a Director whosoever is authorized) have to file an
application with the High Court, which shall be made by a Judges summonsin form no.33 (Annexure-F)supported by an affidavit in form no.34.
(Annexure-G)
4.4 The Following documents shall be submitted along with Judges Summons:-
a. A true copy of the MoA of both Companies.
b. A true copy of the Companys latest audited Balance Sheet of the transferee
company.
c. Copy of Board Resolution which authorizes the Director to make the
application to the High Court.
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4.5 A copy of the application made to the concerned High Court shall also be sentto the Regional Director of the region. Although such notice is supposed to be
sent by the High Court, normally, the company sends it without waiting for
the Court to send it.
4.6 After hearing the summons, the High Court shall give directions fixing the
date, time , venue and quorum for the members meeting and appoint aChairman to preside the meeting. Courts directions will be given in Form 35.
5. Approval of Notice by Registrar of High Court.
5.1 After getting directions from the Court, the transferee and the transferorcompanies shall get the notice calling the meeting of members, approved by
the Registrar of High Court.
5.2 This notice shall be submitted to the Registrar in Form 36, together with the
scheme of Arrangement. (Annexure-H)
5.3 Form of Proxy in Form 37 (Annexure-I) shall also be submitted and got
approved. Later it should be signed by the Chairman who will be appointed
by the High Court.
6. Shareholders Approval.
6.1 Once the notice is signed by the Chairman, it can be distributed to the
Members 21 clear days before the date of meeting. Along with notice, the
following documents have to be sent to the shareholders. They are:6.2 A statement setting forth the terms of amalgamation and its effects, any
material interests of the Manager, MD or directors in any capacity, effect ofamalgamation on those interests.
A copy of the proposed scheme of amalgamation.
A form of proxy.
Attendance Slip.(Annexure-J)
6.3 This notice has to be advertised in Form 38 (Annexure-K)in two
newspapers, one in English and one in the Regional Language of the State. It
should be published not less than 21 clear days before the date fixed for the
meeting.
6.4 If the company is listed, then 3 copies of the notice along with all other
enclosures shall be sent to the stock Exchange where the company is listed.
6.5 The Chairman should file an affidavit to the Court atleast 7 days before the
meeting regarding compliance of issuance of notices to members well withinthe stipulated time limit.
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6.6 Hold the General Meeting as directed by the High Court and get the special
resolutions passed approving the merger. (Annexure-L).
6.7 The special resolutions so passed shall be filed with the Registrar of
Companies in Form 23 within 30 days of passing the resolution.
6.8 A copy of the proceedings of the meeting shall also be sent to the concerned
Stock Exchanges.
6.9 The chairman of the General Meeting is required to submit to the court within
7 days from the date of meeting, a report in Form 39,(Annexure M) setting
out therein the number of persons who attended either personally or by proxy,and the % of shareholders who voted in favour of the resolution.
7. High Courts order confirming the scheme.
7.1 Both the companies should make a joint petition to the High court for
approving the scheme of amalgamation. It should be made in Form 40
(Annexure-N). The Court will fix a date for hearing of the Petition.
7.2 The notice of the hearing shall be advertised in the same newspapers in which
notice of meeting was advertised, not less than 10 days before the date fixedfor the hearing.
7.3 The Court will give a notice of petition to the Regional Director, CompanyLaw Board and will take into consideration, his representations.
7.4 If there are no objections from any side, then the court may pass an orderapproving the scheme in Form 41 or 42.
7.5 This Courts order shall be filed with the Registrar of companies within 30days after the date of the Courts order in Form 21(Annexure-O)under
Central Governments General Rules and Forms 1956.
7.6 Courts order shall be given effect to only after the order has been filed withthe Registrar.
8. Post Merger Activities.
8.1 Dissolution of transferor company :
Section 394(1)(iv) has vested power in the High Court to order dissolution of
the transferor company without winding up, provided that the OfficialLiquidator has made a report to the Court that the affairs of the Company have
not been conducted in a manner prejudicial to the interests of its members or
to public interest.
8.2 Transfer of assets and liabilities.
Section 394(2) vests power in the High Court to order for the transfer of any
property or liabilities from transferor company to transferee company.
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8.3 Treatment of shares in transferor company.Since all the shares of transferor company are held by the transferee company
only, the entire holding stands cancelled.
