An amendment has been made in the Companies Act, 2013 and the new Section 232 has been brought in which corresponds to Section 394 of the Companies Act, 1956 and this amendment seeks to bestow powers to Tribunal to order for holding of meetings of the creditors or the members and to make orders on the proposed Reconstruction, Merger or Amalgamation of companies with enforcement date as December 15, 2016. As per this clause ( 1 ) Where an application is made to the Tribunal under Section 230 for the sanctioning of a compromise or an arrangement proposed between a company and any such persons as are mentioned in that Section, and it is shown to the Tribunal (a) that the compromise or arrangement has been proposed for the purpose of, or in connection with, a scheme for the reconstruction of the company or companies involving merger or the amalgamation of any two or more companies; and (b) that under the scheme, the whole or any part of the undertaking, property or liabilities of any company (hereinafter referred to as the transferor company) is required to be transferred to another company (hereinafter referred to as the transferee company), or is proposed to be divided among and transfer to two or more companies, the Tribunal may on such application, order a meeting of creditors or class of creditors or the members or class of members as the case may be, to be called, held and conducted in such manner as the Tribunal may direct and the provisions of subsections (3) to (6) of section 230 shall apply mutatis mutandis. ( 2 ) Where, an order has been made by the Tribunal under subsection ( 1 ), merging companies or the companies in respect of which a division is proposed, shall also be required to circulate the following for the meeting so ordered by the Tribunal, namely:- (a) the draft of the proposed terms of the scheme drawn up and adopted by the directors of the merging company; (b) confirmation that a copy of the draft scheme has been filed with the Registrar; (c) a report adopted by the directors of the merging companies explaining effect of compromise on each class of shareholders, key managerial personnel, promoters and non-promoter shareholders laying out in particular the share exchange ratio, specifying any special valuation difficulties; (d) the report of the expert with regard to valuation, if any; (e) a supplementary accounting statement if the last annual accounts of any of the merging company relate to a financial year ending more than 6 months before the 1st meeting of the company summoned for the purpose of approving the scheme. ( 3 ) The Tribunal, after satisfying itself that the procedure prescribed in subsections ( 1 ) and ( 2 ) has been complied with, may, by order, sanction the compromise or arrangement or by a subsequent order, make provision for the following matters, namely:- (a) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of the transferor company from a date to be determined by the parties, unless the Tribunal, for reasons to be recorded by it in writing, decides otherwise; (b) the allotment or appropriation by the transferee company of any shares, debentures, policies or other like instruments in the company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person: Provided that a transferee company shall not, as a result of the compromise or arrangement, in its own name or in the name of any trust whether on its behalf or on behalf of any of its subsidiary or associate companies and any such shares shall be cancelled or extinguished; (c) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company on the date of transfer; (d) dissolution, without winding up, of any transferor company; (e) the provision to be made for any persons who, within such time and in such manner as the Tribunal dissent from the compromise or arrangement; (f) where share capital is held by any non-resident shareholder under the foreign direct investment norms or guidelines specified by the Central Government or in accordance with any law for the time being in force, the allotment of shares of the transferee company to such shareholder shall be in the manner specified in the order; (g) the transfer of the company of the transferor company to the transferee company; (h) where the transferor company is a listed company and the transferee company is an unlisted company;- (A) the transferee company shall remain an unlisted company until it becomes a listed company; (B) if shareholders of the transferor company decide to opt out of the transferee company, a provision shall be made for payment of the value of shares held by them and other benefits in accordance with the pre-determined price formula or after evaluation is made, and the arrangements under this provision may be made by the Tribunal: Provided that no compromise agreement shall be sanctioned by the Tribunal unless a certificate by the company’s auditor has been filed with the Tribunal to the effect that the accounting treatment, if any, proposed in the scheme of compromise or arrangement is in conformity with the accounting standards prescribed under section 133. ( 4 ) where an order under this section provides for the transfer of any property or liabilities, then by virtue of the order that property shall be transferred to the transferee company and the liabilities shall be transferred to and become the liabilities of the transferee company and any property may, if the order so directs, be freed from any charge which shall by virtue of the compromise or arrangement, cease to have effect. ( 5 ) Every company in relation to which this order is made shall cause a certified copy of the order to be filed with the Registrar for registration within 30 days of the receipt of certified copy of the order. ( 6 ) The scheme under this section shall clearly indicate an appointed date from which it shall be effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the appointed date. ( 7 ) Every company in relation to which the orders made shall, until the completion of the scheme, file a statement in such form and within such time as may be prescribed with the Registrar every year duly certified by the chartered accountant or a cost accountant or a company secretary in practice indicating whether the scheme is being complied with in accordance with the orders of the Tribunal or not. ( 8 ) If a company fails to comply with subsection (5), the company and every officer of the company who is in default shall be liable to a penalty of ₹ 20,000/-and where the failure is continuing one, with a further penalty of ₹ 1000/-for each day after the 1st during which such failure continues subject to a maximum of rupees ₹ 3 lakh.
Author: Vijay Kumar Kaushal
Vijay Kumar Kaushal is an Advocate of Supreme Court of India and Punjab and Haryana High Court. With a standing of about 30 years at bar, Mr. Kaushal is an Honorary Senior Advisor at Legal Advice Guru.com