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  • Writer's pictureTrivedi and Parashar (Advocates and Solicitors)

Legislative Updates-

THE COMPANIES (COMPROMISES, ARRANGEMENT, AND AMALGAMATIONS) AMENDMENT RULES, 2023.


On May 15, 2023, a notification was issued by the Ministry of Corporate Affairs ("Ministry), notifying amendments in the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016 ("Principal Rules"), vide the Companies (Compromises, Arrangement, and Amalgamations) Amendment Rules, 2023 ("Amendment Rules"). The Amendment Rules will come into effect from June 15, 2023.

Section 233 of the Companies Act, 2013 ("Act"), read with rule 25 of the Principal Rules, prescribe the provisions concerning the scheme of merger or amalgamation of small companies; or between holding and wholly owned subsidiary company or between some other class of companies as specified under section 233 of the Act. The merger and amalgamation process u/s 233 of the Act is commonly known as a 'fast-track merger.'


The Amendment Rules establish specific timelines for government authorities, such as the Registrar of Companies and the Official Liquidator, to provide their observations or confirmation regarding a merger scheme u/s 233 of the Act, in conjunction with Rule 25 of the Principal Rules.


The key amendments are as follows:


1. Rule 25 has been modified to streamline approvals for mergers by way of deemed approvals. Now Rule (5) states that if no objection or suggestion is received within 30 days of the period from the Registrar of Companies or Official Liquidator and if the Government of India thinks that the scheme is in the Public Interest or the Interest of the Creditors, then they can issue a confirmation order within 15 days after the expiry of abovementioned 30 days. Furthermore, if the Government of India does not give a confirmation order within 60 days, then it will be deemed that there is no objection, and a confirmation order will be issued.


2. If the objection or suggestion from the office of Registrar of Companies and Official Liquidator is not sustainable and the Government of India is in the view that the scheme is in the interest of the public and creditors, then they will issue the confirmation order within 60 (sixty) days of the receipt of the scheme. However, suppose the Government of India believes that the scheme is not in the public's or creditors' interest; in that case, they may apply to the Tribunal, within 60 (sixty) days of the receipt of the scheme, requesting the Tribunal to move the scheme under section 232 of the Act.


By specifying the time limits to the government authorities for communicating their objections or suggestions on time, it is evident that the Ministry is set to expedite the process of fast-track merger, which will enable companies to restructure their businesses swiftly under the new fast-track merger process.

 
 

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