8.4 Courts order to be annexed to MOA of transferee company.
As per Section 394(4) of the Companies Act, 1956, after the certified copy of
the Courts order sanctioning the scheme of amalgamation is filed with theRegistrar, it should be annexed to every copy of the Memorandum issued by
the transferee company.
8.5 Preservation of books and papers of transferor company.Section 396A of the Companies Act requires that the books and papers of the
transferor company should be preserved and not be disposed of without prior
permission of the Central Government.
8.6 Other post merger secretarial Obligations.
Other secretarial formalities include:
Filing of returns with ROC. Transfer of investments of transferor company in the name
of the transferee company.
Intimating banks and Financial Institutions.
Creditors and Debtors about the transfer of assets,
liabilities of transferor co in the name of transferee co.
9. Exemption From Payment of Stamp Duty
Notification 1 given on 16-1-1937 says that:
In exercise of the powers under Clause(A) of section 9 of the Indian StampAct 1899, stamp duty is remitted on instruments evidencing transfers ofproperty between companies limited by shares in cases:-
where at least 90% of the issued share capital of the transferee company is inthe beneficial ownership of the transferor company.
where the transfer takes place between a parent company and a subsidiary
company one of which is the beneficial owner of not less than 90% of the
issued share capital of another.where the transfer takes place between two subsidiary companies of each of
which not less than 90% of the share capital is in the beneficial ownership of a
common parent company.
Provided in each case, a certificate is obtained by the parties from the officer
appointed in this behalf by the local Government concerned that theconditions above prescribed are met.
This notification of reduction and remission was designed to facilitate
reconstruction of a company or amalgamation of two companies which are
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more or less under the same ownership so that they should be able to re-
arrange their affairs without being over-burdened with liability for payment ofstamp duty.
Therefore, keeping this notification in mind, it is clear that no stamp dutyneeds to be paid on a merger between a holding company holding more than
90% of the share capital of the transferor company/subsidiary company.
10. Withdrawal of Scheme not permissible.Once the scheme for merger has been approved by requisite majority of
shareholders and creditors, the scheme cannot be withdrawn by subsequentmeeting of shareholders.
ANNEXURES
Annexure A Notice Convening the Board Meeting
XYZ ltd.Place,
Date.
ToShri _______,
Place.
Dear Sir,
This is to inform that the next meeting of the Board of Directors of the
Company will be held at the Registered Office/****** of the company at___________, on _________, the _____day, 2006, at ________a.m/p.m., to
consider the businesses as mentioned in the board document.
You are requested to make it convenient to attend the meeting.
A copy of the Board Document is enclosed for your perusal.
Yours faithfully,For _______________ltd,
Secretary.
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Annexure-B --Board Resolution approving the merger.
RESOLVED THAT The proposal for merger between the company and XYZ company, which is a
wholly owned subsidiary of the company with effect from _______________,
be and is hereby approved.
RESOLVED FURTHER that Mr.______, Company Secretary of the
company be and is hereby authorized to do all formalities for preparing the
scheme of amalgamation and make an application to the High Court, andother associated work relating to this merger.
Annexure C - Intimation to Stock Exchange.
Sample Letter:
To,
The Stock Exchange,
XXXXX.
Sub: Intimation about merger of _________ with _________.
Dear Sir,
The Company has a proposal of merging ___________ltd, which is ourwholly owned subsidiary with our company ___________ltd, into one single
company.
The Board has given its approval for the proposed merger.
Yours Faithfully,
Secretary.
Annexure-D - Scheme of Amalgamtion.
Sample Scheme of AmalgamationOf
__________________ltd
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with
_____________________ltd.
PART I
PREAMBLE.
1. Transferor company was incorporated on __________________- under the
companies Act 1956 and having its registered office at __________. Thetransferor company is engaged in the business of
____________________________________________________.
2. The Transferee company was incorporated on __________________ under thecompanies Act 1956 and having its registered office at
___________________________. The transferee company is engaged in the
business of ______________________________________.
3. The transferor company is a wholly owned subsidiary of the Transferee company
and both the companies are engaged in the business of
__________________________________.
4. In order to achieve the following objectives, it is proposed to merge the above
mentioned companies into one single company. Hence this scheme ofamalgamation has been propounded.
LIST THE OBJECTIVES.To avoid un-necessary duplication of costs of administration, distribution,
[according to the facts of the case]
PART II
A. Definitions.
9 TRANSFEROR COMPANY.
The transferor company means ________________________ltd, a company
registered under the companies Act 1956 and having its registered office at_____________________.
