The Ministry of Corporate Affairs through its notification dated 15th May, 2023 has amended the Companies (Compromises, Mergers and Amalgamation) Rules, 2016, (“Merger Rules”) to further streamline the fast track merger process under Section 233 of the Companies Act, 2013 (“Act”). The changes brought in by the said notification, which shall be effective from 15th June, 2023, are as follows:
Present Position in the Merger Rules – Rule 25(5)
Where no objection or suggestion is received to the scheme from the Registrar of Companies and Official Liquidator or where the objection or suggestion of Registrar of Companies and Official Liquidator is deemed to be not sustainable, the Central Government (“CG”) shall issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA.12.
Revised Position in the Merger Rules – Rule 25(5)
Where no objection or suggestion is received within a period of 30 (thirty) days of receipt of copy of scheme under sub-section (2) of section 233, from the Registrar of Companies and Official Liquidator by CG and CG is of the opinion that the scheme is in the public interest or in the interest of creditors, it may, within a period of 15 (fifteen) days after the expiry of said thirty days, issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA.12.
Provided that if CG does not issue the confirmation order within a period of 60 (sixty) days of the receipt of the scheme under sub-section (2) of section 233, it shall be deemed that it has no objection to the scheme and a confirmation order shall be issued accordingly.
Analysis
Prior to the amendment, Sub-rule 5 neither contained specific timelines nor did it contain a provision regarding deemed approval by the CG. While deemed approval in case no objections are received is contained in proviso to Section 233(4) of the Act, such proviso does not specify any timelines within which the CG may issue a confirmation.
The amendment has not only included specific timelines to provide objections or suggestions but has also included the concept of deemed approval, which would further make the fast-track merger time effective and would amplify the objective of introducing Section 233.
Present Position – Rule 25(6)
Where objections or suggestions are received from the Registrar of Companies or Official Liquidator and CG is of the opinion, whether on the basis of such objections or otherwise, that the scheme is not in the public interest or creditors, it may file an application before the Tribunal in Form No. CAA.13 within 60 (sixty) days of the receipt of the scheme stating its objections or opinion and requesting that Tribunal may consider the scheme under section 232 of the Act.
Revised Position – Rule 25(6)
Where objections or suggestions are received within a period of 30 (thirty) days of receipt of copy of scheme under sub-section (2) of section 233 from the Registrar of Companies or Official Liquidator or both, by CG and –
(a) such objections or suggestions of Registrar of Companies or Official Liquidator are not sustainable and CG is of the opinion that the scheme is in the public interest or in the interest of creditors, it may within a period of 30 (thirty) days after expiry of 30 (thirty) days referred to above, issue a confirmation order of such scheme of merger or amalgamation in Form No. CAA.12; or
(b) CG is of the opinion, whether on the basis of such objections or otherwise, that the scheme is not in the public interest or in the interest of creditors, it may within 60 (sixty) days of the receipt of the scheme file an application before the Tribunal in Form No. CAA.13 stating the objections or opinion and requesting that Tribunal may consider the scheme under section 232 of the Act.
Provided that if the CG does not issue a confirmation order under clause (a) or does not file any application under clause (b) within a period of 60 (sixty) days of the receipt of the scheme under subsection (2) of section 233 of the Act, it shall be deemed that it has no objection to the scheme and a confirmation order shall be issued accordingly.
Analysis
Similar proviso is included in Section 233(6) of the Act whereby if the CG does not have any objection to the scheme and does not file an application with the Tribunal, it shall be deemed to have no objections to the scheme. However, the said proviso does not include an obligation on the part of the CG to issue a confirmation order in such an event.
The amendment therefore requires the authorities to take action under specified timelines, failing which it shall be deemed that there are no objections and accordingly the CG has to mandatorily issue a confirmation order, which is a respite for the parties.
The introduction of such deeming provisions and consequent de-facto approval would bring out the objective of the fast track merger process in its true sense.
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