Outbound mergers: A welcome step forward

By Aseem Chawla and Shruti Singh, Phoenix Legal

The Ministry of Corporate Affairs (MCA) on 13 April notified the long-awaited section 234 of the Companies Act, 2013, dealing with the merger or amalgamation of a company incorporated under the act and a foreign company incorporated outside India and vice versa, with effect from 13 April.

Aseem Chawla Partner Phoenix Legal
Aseem Chawla
Phoenix Legal

Section 394 of the erstwhile Companies Act, 1956, dealing with provisions for facilitating reconstruction and amalgamation of companies, permitted only merger of a foreign company with an Indian company (inbound merger) and not merger of an Indian company with a foreign company (outbound merger).

In a separate notification dated 13 April, the MCA also notified the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2017, which amend the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, by inserting rule 25A. This new rule sets out procedural prerequisites of cross-border merger and their valuation norms. It also defines the term permitted jurisdiction for outbound mergers.

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Aseem Chawla is a partner and Shruti Singh is a senior associate at the Delhi office of Phoenix Legal. Shamik Saha, also a senior associate, co-authored the article.


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