10 TRANSFEREE COMPANY.
The Transferee company means ___________________ ltd, a company
registered under the Companies Act 1956, and having its registered office at________________.
11 ACT
The Act means the Companies Act 1956.
12 APPOINTED DATE
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The Appointed Date means the commencement of business on___________ or such other date as the Honble High Court of Karnataka may
direct.
13 BOARD
Board or Board of Directors of the company concerned and includes anycommittee thereof.
14 EFFECTIVE DATE
The Effective Date means the date on which a certified copy of the order of
the High Court of Karnataka at Bangalore sanctioning this Scheme is filed
with the Registrar of Companies in the state.
15 SCHEME
The Scheme means this scheme of Amalgamation in its present form orwith any modification(s) approved or directed by the shareholders in general
meetings and / or the High Court of the State.
16 SHARE CAPITAL
1. The present Authorized, Issued, Subscribed and Paid up Share capital of theTRANSFEREE COMPANY is as stated below:
Authorized:
Issued, Subscribed and Paid up:
2. The present Authorized, issued, subscribed and paid up share capital of the
TRANSFEROR COMPANY is as stated below:
Authorized:
Issued, Subscribed and Paid up:
All the Equity Shares issued by the Transferor company as above, are held bythe Transferee company and its nominees. Accordingly, the Transferor
company is a wholly owned subsidiary of the transferee company.
PART IIITHE SCHEME.(To be finetuned as per the facts of the case)
1. TRANSFER OF UNDERTAKINGS.
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1.1 With effect from the Appointed Date and subject to the provisions of thisscheme in relation to the mode of transfer and vesting, the entire undertakings
and the entire business and all the movable and immovable properties , real or
personal, corporeal or incorporeal of whatsoever nature and wheresoeversituate belonging to or in the ownership, power or possession and/or in the
control of or vested in or granted in favour of or enjoyed by the Transferor
company including but without being limited to fixed assets, capital work-in-progress, current assets, debts, receivables, investments, powers, authorities,
allotments, approvals, consents, licences, permissions and registrations and
other statutory licenses, and brand, registrations, contracts, engagements,
arrangements, rights, title, interest, quotas, benefits and advantages ofwhatsoever nature and wheresoever situated, software, technologies, trade
names and other industrial or intellectual property rights of any nature
whatsoever and licenses in respect thereof, privileges, liberties, easements,advantages, exemptions, benefits, leases, leasehold rights, licences, tenancy
rights, quota rights, permits, approvals, authorizations, right to use and avail
of telephones, telexes, facsimile connections and installations, utilities,
electricity, power lines, communication lines and other services, reserves,deposits, provisions, funds, benefits of all agreements, subsidies, grants, sales-
tax, turnover tax, excise and all other interests arising to the Transferor
company and any accretions or additions thereto after the Appointed date(hereinafter collectively referred to the Said Assets) shall without any
further act instrument or deed be transferred to and vested in the transferee
company pursuant to the provisions of section 394 of the said Act for all theestate, right, title and interest of the Transferor Company therein, so as to
become the properties of the transferee company therein.
1.2 The transfer/vesting , as aforesaid, shall be, subject to existingcharges/hypothecation/mortgage (if any as may be subsisting) over or inrespect of the Said Assets or any part thereof. Provided, however, that any
reference in any security documents or arrangements to which any of the
Transferor Company is a party, to such assets of the Transferor company,
offered or agreed to be offered as security for any financial assistance, orobligations, to the creditors of the Transferor Company, shall be construed as
references only to the assets pertaining to the undertaking of such Transferor
Company as are vested in the Transferee company by virtue of the sub-clause(1.1) hereof.
1.3 The transferee company may, at any time after coming into effect of thisscheme in accordance with the provisions hereof, if so required under any law
or otherwise, execute deeds of confirmation in favour of the creditors of the
Transferor company or in favour of any other party or any writings, as may be
necessary, in order to give formal effect to the above provisions. Thetransferee company shall under the provisions of the scheme be deemed to be
authorized to execute any such writings on behalf of the Transferor Company
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and to implement or carry out all such formalities or compliances referred to
above on the part of the Transferor Company to be carried out or performed.
