A scheme of merger is the blueprint of a merger transaction. The scheme of merger governs and prescribes the entire transaction of merger – the method of valuation of the merging companies, the share exchange ratio and the legal rights and obligations of both the transferor and transferee companies.
Titus & Co
In dealing with an application for sanction of a scheme of merger under sections 391 and 394 of the Indian Companies Act, 1956, it is the duty of the courts to see that the scheme is fair and reasonable. However, the onus is on the petitioner to represent that prima facie the scheme is fair and reasonable and that a reasonable shareholder would approve of it.
The essential approach, therefore, is to ascertain whether the statutory requirements have been complied with, and then to determine whether the scheme as a whole has been arrived at by the majority of parties. Finally, it should be ascertained whether the scheme is such that a reasonable shareholder would consider it to be in his interest.
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Titus & Co Advocates is a full service law firm based in New Delhi. The firm can be contacted at titus@titus-india.com.
Titus & Co
Titus House
R-77A Greater Kailash-I
New Delhi – 110 048
India
Tel: +91 11 2647 5800, 2647 0700, 2628 0100
Fax: +91 11 2648 0300, 2648 9950
Email: titus@titus-india.com; titusco@vsnl.com
