V S VARUN (COMPANY SECRETARY) 27 February 2012

Mergers and amalgamation

Dear Friends,

Would like to know on the following.

What happens to the Authorised Share Capitals of merged companies, on their getting merged with another company. Will the authorised share capital of the transferee company automatically increase without having to file F5 and pay fees to ROC, or is it necessay to have to comply with the Companies Act requirements of having to increase the capital and then file F5 and then pay ROC fees.

Would like to have specific case laws in either situation.

Warm regards for professional views.

CS V S Varun,

Bangalore

270212

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(Guest)

Mergers or amalgamations may take two forms:

Merger through Absorption:- An absorption is a combination of two or more companies into an 'existing company'. All companies except one lose their identity in such a merger.

Merger through Consolidation:- A consolidation is a combination of two or more companies into a 'new company'. In this form of merger, all companies are legally dissolved and a new entity is created. Here, the acquired company transfers its assets, liabilities and shares to the acquiring company for cash or exchange of shares.

Two or more companies can amalgamate only when the amalgamation is permitted under their memorandum of association.In the absence of these provisions in the memorandum of association, it is necessary to seek the permission of the shareholders, board of directors and the Company Law Board before affecting the merger.

Yes, you can increase authorized capital and allot shares .But, while filing keep margin of days from approving Form 5 first.When Form 5 is approved then only you can file your return of allotment.