2. TRANSFER OF DEBTS AND LIABILITIES.
With effect from the said Appointed Date, all debts, liabilities, duties and
obligations of the Transferor Company (hereinafter referred to as the saidLiabilities and any accretions and additions or discretions thereto after the
Appointed Date shall without any further act or instrument or deed stand
transferred and vested in or be deemed to be transferred to and vested in the
Transferee company so as to become as and from that date, the debts,liabilities duties and obligations of the Transferee Company. PROVIDED
ALWAYS that nothing in this clause shall or is intended to enlarge the
security for any loan, deposit or other indebtedness created by the TransferorCompany prior to the Appointed Date which shall be transferred to and
vested in the Transferee Company by virtue of the amalgamation and the
Transferee Company shall not be required or obliged in any manner to create
any further or additional security therefore after the Appointed Date orotherwise.
3. LEGAL PROCEEDINGS
All suits, actions and proceedings by or against the Transferor Company
pending and/or arising on or before the effective Date shall be continued andbe enforced by or against the Transferee Company as effectively as if the
same had been pending and/or arising against the Transferee Company
4. CONDUCT OF BUSINESS TILL EFFECTIVE DATE .
With effect from the appointed Date up to the date on which thisScheme finally takes effect [viz the Effective Date]-
4.1 The Transferor company shall carry on and be deemed to
have carried on all its business and activities and shall be deemed tohave held and stood possessed of and shall hold and stand possessed of
all the said assets for and on account of and in t rust for the Transferee
Company;
4.2 All the profits or incomes accruing or arising to the
Transferor Company or expenditure or losses arising or incurred by theTransferor Company shall for all purposes be treated and be deemed to
be and accrue as the profits or incomes or expenditure or losses of the
Transferee company, as the case may be;
The Transferor Company shall also be entitled, pending the sanction of
the scheme, to apply to the Central Government, State Government,
and all other agencies, departments and statutory authorities
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concerned, as are necessary for such consents, approvals and
sanctions, which the Transferee company may require.
The Transferor Company shall declare or pay any dividend out of the profits
for the period commencing from the Appointed Date only with theprior written consent of the Transferee Company.
The Transferee Company shall not make any modification to their capital
structure either by an increase (by issue of right shares, bonus shares,
convertible debentures or otherwise), decrease, reclassification, sub-
division or re-organization or in any other manner, whatsoever, exceptby mutual consent of the Board of Directors of the Transferor
company and the Transferee Company.
5. CONTRACT, DEEDS, BONDS AND OTHER INSTRUMENTS.
Subject to the provisions of this Scheme all contracts, deeds, bonds,
agreements, arrangements and other instruments of whatsoever natureto which the Transferor Company is party or to the benefit or which
the Transferor Company may be eligible, and which are subsisting or
having effect immediately before the Effective Date, shall be in fullforce and effect against or in favour of the Transferee Company, as the
case may be, and may be enforced by or against the Transferee
Company as fully and effectually as if, instead of the TransferorCompany, the Transferee Company had been a party or beneficiary
thereto. The Transferee Company shall enter into any Tripartite
Arrangements, confirmations or novations to which the TransferorCompany will, if necessary, also be a party in order to give formal
effect to the provisions of this Clause, if so required or becomesnecessary.
6. CONCLUDED MATTERS.
The transfer of the said assets and the said liabilities of the TransferorCompany to the Transferee Company and the continuance of all the contracts
or proceedings by or against the Transferee Company shall not affect any
contract or proceedings relating to the said assets or the said liabilities alreadyconcluded by the Transferor Company on or after the Appointed Date.
7. TREATMENT OF SHARES OF THE TRANSFEROR COMPANY.
Since the Transferor Company is a wholly owned subsidiary of the Transferee
Company, upon the scheme being sanctioned by the Honble High Court of
___________ at _________ and the transfers having been effected asprovided hereinabove all the Equity Shares, held by the Transferee Company
and its nominees in the Transferor Company shall be cancelled and
extinguished. Accordingly, there will be no issue and allotment of Equity
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shares of the Transferee Company to the Shareholders of the Transferor
Company upon this scheme becoming effective.
8. DISSOLUTION OF TRANSFEROR COMPANY .
Upon this Scheme being sanctioned and becoming finally effective the
Transferor Company shall be dissolved without winding up.
