Stepwise process / Checklist for Scheme of Amalgamations

Stepwise process / Checklist for Scheme of Amalgamations under Companies Act, 2013 and SEBI Regulations

Regulatory Framework

•       Companies Act, 2013 – [Sec 230-232]

•       National Company Law Tribunal Rules, 2016

•       Foreign Exchange Management Act, 1999

•       Indian Accounting Standards

•       Indian Stamp Act 1899, as applicable to relevant State

•       Competition Act, 2002

•       Income Tax Act, 1961

•       SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

•       SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011

•       SEBI Circular(s) on Scheme of Amalgamations

Approvals required

•       Board of Directors of the companies

•       SEBI / Stock exchange(s), where the companies are listed

•       Shareholders of the companies

•       Creditors of the companies

•       National Company Law Tribunal

•       Reserve Bank of India & Competition Commission, if required

Documents required

•       Memorandum and Articles of Association of the companies

•       Audited Financials

•       Statutory Records of transferor company(ies) till date.

•       Minute Books transferor company(ies) till date.

•       List of Directors

•       List of Shareholders / Shareholding Pattern

Stepwise procedure

Board Approval

•       Listed Company(ies) to intimate the date of the Board Meeting in which the in-principle proposal for amalgamation will be considered to the stock exchange(s) 

•       Convene the Board Meetings of Transferor / Transferee companies for considering the proposal of amalgamation

o   In-principle approval for amalgamation

o   Appoint Chartered Accountants for valuation

o   Registered valuer / Merchant Bankers for fairness opinion

o   Company Secretaries / Advocates for representing the matter before the Hon’ble NCLT

o   Delegate powers to a sub-committee of the Board, if any.

•   Listed Company(ies) to disclose the outcome of the Board Meeting to the stock exchange(s)

•  Independent Valuation and Fairness Opinion to be obtained; Draft Scheme of Amalgamation to be ready

•       Listed Company(ies) to intimate the date of the Board Meeting in which the Scheme of Amalgamation and Share Exchange Ratio would be considered

•       Conduct Audit Committee / Board Meetings of the Companies for considering

o   Valuation Report

o   Fairness Opinion

o   Designated Stock Exchange

•   Listed Company(ies) to disclose the outcome of the Board Meeting to the stock exchange(s)

o   Share Exchange Ratio & other details as per continuous disclosure requirements Reg. 30 of SEBI (LODR) Regulations, 2015 (Part A of Schedule III)

Stock Exchange / SEBI approval

•    Listed company(ies) not to file the Scheme with NCLT without obtaining Observation Letter / No Objection letter from the stock exchange(s)

•     Application to the Stock exchange(s) where the companies are listed under Reg.37 for obtaining Observation Letter / No Objection letter to the proposed Scheme.

•      Application to be accompanied by the documents specified in SEBI Circular on Scheme of Arrangements.

•  Documents submitted to the stock exchange(s) to be uploaded on the Company’s website.

•     Provide response to clarifications sought by the stock exchange(s), if any.

•   Obtain Observation Letter / No Objection letter from the stock exchange(s) to the proposed Scheme of Amalgamation

•     Upload the Observation Letter / No Objection letter on the Company’s website within 24 hours of receipt

NCLT Approval

•  Application to NCLT seeking directions, inter alia, for dispensing / convening shareholders’ and creditors’ meetings; publishing advertisements; appointment of chairpersons.

•      Obtain NOC from Secured Creditors.

•      Obtain Orders from NCLT.

•       If ordered for convening the meetings, convene board meetings to seek approval of -

o   Supplementary accounting statements, if required.

o   Approval of the Notices of the Tribunal Convened Meetings to be issued to the shareholders and creditors

o   Notice to be issued pursuant to SEBI Circular on Scheme of Arrangements seeking approval of Public Shareholders through e-voting

•       Printing and Dispatch of Notices to shareholders / creditors – physical and electronic

o   Notice with all documents to be sent to the offices of ROC, Official Liquidator, Central Government (Regional Director), Income Tax authorities, RBI, Stock exchange(s) and any other regulatory authorities, as directed by NCLT. 

•    Intimate stock exchange(s) on the dispatch of notices and also submit the notices to the stock exchange(s).

•      Upload the complete Notice(s) on the Company’s website

•      Publication of advertisement in Newspapers about the meetings  

•    Upload the newspaper advertisement the Company’s website and submit the same to the stock exchange(s) 

•      Convene the meetings / e-voting

o   NCLT convened meeting Resolution(s) to be passed with Special Majority, i.e., majority of members present (more than 50%) and holding 3/4^th in value of voting rights. Result to be decided through Poll and also E-voting for Listed entities.

o   SEBI requirement - Postal Ballot / e-voting - votes cast by the public shareholders in favour are more than the number of votes cast by the public shareholders against it – E-voting (Postal Ballot may also be provided).

