Companies Act Section 233

Companies Act, Section 233: Merger or Amalgamation of Certain Companies

Section 233 of the Companies Act, 2013 provides a simplified process for the merger of smaller companies and holding companies with their wholly-owned subsidiaries, ensuring legal validity and stakeholder involvement.

Provisions for Merger or Amalgamation (Subsection 1):
Subsection (1) allows mergers between two or more small companies, a holding company and its wholly-owned subsidiary, or other prescribed companies, subject to key conditions.

Conditions for Merger or Amalgamation:

a. Notice of Proposed Scheme:
The transferor and transferee companies must issue a notice inviting objections or suggestions within 30 days, addressed to the Registrar, Official Liquidators, and affected parties.

b. Consideration of Objections and Suggestions:
The companies must address objections or suggestions at their general meetings, where the scheme must be approved by a majority, with at least ninety percent of shares represented.

c. Declaration of Solvency:
Each company must file a declaration of solvency with the Registrar, confirming its financial health and ability to meet liabilities.

d. Approval by Creditors:
The scheme must be approved by at least ninety percent of creditors by value. A creditors' meeting must be convened with at least 21 days' notice.

2. Filing of the Scheme:
After approval, the transferee company must file the scheme with the Central Government, Registrar, and Official Liquidator as prescribed.

3. Registrar and Official Liquidator Review:
If no objections are raised by the Registrar or Official Liquidator within 30 days, the Central Government will register the scheme and issue confirmation; silence is taken as no objection.

4. Objections from Registrar or Official Liquidator:
If the Registrar or Official Liquidator has objections, they must notify the Central Government in writing within 30 days; otherwise, it's presumed there are none.

5. Review by the Central Government:
If the Central Government finds the scheme objectionable or not in public or creditors' interest, it may apply to the Tribunal within 60 days to have the scheme reviewed under Section 232.

6. Tribunal’s Role in Reviewing the Scheme:
If the Tribunal finds merit in objections raised by the Central Government or others, it may direct that the scheme be reviewed under Section 232. Otherwise, if no application is filed, it is presumed there are no objections.

7. Communication and Registration of the Order:
Once the Tribunal confirms the scheme, the Registrar of the transferee company must register it and send confirmation to the concerned companies and relevant Registrars.

8. Dissolution of Transferor Company:
Once the scheme is registered, the transferor company is automatically dissolved without formal winding-up, and its assets and liabilities transfer to the transferee company.

9. Effects of the Scheme: Once the scheme is registered, the following effects shall take place:

a. Transfer of Property and Liabilities:
The transferor company’s property and liabilities transfer to the transferee company.

b. Charges on Property:
Existing charges on the transferor company’s property remain enforceable against the transferee company.

c. Continuance of Legal Proceedings:
Ongoing legal proceedings against the transferor company will continue against the transferee company, which assumes all its rights and obligations.

d. Liability for Dissenting Shareholders and Creditors:
The transferee company will assume responsibility for purchasing shares or settling debts of dissenting shareholders or creditors as per the scheme.

10. Cancellation of Shares:
The transferee company cannot hold shares in its own name or through a trust, subsidiaries, or associates. Such shares must be canceled or extinguished during the merger.

11. Revised Authorized Capital:
The transferee company must apply to the Registrar for the revised authorized capital and pay the prescribed fees. Fees paid by the transferor company will be set off against the transferee company's fees.

12. Application of Section 232:
Section 232’s principles and procedures will also apply to companies involved in a compromise, arrangement, division, or asset transfer under this section.

13. Central Government’s Role in Prescribing Rules:
The Central Government can prescribe rules for the merger or amalgamation of companies, including the process and conditions.

14.Option to Use Section 232 for Approval:
A company under this section can choose to follow the procedures of Section 232 for its merger or amalgamation, offering flexibility.