Swiss lessons in simplified mergers

Having completed a simplified takeover in seven working days under the 2003 Swiss merger act, Yashasvini Kumar, Pooja Gondalia and Bhakti Sampat look at how the approval process could be made quicker in India, where even fast-track mergers take an average of eight months

In the corporate world, mergers are big news and everyone loves them – financial journalists, investment bankers and perhaps corporate lawyers most of all. Takeovers make headlines on the basis of their size – in particular, where a very large business absorbs another to make a bigger entity.

However, the majority of mergers happen for less glamorous reasons. They are a very effective medium for transferring assets, achieving balance sheet synergies and simplifying organisational charts, and are widely used for internal restructuring of group companies.

In light of the popularity of mergers and the corresponding growth in the number of merger petitions being placed before the National Company Law Tribunal (NCLT), India’s Companies Act, 2013, prescribes two kinds of merger processes, the ordinary (extended) merger process and a fast-track procedure.

Ordinary mergers

An ordinary merger typically occurs between unrelated parties and there are many stakeholders to consider. As a result, the prescribed process mandates that the object clause of the memorandum of association of the companies to be merged shall confer power on the company to undergo merger/amalgamation. Thereafter, the preparation of the merger scheme and approval of the same by the board of directors of both companies at a duly convened board meeting is carried out as per the act, followed by an application filed with the NCLT.

A meeting then needs to be called as per the order of the NCLT, and a notice of the meeting is to be sent to all the creditors, members and debenture holders. The publication of the notice of the meeting on the website also needs to be published in both an English-language and vernacular-language newspaper having wide circulation in the state in which the registered offices of the companies are situated.

A notice then shall be sent to the central government, the Registrar of Companies (RoC), the income tax department and other statutory regulators or authorities seeking representation/objections to be made to the NCLT within a period of 30 days from the date of receipt of the notice.

YASHASVINI KUMAR is the group general counsel, POOJA GONDALIA is the deputy manager of compliance and BHAKTI SAMPAT is the deputy general manager of compliance at Innoterra India.