•    Outcome of Meetings / E-voting to be intimated to the stock exchange(s) within 48 hours of conclusion of the Meeting.

•     Submit responses to any information / clarifications sought by the Official Liquidator and Central Government (RD Office)

•      Reports of the Chairman to be submitted to the NCLT along with the attendance slips & proxy forms in original within 7 days from the date of holding the meeting.

•      Company Petitions seeking orders of the NCLT for amalgamation of the companies to be filed with the NCLT within 7 days from the date of filing of the Chairman’s report.

•       Filing of MGT-14 with ROC within 30 days of approval of the Resolutions.

•       Date of hearing to be fixed by NCLT Registry

•       Obtain NOCs from Income Tax authorities / RBI / CCI, if required.

•       Publish Notice of Hearing in the newspapers seeking objections, if any, to the Scheme.

•       Upload the newspaper advertisement the Company’s website and submit the same to the stock exchanges

•       Counsel to file the responses to the Notice with NCLT. 

•       Petition to be admitted by NCLT and notices to be served on Official Liquidator and Central Government (Regional Director).

•       Submission of reports on the Scheme by the offices of the Regional Director and the Official Liquidator to the NCLT.

•       Hearing of the matter by the NCLT.

•       NCLT to pronounce the Orders.

Post NCLT approval

•       Obtain Certified True Copy of the Order from the NCLT.

•       Payment of Stamp Duty, as per the Stamp Act, if required.

o   Adjudication of the Court Order

o   Payment

•       Inform SEBI / Stock exchange(s) on receipt of the Order

•       Post receipt of the Certified True Copy of the Order, documents to be sent to the Designated Stock Exchange, as per SEBI Circular on Amalgamations.

•       Filing of INC 28, along with Stamp Duty payment challan with the ROC.

•    Stock Exchange(s) to take note of NCLT Order and inform the Company.

•       Board to note the NCLT Order and fix the Record Date

•       Intimate Record Date to Stock exchange(s) (7 working days’ notice)

•       Allotment of shares

•       Intimation to the Stock Exchange(s) on Allotment

•       Admit new shares issued with the Depositories

•       Listing Application to the Stock Exchange(s)

•       Submit FC-GPR through Authorized Dealer Bank, if required.

•       File PAS-3 with the ROC within 30 days of Allotment.

•       Obtain Listing and Trading approval

•   Intimations to all other concerned offices, including statutory authorities, with Certified copies of NCLT orders.

•       Any specific compliances stipulated in the Amalgamation Order to be adhered to.

Provisions relating to voting on resolutions to be passed at General Meetings

Summary of provisions relating to voting on resolutions to be passed at General Meetings – Companies Act, 2013 and Rules thereon and Secretarial Standard on General Meeting

Applicability:

E-voting - Mandatory for every listed company or a company having not less than 1,000 shareholders, to provide e-voting facility for resolutions proposed to be considered at general meetings by electronic means (Sec 107(1) and Sec 108 of the Act applicable).

Voting by show of hands:  All other Companies which are not covered under e-voting provisions (Sec 107(2) and Sec 109 of the Act applicable).

Governing Laws

Companies Act, 2013

Companies (Management and Administration Rules) 2014

General Circular 20 of 2014

Secretarial Standard-2 on General Meetings

Sections 107, 108 & 109 of Companies Act, 2013

Voting by show of hands

107. (1) At any general meeting, a resolution put to the vote of the meeting shall, unless a poll is demanded under section 109 or the voting is carried out electronically, be decided on a show of hands.

(2) A declaration by the Chairman of the meeting of the passing of a resolution or otherwise by show of hands under sub-section (1) and an entry to that effect in the books containing the minutes of the meeting of the company shall be conclusive evidence of the fact of passing of such resolution or otherwise.

Voting through electronic means

108. The Central Government may prescribe the class or classes of companies and manner in which a member may exercise his right to vote by the electronic means.

Demand for poll

109. (1) Before or on the declaration of the result of the voting on any resolution on show of hands, a poll may be ordered to be taken by the Chairman of the meeting on his own motion, and shall be ordered to be taken by him on a demand made in that behalf,—

(a) in the case a company having a share capital, by the members present in person or by proxy, where allowed, and having not less than one-tenth of the total voting power or holding shares on which an aggregate sum of not less than Rs. 5 lakhs or such higher amount as may be prescribed has been paid-up; and

(b) in the case of any other company, by any member or members present in person or by proxy, where allowed, and having not less than one-tenth of the total voting power.

(2) The demand for a poll may be withdrawn at any time by the persons who made the demand.

