Merger & Amalgamation

The beginning to amalgamation may be made through common agreements between the transferor and the transferee but mere agreement does not provide a legal cover to the transaction unless it carries the sanction of company court for which the procedure laid down under section 391 of the Companies Act should be followed for giving effect to amalgamation through the statutory instrument of the court’s sanction.

Although chapter V of the Companies Act, 1956 comprising sections 389 to 396-A deals with the issue and related aspects covering arbitration, compromises, arrangements and constructions but at different times and under different circumstances in each case of merger and amalgamation application of other provisions of the Companies Act, 1956 and ruled made there-under may necessarily be attracted. So, the procedure does not remain simple or literally confined to chapter V.

The procedure is complex, involving not only the compromises or arrangements between the company and its creditors or any class of them or between the company and its members or any class of them but it involves, safeguard of public interest and adherence to public policy. These aspects are looked after by the Central Government through official liquidator on Company Law Board, Department of Company Affairs and the court has to be satisfied of the same.

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