AMENDMENTS IN MERGER AND AMALGAMATION RULES 2016

Ministry of Corporate affairs has came out with amendments in Companies (Compromise, Arrangements and Amalgamation) Rule 2016. By using it's power prescribed under section 469 of companies act 2013.read with section 230 of the Companies Act,2013 (18 of 2013), the Central Government hereby makes the following rules,

Merger & Amalgamation

REFERENCE OF SECTION 230(11)OF COMPANIES ACT 2013.

Any compromise or arrangement may include takeover offer made in such manner as may be prescribed,

Provided that in case of listed companies, takeover offer shall be as per the regulations framed by the Securities and Exchange Board.

INTERPRETATION BY AUTHOR

The provisions for takeover has already been given during the process of compromise and Arrangements in the Companies  Act 2013, however it was not notified.

In the rule 3(4), It is mentioned that the Application made to the Tribunal for Compromise or Arrangement-Creditor’s Responsibility Statement Creditor’s Responsibility Statement to be included in the Scheme of CDR.

WHAT'S NEW IN THE AMENDMENT

In the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, (hereinafter referred to as the principal rules), in rule 3, after Sub-rule (4), the following sub-rules shall be inserted, namely:

5. SUB RULE AS AMENDED BY,

A member of the company shall make an application for, arrangement for the purpose of takeover offer in terms of sub-section (11) of section 230, when such member along with any other member holds not less than three-fourths of the shares in the company, and such application has been filed for acquiring any part of the remaining shares of the company.

Explanation- Nothing in this sub-rule shall apply to any transfer or transmission of shares through a contract, arrangement or succession, as the case may be, or any transfer made in pursuance of any statutory or regulatory requirement.

INTERPRETATION BY AUTHOR

# What holding is required to make Takeover offer in arrangement process ?

Ans.  A member holding at least 3/4 of shares either alone or with any other member carrying voting rights (Rights gained under section 47(2) is also considerable).

# Can a member's holding who is making offer be considered in 3/4 value along with other person?

Ans. No, strictly it is mentioned that a member can make such offer and his 3/4th shares value shall be considered along with any other member only.

If a member is holding equal to more than 3/4th shares value along with any company or body corporate, then it shall not be considered in 3/4th share value

# What is the meaning of remaining shares?

Ans. Other than those 3/4 shares, means offer can be made for remaining 1/4 shares

e.g. Suppose Mr. A is a member of company X LTD and he holds 75 shares in X LTD and further he is willing to acquire remaining 25 share. This 25 share is to be taken for reference of remaining shares.

Cases which are exempted from this subrule

# Any transfer or transmission executed by contract arrangements or succession

# Any transfer by statutory or regulatory requirement

6. SUB RULE AS AMENDED BY,

 An application of arrangement for takeover offer shall contain:_

(a) The report of a registered valuer disclosing the details of the valuation

of the shares proposed to be acquired by the member after taking into a account the following factors: -

(i) the highest price paid by any person or group of persons fore acquisition of shares during last twelve months;

(ii) the fair price of shares of the company to be determined by their registered valuer after taking into account valuation parameters including return on net worth, book value of shares, earning pers share price earning multiple vis-d-vis the industry average, and such other parameters as are customary for valuation of shares of such Companies.

(b) Details of a bank account, to be opened separately, by the member wherein a sum of amount not Iess than one-half of total consideration of the takeover offer is deposited.

NOTE: In the principal rules, in Schedule of Fees, for S.No. 1, fees for filling application is now 5000.

Posted by LawgicAL ARUSH