Exclusive HOLI Discounts!
Get Courses and Combos at Upto 50% OFF!
Upgrad
LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

BBA LLB   03 March 2021

Companies law

Greetings Everyone!

My query is in connection with amalgamation u/s.395 i.e. by takeover of shares by the acquiring company.  

I would like to know that does this section contemplates amalgamation of companies without reference to court ; does it means that after complying with all the formalities amalgamation in real sense i.e. vesting of all the assets and liabilities of the transferor company is affected?



Learning

 1 Replies

Ishaan   03 May 2021

An arrangement can be struck out between a concerned company and its creditors and also between a concerned company and members of such company. Such an arrangement requires approval of the court, which supervises meeting of creditors or such members or class of creditors, as the case may be. On agreement of creditors or members present in majority representing three-fourth in value of members or creditors whatever the case may be, the court may authorize any such arrangement. It is also compulsory for the Court to consider the reports of Registrar of Companies concerned and also the reports of the Official Liquidator before permitting the scheme of amalgamation.
The provisions concerning amalgamation are contained in sections 391 to Section 396A in Part VI of the Act. Any request of amalgamation or merger begins with the procedure of due diligence. 
It must be noted that there are only two ways by which you can transfer the Assets and Liabilities of the Transferor company to the Transferee company. One cannot draw a scheme of amalgamation under Section 395 of the Companies Act. 
Section 395 supports taking over a company without approaching the court by acquiring the shares of that company. This section provides a mode for the acquiring company to make an agreement with the stockholders of the Transferor Company to purchase the shares and securities at a specified price. It also provides a mechanism for safeguarding the rights and liabilities of the dissentient shareholders. Section 395, however, does not provide for any tool for transferring assets and liabilities of the Transferor to the Transferee company. 
The share exchange ratio is obtained or decided based on the valuation of the company which is done by a Chartered Accountant. Considering the report of valuation, share exchange ratio is reached upon.
 


Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register