Checklist for Cross Border Merger: India & Hong Kong

TRANSFEREE COMPANY (Amalgamated Company): INDIAN HOLDING COMPANY;
TRANFEROR COMPANY (Amalgamating Company): SUBSIDIARY COMPANY SITUATED IN HONG KONG

PREPARATION OF SCHEME OF AMALGAMATION IN NATURE OF MERGER:

INFORMATION REQUIRED BY ADVOCATES:

a. Cross holding of Directors of Transferor and Transferee companies
b. Relationship between transferee and transferor companies
c. Names of authorised signatories
d. Names of newspapers where notice is being published
e. List of creditors and their dues
f. List of chairmen of meetings of transferee and transferor companies

INFORMATION/DOCUMENTS MAY BE REQUIRED BY THE REGIONAL DIRECTOR, MINISTRY OF CORPORATE AFFAIRS:

a. Balance sheets for last 5 years of the Transferor and Transferee companies
b. 2 copies of Valuation Report of Chartered Accountants
c. List of directors of transferor company and their other directorships
d. List of directors of transferee company and their other directorships
e. Rights/Bonus/Debentures Issues made by transferee and transferor companies in the last 5 years

s. 233 read with s. 234 of Companies Act, 2013 provides for fast track merger for small companies and merger between Holding Company and its Wholly Owned Subsidiary Company.

PROCEDURE FOR AMALGAMATION:

a. Scheme approved by BoD to be sent to RoC, Official Liquidator for their suggestions within 30 days of approval of scheme.
b. Scheme along with suggestion from RoC and Official Liquidator to be approved by:

• Shareholders holding 90% of the total number of shares at a general meeting
• Majority creditors (representing nine-tenth in value) in a meeting convened with 21 days’ notice.

c. Approval of RBI also required pursuant to section 234(1) of the Companies Act, 2013.
d. Each of the companies to file Declaration of Solvency with the RoC.
e. Copy of scheme to be filed with RoC, Official Liquidator and Central Government.
f. RoC and Official Liquidator to intimate the suggestions in the scheme to Central Government in writing within 30 days.
g. In absence of no such communication, the scheme shall be deemed to be approved by the RoC and the Official Liquidator and the Central Government shall register the same and issue a confirmation thereof.
h. Tribunal to record the merger pursuant to section 232 of the Companies Act, 2013 if the Central Government feels the merger is against the public interest and the same is intimated to the Tribunal.
i. Registration of the scheme would result in dissolution of Transferor Company without the process of wounding up.
j. Registration of scheme to result in:

• Transfer of property or liabilities of Transferor Company as property and liabilities of Transferee Company
• Charges on the property of Transferor Company to be applicable and enforceable as charges on the property of Transferee Company
• Legal proceedings pending before any court of law to be continued by or against the Transferee Company.
• Purchase of shares by dissenting shareholders and settlement of debt due to dissenting creditors, if the scheme so provides, such amount to the extent that it is unpaid becomes liability of the Transferee Company.

k. All shares held by Transferee Company in its subsidiary to be cancelled and extinguished on merger.
l. Transferee Company to file an application with RoC indicating revised authorised capital along with the requisite fees.

COMPLIANCE BY THE TRANSFEREE COMPANY (HOLDING COMPANY) PURSUANT TO COMPANIES ACT, 2013:

a. EXAMINATION OF OBJECT CLAUSE:

• With regard to power of amalgamation
• With regard to power to carry on the business of transferor company
• With regard to sufficiency of authorised share capital

b. PREPARATION OF SCHEME OF AMALGAMATION:

• Business Valuation
• Consideration paid: According to sub-section 2 of section 234 of the Companies Act, 2013, RBI may provide for the payment of consideration to the shareholders of the transferor company in cash or in Indian Depository Receipts (IDRs), or partly in cash and partly in IDRs.
• Calculation of Swap Ratios

c. BOARD MEETINGS:

• Notice of BM to be sent
• Approval of scheme of amalgamation
• Approval of Swap Ratio
• Directors/Officers to be empowered to make application to the Tribunal

d. APPLICATION TO THE TRIBUNAL:

• Application to be made in Form No. 33 of Companies (Court) Rules, 1959
• Affidavit in support of summons in Form No. 34 of Companies (Court) Rules, 1959
• Order of the Judge in summons convening meeting of the members to approve the scheme for approval in Form No. 35 of Companies (Court) Rules, 1959

e. FILING/ANNEXING:

• Certified copy of Order to be filed with ROC within 30 days
• Form 21- Notice of Court or any competent authority
• MGT 14- Special Resolutions passed
• GNL 1- File an application with RoC
• GNL 2- Submission of documents with RoC
• GNL 3- Particulars of authorised signatories for the purpose.

PROVISIONS FOR TRANSFEROR COMPANY:
a. Companies Ordinance, 2012 provides for an amalgamation of two or more wholly-owned companies within an existing group of companies without the need of court approval.
b. An amalgamation under the Companies Ordinance will not require the amalgamated company to pay any consideration for the acquisition of the business assets and liabilities of the amalgamating companies.

SOURCES:
Companies Act, 2013 (India);
The New Companies Ordinance, 2012 (Hong Kong);
Secretarial Audit and Due Diligence: ICSI