9. EMPLOYEES.
9.1 All employees of the Transferor Company in service on the date
immediately preceding the date on which this Scheme finally takes
effect i.e. the Effective Date, shall become the employees of theTransferee Company on such date without any break or interruption in
service and on the terms and conditions not less favourable than those
subsisting with reference to the Transferor Company as on the saiddate.
9.2 It is expressly provided, that as far as the Provident Fund, Gratuity
Fund, Superannuation Fund or any other special Fund created orexisting for the benefit of the employees of the Transferor Company
are concerned, upon the Scheme becoming finally effective, the
Transferee Company shall, stand substituted for the TransferorCompany for all purposes whatsoever related to the administration or
operation of such Schemes or Funds or in relation to the obligation to
make contributions to the said Funds in accordance with provisions ofsuch Schemes or Funds as per the terms provided in the respective
Trust deeds. It is to this end and intent that all the rights, duties,
powers and obligations of the Transferor Company in relation to suchFunds shall become those of the Transferee Company. It is clarified
that the services of the employees of the Transferor Company will betreated as having been continuous for the purposes of the aforesaidFunds or provisions.
10. ACCOUNTING TREATMENT IN THE BOOKS OF TRANSFEREECOMPANY.
10.1 All assets, liabilities including reserves of the Transferor Company shall berecorded in the books of account of the Transferee Company at their existing
carrying amount and in the same form in accordance with the applicable
Accounting Standards issued by the Institute of Chartered Accountants ofIndia
10.2 Upon the coming into effect of this scheme, an amount representing the
excess of the value of the assets over the liability of the Transferor Companyafter making such adjustments as the Board of Directors of the Transferee
Company may decide shall be reflected as the General Reserve in the Books
of the Transferee Company.
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10.3 Goodwill, arising if any, shall be fully adjusted against the balance in theprofit and loss Account of the Transferee Company on Amalgamation.
11. TREATMENT OF ADVANCE TAX PAID BY THE TRANSFEROR
COMPANY.
All taxes (whether direct or indirect) that might have been paid by the
Transferor Company (whether before or after the Appointed Date) during the
period when the merger has not become effective shall be deemed to be the
corresponding tax paid by the transferee Company and credit in respectthereof shall be given to the Transferee Company accordingly.
12. APPLICATION TO THE HIGH COURT OF THE STATE
The Transferor Company and the Transferee Company hereto shall,
with all reasonable despatch, make applications/petitions under
Sections 391 and 394 and other applicable provisions of the said Act tothe High Court of Karnataka at Bangalore for sanctioning the Scheme
and for dissolution of the Transferor Company without winding up
under the provisions of law.
13. MODIFICATIONS/AMENDMENTS TO THE SCHEME.
13.1 The Transferor Company (by its Directors) and the TransfereeCompany (by its Directors) may assent from time to time on behalf of
all persons concerned to any modifications or amendments of this
Scheme or of any conditions or limitations which the Court and /or anyother authorities under law may deem fit to approve of or impose and
to resolve all doubts or difficulties that may arise for carrying out theScheme and to do and execute all acts, deeds, matters and thingsnecessary for putting the Scheme into effect.
14. SCHEME CONDITIONAL ON APPROVALS/SANCTIONS .
14.1 The approval of and agreement to the Scheme by the requisitemajorities of such classes of persons of the Transferor Company and
the Transferee Company as may be directed by the High Court of
Karnataka at Bangalore on the applications made for directions underSection 391 of the said Act ;
14.2 The sanction of the High Court of Karnataka at Bangalore being obtainedunder Sections 391 and 394 of the said Act in favour of the Transferor
Company and the Transferee Company and to the necessary Order or
Orders under Section 394 of the said Act, being obtained.
14.3 In the event of any of the said sanctions and approvals not being
obtained and/or the scheme not being sanctioned by the High Court
and/or the Order or Orders not being passed, as aforesaid, on or before
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____________ or within such further period or periods, as may be
agreed upon between the Transferor Company and the TransfereeCompany through their respective Boards of Directors, the Scheme of
Amalgamation shall become null and void and each party shall bear
and pay its respective costs, charges and expenses for and/or inconnection with the Scheme.
15. EXPENSES CONNECTED WITH THE SCHEME .
All costs, charges and expenses of the Transferor Company and the
Transferee Company respectively in relation to or in connection withthis Scheme and of and incidental to the completion of the
amalgamation of the said undertaking of the Transferor Company in
pursuance of the Scheme shall, except as specifically provided herein,be borne and paid by the Transferee Company.
