The concept of a "Fast Track Merger" was introduced under Section 233 of the Companies Act, 2013, and further elaborated in the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. It provides a simplified and expedited procedure for the merger or amalgamation of certain types of companies, aiming to reduce the time and cost involved compared to the regular merger process under Sections 230-232 of the Act.
Key Features and Objectives:
Simplified Procedure: It bypasses the need for approval from the National Company Law Tribunal (NCLT) in many cases, making the process faster.
Applicability to Specific Company Types: This route is primarily available for:
Merger between two or more small companies.
Merger between a holding company and its wholly-owned subsidiary.
Other class(es) of companies as may be notified by the Central Government.
Focus on Shareholder and Creditor Consent: The process relies heavily on obtaining the consent of shareholders and creditors through notices and their right to object.
Approval by Regional Director (RD): The primary approval authority under the fast track merger route is the Regional Director (RD) of the Ministry of Corporate Affairs (MCA).
Procedure for Fast Track Merger:
Board Meeting and Approval: The Boards of Directors of the transferor and transferee companies pass resolutions approving the scheme of merger or amalgamation.
Notice to Regulatory Authorities: Notice of the proposed scheme is required to be given to:
The Registrar of Companies (ROC).
Official Liquidator (OL).
Persons affected by the scheme.
Approval by Shareholders and Creditors:
The scheme must be approved by 90% of the total number of shareholders of each of the transferor and transferee companies.
Approval is also required from the creditors representing 90% in value of the total creditors of each of the transferor and transferee companies.
The approval is typically obtained through a meeting or a written consent process.
Filing the Scheme with the Regional Director (RD): After obtaining the necessary approvals, the transferee company is required to file the scheme of merger/amalgamation with the Regional Director (RD) in the prescribed form, along with the necessary documents.
RD's Scrutiny and Approval: The Regional Director examines the scheme and the documents filed. They may raise objections or seek clarifications. If satisfied, the RD will issue an order approving the scheme.
Filing with the Registrar of Companies (ROC): The order of the Regional Director, along with the scheme, is then filed with the ROC by the transferee company.
Effective Date: The merger becomes effective from the date of filing the RD's order with the ROC, or as specified in the scheme.
List of Documents Required for Fast Track Merger (Indicative):
The specific documents required may vary based on the specifics of the merger and the requirements of the Regional Director. However, a general list includes:
Scheme of Merger/Amalgamation: A detailed document outlining the terms and conditions of the merger.
Board Resolutions: Certified copies of the resolutions passed by the Boards of Directors of the transferor and transferee companies approving the scheme.
Notice to Regulatory Authorities: Proof of dispatch and acknowledgment of the notice sent to the ROC and OL.
Shareholder Approval: Evidence of approval of the scheme by at least 90% of the total number of shareholders of each company (e.g., resolutions passed at meetings or written consents).
Creditor Approval: Evidence of approval of the scheme by creditors representing at least 90% in value of the total creditors of each company (e.g., resolutions passed at meetings or written consents).
Valuation Report (if applicable): Though not always mandatory under fast track merger for holding-subsidiary or small companies, a valuation report might be required in certain situations or if requested by the RD.
Statement of Assets and Liabilities: Latest audited financial statements of the transferor and transferee companies.
Undertakings: Undertakings from the directors of the transferee company regarding compliance with the scheme and the Act.
Rationale for Merger: A statement explaining the reasons and benefits of the merger.
No Objection Certificates (NOCs) (if applicable): From any other regulatory authorities if required.
Affidavits: Affidavits from the directors confirming the authenticity of the documents and compliance with the rules.
Form MGT-14: For filing the Board Resolutions and Special Resolutions (if any) with the ROC.
Form CRA-2: The specific form for filing the scheme of compromise or arrangement (including mergers) with the Regional Director.
Any other document as may be prescribed by the Rules or required by the Regional Director.
Advantages of Fast Track Merger:
Faster Process: Avoids the lengthy NCLT approval process.
Cost-Effective: Reduces legal and procedural expenses.
Simplified Requirements: Fewer regulatory hurdles compared to regular mergers.
Streamlined for Specific Company Structures: Facilitates easier restructuring for holding-subsidiary and small companies.
Limitations:
Limited Applicability: Only available for specific types of companies.
High Threshold for Consent: Requires a high level of shareholder and creditor consent (90%).
RD Scrutiny: The Regional Director still has the power to scrutinize and object to the scheme.
the Fast Track Merger route provides a more efficient mechanism for the amalgamation of certain related or smaller companies, provided the stringent consent requirements are met and the Regional Director approves the scheme. It's crucial to carefully review the eligibility criteria, procedural steps, and documentation requirements outlined in Section 233 of the Companies Act, 2013, and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, for a successful fast track merger.