Mergers and Amalgamations is a type of reorganizational tool to diversify the business of various companies. Mergers and Amalgamations mean the procedure or arrangement of merging two or more existing companies or forming a new company. It leads to acquisition of assets and liabilities of different business. The acts which govern the Mergers and Amalgamations are:

  1. Income Tax Act, 1961
  2. SEBI (Listing Obligation & Disclosure Requirements) Regulations, 2015
  3. The Indian Stamp Act, 1899
  4. SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011
  5. The Companies Act, 2013 and The Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 made under Chapter XV of the Companies Act 2013
  6. Competition Act, 2002.

The main objective of Mergers and Amalgamations is to expand the business of the merging companies as well as for the tax benefits to the companies. It also helps in entering into foreign markets as well as helps in increasing the efficiency of the operation and production of the companies.


Section 230 to Section 234 of the Companies Act, 2013 governs Mergers and Amalgamations. The provisions as stated above are as follows:

  1. Power to make compromise and arrangement (Section 230): An application is submitted by the companies to the NCLT disclosing the relevant information about its latest financial position and the current auditor report, investigation or proceeding against the company, reduction of share capital and corporate debt restructuring scheme which is consented by 75% of the secured creditors of the company. When a meeting is called in pursuance of the order of the tribunal, a notice regarding the same is sent to all the creditors or class of creditors, members or class of members and the debenture-holders of the company individually to their registered address. It shall provide the person to whom the notice is sent may vote in the meeting either themselves or through proxies or by postal ballot. The power to raise objection on this scheme is given to those shareholders and creditors who holds 10% of the shareholding and 5% of the outstanding debt. The order of the tribunal shall be filed with the registrar within thirty days of the receipt of the order.
  • Power of tribunal to enforce compromise or arrangement (Section 231): When a tribunal makes an order under Section 230, it shall have the power to supervise and monitor the implementation of the scheme or to make any changes in the scheme etc.
  • Procedure of merger and Amalgamation (Section 232): Section 232 (1) states that an application is filed to the tribunal in Form no. AMG.1 along with the affidavit of the order of meeting and the notice of the meeting. Section 232 (2) deals with the circulation of the documents for member’s or creditor’s meeting. The documents are:
  1. the draft of the proposed terms of the scheme drawn up and adopted by the directors of the merging company;
  2.   confirmation that a copy of the draft scheme has been filed with the Registrar;
  3.  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;
  4. the report of the expert with regard to valuation, if any;
  5.  a supplementary accounting statement if the last annual accounts of any of the merging company relate to a financial year ending more than six months before the first meeting of the company summoned for the purposes of approving the scheme.

      Section 232 (3) deals with sanctioning of the scheme of merger and amalgamation if the companies have complied with the provision of Section 232(1) and 232(2).

Section 232(4) deals with order of the tribunal to transfer the property or liabilities to the transferee company.

Section 232(5) deals with filing of the certified copy of the order to registrar within thirty days of the receipt of the certified copy of the order.

Section 232(5) deals with the appointed date from which the scheme will be effective.

  • Merger and Amalgamation of certain companies (Section 233): Section 233 deals with the procedure for merger or amalgamation of two or more small companies or between a holding company and its wholly-owned subsidiary company or such other class or classes of companies as may be prescribed.

Section 233(1) deals with the conditions to be complied when the merger or amalgamation of two or more small companies or between a holding company and its wholly-owned subsidiary company or such other class or classes of companies as may be prescribed is held notwithstanding the provisions of Section 230 and 232.

Section 233(2) deals with the filing of the copy of the approved scheme by the transferee company to the central government, registrar and the official liquidator.

Section 233(3) states that when there are no objections or suggestions from official liquidator or registrar, then the central government can issue a confirmation order to the companies.

Section 233(4) states that if there is any objections by the registrar or official liquidator, he can communicate in writing to the central government within a period of thirty days.

Section 233(5) states that after receiving objections or suggestions, if the central government has the reason to believe that the scheme is not in public interest or in the interest of the creditors then it may file an application before the tribunal within sixty days of the receipt of the scheme stating the objection.

Section 233(6) states that tribunal may pass an order to reconsider the scheme if it thinks fit on receipt of the application from the central government or any other person.

Section 233(7) states that a copy of the order confirming the scheme shall be communicated to the registrar having jurisdiction over the transferee company and it shall register the scheme accordingly.

Section 233(8) states that the registration of the scheme shall have the effect of dissolution of the transferor company without following the procedure of winding up.

Section 233(9) states that the registration of the scheme shall have the following effects:

  •  transfer of property or liabilities of the transferor company to the transferee company so that the property becomes the property of the transferee company and the liabilities become the liabilities of the transferee company;
  • the charges, if any, on the property of the transferor company shall be applicable and enforceable as if the charges were on the property of the transferee company;
  • legal proceedings by or against the transferor company pending before any court of law shall be continued by or against the transferee company; and
  •  where the scheme provides for purchase of shares held by the dissenting shareholders or settlement of debt due to dissenting creditors, such amount, to the extent it is unpaid, shall become the liability of the transferee company.

Section 233(10) states that the transferee company cannot hold any shares in its own name or trust on merger or amalgamation and all such shares shall be cancelled or extinguished.

Section 233(11) states that the transferee company shall file an application along with the registered scheme to the registrar indicating the revised authorized capital.

  • Merger or Amalgamation of a company with a foreign company (Section 234): It states that a foreign company can merge into a company registered under this act or vice versa with the prior approval of the Reserve Bank of India.


  1. Acit Chennai vs. Sundaram Finance Limited on 4th September, 2019: It was held in this case that when the companies are amalgamating, the amalgamating companies exist within the amalgamated companies without a separate identity but the full identity is not completely lost.
  • Li Taka Pharmaceutical Ltd. vs. State of Maharashtra: It was held that the amalgamation is a type of instrument under the Stamp act, so a stamp duty must be paid on conveyance of property.
  • Miheer H. Mafatlal vs. Mafatlal Industries Ltd. on 11th September, 1996: It was held that while sanctioning the scheme of merger and amalgamation the bonafide voting or consent of the majority of the group must be considered rather than the single person.


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