Annexure-E Board Resolution (Giving final approval).
Board Resolution approving the merger.RESOLVED THAT
a. The draft specimen scheme of arrangement be and is hereby approved.
b. Such steps be taken as may be necessary and expedient to carry into effect
the schemes of arrangement between the subsidiary and its members on
such terms and conditions as may be approved by the members of thesubsidiary company and accepted by the High Court, to which this
Company would be a party.
c. The Board of Directors be and is hereby authorized to take such steps asmay be necessary or expedient to carry into effect the amalgamation of the
subsidiary company with the company on such terms and conditions asmay be approved by the Board of both companies and accepted by the
High Court.
d. The Directors of the Company be and are hereby authorized severally to
sign all documents and papers which are required to be signed for carryinginto effect the said scheme of arrangement.
e. Mr.___________ and Mr._____________are hereby authorized to take all
necessary steps to file an application with the High Court for convening
the General meeting, etc.
Annexure-F Summons for directions to convene a meeting.
Form 33:Summons for directions to convene a meeting under section 391.
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Company Application No. of 20..
Applicant(s).Summons for directions to convene a meeting under section 391.
Let all parties concerned attend the Judge in Chambers on ..(day), the
.day of ..20. at .oclock in the noon on the hearing ofan application of the above named company(or of the applicant(s) above named)
for an order that a meeting or (separate meetings) be held at .of ( here
enter creditors or class of creditors, eg: debenture holders other secured creditors,unsecured creditors, etc. Or the members or class of members eg: preference share
holders, equity share holders , of which class or classes the meetings have to be
held) of the above company, for the purpose of considering, and if thought fit,
approving, with or without modification, a scheme of compromise or arrangementproposed to be made between the company and the said(mention the creditors or
members) of the said company.
And that directions may be given as to the method of convening, holding andconducting the said meeting(s) and as the notices and advertisements to be issued.
And that a Chairman (or Chairmen) may be appointed of the said meeting(s), who
shall report the result thereof to the Court.
Advocate for the applicant(s). Registrar.
The affidavit of .will be used in support of summons.
Annexure-G Affidavit in support of summons.
FORM 34:Affidavit in support of summonsCompany Application No. .of 20.
Applicant(s)
Affidavit in support of summons.
I,. Of etc, solemnly affirm and say as follows:-i. I am the managing director/secretary/a director //of the said
company (or an auditor of the said company authorized by the directors to
make this affidavit, or liquidator of the said company in liquidation).ii. The company was incorporated on The document now
produced and shown to me is printed copy of MOA and AOA of the said
company, and also contains copies of all the special resolutions whichhave been passed and are now in force.
iii. The registered office of the company is situated at
iv. The capital of the company is Rs.----------------divided into
..(set out the classes of shares issued and the amounts paid up oneach share).
v. The objects of the company are set out in the MOA annexed hereto. They
are briefly ( set out the main objects in brief).
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vi. The company commenced business of .and has been
carrying on the same sincevii. Set out reasons for the proposed arrangement. Copy of the scheme of
arrangement should be marked as an exhibit and annexed to the affidavit.
viii. Set out the class of creditors or members with whom the compromise orarrangement is to be made.
ix. It is necessary that a meeting(s) of the creditor(s)/ member(s) should be
called to consider and approve the proposed compromise or arrangement.x. It is suggested that the meeting may be held at the registered office of the
company or such place as may be determined by the Court on such time,
date as directed by the Court, and that a Chairman may be appointed for
the meeting.xi. It is suggested that notice of the proposed compromise or arrangement be
published once in ..newspaper in such manner as court may direct.
xii. It is prayed that necessary directions may be given as to the issue andpublication of notices and the convening, holding and conducting of the
meeting(s) proposed above.
Solemnly affirmed, etc.
(Sd) X.Y..Before me
(Sd).
Commissioner of Oaths.
Annexure-H Notice Convening Meeting.
Form 36
Company Application No.___ of _____.
__________Applicants.
Notice convening Meeting.
To
The Shareholders of_____________ltd.
Take notice that by an order made on __________, the Court has directed thata meeting of the shareholders of the company be held at
____________________________, on __________________________, for
the purpose of considering and if thought fit approving, with or without
modification, the scheme of amalgamation whereunder the company knownas _____________________________ is proposed to be merged with the
Applicant company.