(3) A poll demanded for adjournment of the meeting or appointment of Chairman of the meeting shall be taken forthwith.

(4) A poll demanded on any question other than adjournment of the meeting or appointment of Chairman shall be taken at such time, not being later than forty-eight hours from the time when the demand was made, as the Chairman of the meeting may direct.

(5) Where a poll is to be taken, the Chairman of the meeting shall appoint such number of persons, as he deems necessary, to scrutinise the poll process and votes given on the poll and to report thereon to him in the manner as may be prescribed.

(6) Subject to the provisions of this section, the Chairman of the meeting shall have power to regulate the manner in which the poll shall be taken.

(7) The result of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll was taken.

Rules 20 and 21 of Companies (Management and Administration Rules), 2014, as amended from time to time

Rule 20 - voting through electronic means

(1) The provisions of this rule shall apply in respect of the general meetings for which notices are issued on or after the date of commencement of this rule, i.e., March 19, 2015

(2) Every listed company or a company having not less than one thousand shareholders, shall provide to its members facility to exercise their right to vote on resolutions proposed to be considered at general meetings by electronic means.

(ii) “cut-off date” means a date not earlier than seven days before the date of general meeting for determining the eligibility to vote by electronic means or in the general meeting;

(v) "remote e-voting" means the facility of casting votes by a member using an electronic voting system from a place other than venue of a general meeting;

(vii) “voting by electronic means" includes "remote e-voting" and voting at the general meeting through an electronic voting system which may be the same as used for remote e-voting

(3) A member may exercise his right to vote through voting by electronic means all resolutions referred to in sub-rule (2) and the company shall pass such resolutions in accordance with the provisions of the Rules.

(4) A company which provides the facility to its member to exercise voting by electronic means shall comply with the following procedure provided in Rule 4.

(i)      the notice of the meeting shall be sent to all the members' directors and auditors of the company either -

(a) by registered post or speed post ; or

(b) through electronic means, namely, registered e-mail lD of the recipient; or

(c) by courier service;

(ii)     the notice shall also be placed on the website, if any, of the company and of the agency forthwith after it is sent to the members;

(iii)    the notice of the meeting shall clearly state

(A)     that the company is providing facility for voting by electronic means and the business may be transacted through such voting;

(B)     that the facility for voting, either through electronic voting system or ballot or polling paper shall also be made available at the meeting and members attending the meeting who have not already cast their vote by remote e-voting shall be able to exercise their right at the meeting;

(C)     that the members who have cast their vote by remote e-voting prior to the meeting may also attend the meeting but shall not be entitled to cast their vote again.

(iv)     the notice shall -

(A)     indicate the process and manner for voting by electronic means ;

(B)     indicate the time schedule including the time period during which the votes may be cast by remote e-voting

(C)     provide the details about the login lD;

(D)     specify the process and manner for generating or receiving the password and for casting of vote in a secure manner.

(v)      the company shall cause a public notice by way of an advertisement  to be published' immediately on completion of despatch of notices for the meeting under clause (i) of sub-rule (4) but at least twenty-one days before the date of general meeting' at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and having a wide circulation in that district' and at least once in English language in an English newspaper having country-wide circulation' and specifying in the said advertisement, inter alia the following manner namely:

Provided that the public notice shall be placed on the website of the company, if any, and of the agency;

(vi)     the facility for remote e-voting shall remain open for not less than three days and shall close at 5.00 p.m. on the date preceding the date office general meeting;

(vii)    during the period when facility for remote e-voting is provided, the members of the company' holding shares either in physical form or in dematerialised form, as on the cut-off date' may opt for remote e-voting:

Provided that once the vote on a resolution is cast by the member' he shall not be allowed to change in subsequently or cast the vote again

Provided further that a member may participate in the general meeting even after exercising his right to vote through remote e-voting but shall not be allowed to vote again;

(viii)   at the end of the remote e-voting period, the facility shall forthwith be blocked

Provided that if a company opts to provide the same electronic voting system as used during remote e-voting during the general meeting, the said facility shall be in operation till all the resolutions are considered and voted upon in the meeting and may be used for voting only by the members attending the meeting and who have not exercised their right to vote through remote e-voting.

(ix)     the Board of Directors shall appoint one or more scrutiniser, who may be Chartered Accountant in practice, Cost Accountant in practice, or Company Secretary in practice or an Advocate' or any other person who is not in employment of the company and is a person of repute who' in the opinion of the Board can scrutinise the voting and remote e-voting process in a fair and transparent manner:

Provided that the scrutiniser so appointed may take assistance of a person who is not in employment of the company and who is well-versed with the electronic voting system;

(x)      the scrutiniser shall be willing to be appointed and be available for the purpose of ascertaining the requisite majority;

(xi)     The Chairman shall, at the general meeting. at the end of discussion on the resolutions on which voting is to be held, allow voting as provided in Rule 21(1), as applicable, with the assistance of scrutiniser by use of ballot or polling paper or by using an electronic voting system for all those members who are present at the general meeting but have not cast their votes by availing the remote e-voting facility'.