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Take further notice that in pursuance of the said order a meeting of the
shareholders of the company will be held on the ________________ at__________ at ______________________, when you are requested to attend.
Take further notice that you may attend and vote at the said meeting inperson or by proxy provided that a proxy form in the prescribed form, duly
signed by you is deposited at the registered office of the applicant company,
not later than 48 hours before the meeting.
The Court has appointed Mr.___________,Chairman , failing him
Mr.___________, director of the company as Chairman of meeting.
The statement under sec 393 of the Companies Act 1956, proxy form and
copy of the scheme of amalgamation are enclosed.
Dated this the______________.
Chairman appointed for the meeting.
Annexure-I Form of Proxy.
Form 37.
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
Original Jurisdiction
In the matter of Companies Act 1956And
In the matter of sections 391 and 394 of the Companies Act,
And
In the matter of ________________ltd
AndIn the matter of scheme of amalgamation of ___________ltd with _________ltd
Company Application No.______of ___.
______________ltd,
Regd Office: APPLICANT
Form of Proxy.
I, the undersigned equity shareholder of the above company herebyappoint__________________ of ___________________, failing him
__________________ of ____________________ as my proxy, to act for me at the
meeting of the shareholders of the company to be held at ___________________ on
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_____________________ for the purpose of considering and if thought fit, approving
with or without modification, the scheme of Amalgamation whereunder the companyknown as ___________ltd, is proposed to be merged with the Applicant company and
at such meeting and any adjournment thereon to vote, for me and in my name, the
said scheme of Amalgamation either with or without modification as my proxy mayapprove.
Dated this the _____day of _____.Signature:
Address:
Annexure-J Attendance Slip.]
________________________LIMITED
Regd Office:__________________________________________
ATTENDANCE SLIP:I/We hereby record my/our presence at the Court Convened Meeting of the
Shareholders of the Company held at the registered office of the Company
situated at ___________________________________ at ______P.M on___________, the ______________2006.
NAME(S) OF THE
SHAREHOLDER(S)/PROXY
(IN BLOCK LETTERS)
FOLIO NO. / CLIENT NO.
DP ID NO.
NO. OF SHARES HELD
SIGNATURE OF THE
SHAREHOLDER(S) / PROXY
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Annexure-K Notice Convening Meeting of Creditors/Shareholders.
Form No.38
Company Application No.____of 2006.___________Applicant.
Notice convening Meeting of Creditors/Shareholders.
Notice is hereby given that by an order, dated the ___________, the court, has
directed a meeting to be held of [mention class] of the said company for the purpose
of considering , and if thought fit, approving with or without modification, thecompromise or arrangement proposed to be made between the said company and
[mention class of creditors/members] of the company aforesaid.
In pursuance of the said order and as directed therein, further notice is hereby giventhat a meeting of [class of creditors/members] of the said company will be held at
______on______day___________, the ______day of 2006, at _____oclock in the
______________noon at which time and place the said [class] are requested to attend.
Copies of the said compromise or arrangement, and of the statement under section
393 can be had free of charge at the registered office of the company or at the officeof its advocate Shri__________ at_________.
Persons entitled to attend and vote at the meeting may vote in person by proxy,provided that all proxies in the prescribed form are deposited at the registered office
of the company at ________not later than 48 hours before the meeting.
Forms of Proxy can be had at the registered office of the company.
The court has appointed _______________ and failing him_______________, as
chairman of the said meeting. The above mentioned compromise or arrangement, ifapproved by the meeting, will be subject to the subsequent approval of the Court.
Dated this _________day of 2006.
Chairman appointed for the meeting.
ANNEXURE-L Special Resolution approving merger.
Special Resolution:
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RESOLVED that subject to the sanction of the High court at __________ of
the annexed scheme of arrangement between the company _________ltd andits members with or without modification as may be directed by the Court,
approval be and is hereby accorded to the scheme of arrangement whereby the
subsidiary company ______________ltd will stand absorbed by the companyand their rights, obligations, assets, liabilities and the entire undertaking will
be vested in the company from the appointed day if not amended by the said
High Court
RESOLVED FURTHER that the Board of directors of the company be and is
hereby authorized to implement the scheme once sanctioned by the High
Court and to do everything that may be necessary in connection therewith.
ANNEXURE-M Report by Chairman.
Form No.39
Company Application No._____ of 2006.
Report by Chairman.
I,________, the person appointed by this Honble Court to act as Chairman ofthe meeting of (class) of the abovementioned company , summoned by notice
served individually upon them and by advertisement dated the ________day of
______2006 and held on the ______day of __________2006 at __________dohereby report to this Honble Court as follows:
1 The said meeting was attended either personally or by proxy by (state thenumber of members/creditors) of the said company entitled together to (total
value of debts, or debentures, where the meeting was of creditors, and value of
shares for meeting of members).
2 The compromise or arrangement was read out and explained by me to themeetings and the question submitted to the said meeting was whether the [class of
creditors/members] of the said company approved of the compromise or
arrangement submitted to the meeting and agreed thereto.3 The said meeting was unanimously of the opinion that the compromise or
arrangement should be approved and agreed to/or the result of the voting upon the
said question was as follows:The undermentioned [class of creditors/members] who attended
the meeting voted in favour of the proposed compromise or
arrangement being adopted and carried into effect:-
___________________________________________________________
_
Name of creditor Address Value of debts(or No.of
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(or Member) value of pref shares votes
or equity shares held
____________________________________________________________
1.2.
3.
____________________________________________________________
Similar table for people who voted against the proposed compromise or
arrangement.
Dated this_____day of 2006.
Chairman.
ANNEXURE-N Petition to Sanction Compromise or Arrangement.
Form 40.
Company Petition No.______ of 19___________ltd (in liquidation
by its liquidator____) Petitioner.
Petition to sanction compromise or arrangement.
The petition of___________, (in liquidation, by its liquidator) the petitionerabovenamed is as follows:-
i. The object of this petition is to obtain sanction of the Court to acompromise or arrangement whereby (set out the nature ofcompromise or arrangement).
ii. The company was incorporated under the Companies Act 1956, with a
nominal capital of Rs.________ divided into _________shares of
Rs.___________ each of which_________ shares were issued andRs.________ was paid up on each share issued.
iii. The objects for which the company was formed are as set forth in the
Companys memorandum of Association. Set out the Principal Objectsof the company.
iv. Set out the nature of the business carried on by the company. Also
state the advantages/benefits sought to be achieved by the compromiseor merger.
v. The compromise or arrangement was in the following terms:[Here, set
out the terms of the compromise or arrangement].
vi. By an order made in the above matter on ____2006, the petitioner wasdirected to convene a meeting of (set out the class of
creditors/members)of the company for the purpose of considering and
if thought fit, approving with or without modifications, the said
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compromise or arrangement and the said order directed that
Mr.________, failing him , Mr._____ should act as the Chairman ofthe said meeting and should report the result thereof to this Court.
vii. Notice of the meeting was sent individually to the (class of
creditors/members) as required by the order together with a copy ofthe compromise or arrangement and of the statement required by
section 393 and a form of proxy. The notice of the meeting was also
advertised as directly by the said order in (set out the newspapers).viii. On the ____2006, a meeting of (class of creditors/members) of the
company duly convened in accordance with the said order, was held
at _________ and the said chairman , acted as the Chairman of the
meeting.ix. The said chairman has reported the result of the meeting tot his
Honble High Court.
x. The said meeting was attended by (class of creditors/members and thetotal value of their (debts, debentures, shares) is Rs.________. The
said compromise or arrangement was read and explained by the said
Chairman to the meeting and it was resolved unanimously [or by a
majority of______votes against _________votes) as follows:Here set out the resolution as passed.
xi. The sanctioning of the compromise or arrangement will be for the
benefit of the company.xii. Notice of this petition need not be served on any person.
The petitioner therefore prays:
1. that the said compromise or arrangement may be sanctioned bythe court so as to be binding on all the (class of
creditors/members)of the said company and on the said
company.2. Or such other order may be made in the premises so to the court
shall deem fit.
ANNEXURE-O Notice of Courts Order.
Form 21.
Notice of the Courts/CLBs Order.
Registration No. of the Company______ Nominal Capital______THE COMPANIES Act, 1956
Notice of the Courts/ Company Law Boards Order[pursuant to section 394(1)]
Name of the Company.
Name of the Court/Company Law board with location.Date of passing the Order.
Section of the Companies Act under which order passed.
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An authenticated copy of the order is attached.
Signature________
Name_____________
Designation_______
Dated this________day of 2006.