(xvii) subject to receipt of requisite number of votes, the resolution shall be deemed to be passed on the date of the relevant general meeting.

(xviii)           a resolution proposed to be considered through voting by electronic means shall not be withdrawn."

Rule 21 - Manner in which the Chairman of meeting shall get the poll process scrutinised and report thereon

(1) The Chairman of a meeting shall ensure that-

(a) The Scrutinizers are provided with the Register of Members, specimen signatures of the members, Attendance Register and Register of Proxies.

(b) The Scrutinizers are provided with all the documents received by the Company pursuant to sections 105, 112 and section 113.

(c) The Scrutinizers shall arrange for Polling papers and distribute them to the members and proxies present at the meeting; in case of joint shareholders, the polling paper shall be given to the first named holder or in his absence to the joint holder attending the meeting as appearing in the chronological order in the folio and the Polling paper shall be in Form No. MGT.12.

(d) The Scrutinizers shall keep a record of the polling papers received in response to poll, by initialing it.

(e) The Scrutinizers shall lock and seal an empty polling box in the presence of the members and proxies.

(f) The Scrutinizers shall open the Polling box in the presence of two persons as witnesses after the voting process is over.

(g) In case of ambiguity about the validity of a proxy, the Scrutinizers shall decide the validity in consultation with the Chairman.

(h) The Scrutinizers shall ensure that if a member who has appointed a proxy has voted in person, the proxy’s vote shall be disregarded.

(i) The Scrutinizers shall count the votes cast on poll and prepare a report thereon addressed to the Chairman.

(j) Where voting is conducted by electronic means under the provisions of section 108 and rules made thereunder, the company shall provide all the necessary support, technical and otherwise, to the Scrutinizers in orderly conduct of the voting and counting the result thereof.

(k) The Scrutinizers’ report shall state total votes cast, valid votes, votes in favour and against the resolution including the details of invalid polling papers and votes comprised therein.

(l) The Scrutinizers shall submit the Report to the Chairman who shall counter-sign the same.

(m) The Chairman shall declare the result of Voting on poll. The result may either be announced by him or a person authorized by him in writing.

(2) The scrutinizers appointed for the poll, shall submit a report to the Chairman of the meeting in Form No. MGT.13 and the report shall be signed by the scrutinizer and, in case there is more than one scrutinizer by all the scrutinizer, and the same shall be submitted by them to the Chairman of the meeting within seven days from the date the poll is taken.

General Circular 20 of 2014

Clarifications on electronic voting under Rule 20

(i) Voting by show of hands would not be allowable in cases where electronic voting is applicable.

(ii) Participation in the general meeting after voting by electronic means – person who has voted electronically shall not be debarred from participation in the general meeting physically. But he shall not be able to vote in the meeting again, and his earlier vote (cast through e-means) shall be treated as final.

(iii) Postal Ballot Transactions [under Rule 22(16)] cannot be considered in a general meeting where Rule 20 (electronic voting) is applicable.

(iv) Relevance of provisions relating to demand for poll – Provisions relating to demand for poll will not be relevant in cases where e-voting is applicable.

(v) Option of voting through postal ballot is not available to shareholder, who is not able to participate in the general meeting personally and also not able to exercise voting through e-voting.

Clause 7 of Secretarial Standard-2 on General Meetings

7.       Voting

7.1     Proposing a Resolution

Every Resolution shall be proposed by a Member and seconded by another Member.

7.2     E-voting

7.2.1 Every company having its equity shares listed on a recognized stock exchange other than companies whose equity shares are listed on SME Exchange or on the Institutional Trading Platform and other companies as prescribed shall provide e-voting facility to their Members to exercise their Voting Rights.

Other companies presently prescribed are companies having not less than one thousand Members.

The facility of Remote e-voting does not dispense with the requirement of holding a General Meeting by the company.

7.2.2 Voting at the Meeting

Every company, which has provided e-voting facility to its Members, shall also put every Resolution to vote through a ballot process at the Meeting.

Ballot process may be carried out by distributing ballot/poll slips or by making arrangement for voting through computer or secure electronic systems.

Any Member, who has already exercised his votes through Remote evoting, may attend the Meeting but is prohibited to vote at the Meeting and his vote, if any, cast at the Meeting shall be treated as invalid.

A Proxy can vote in the ballot process.

7.3     Show of Hands

Every company shall, at the Meeting, put every Resolution, except a Resolution which has been put to Remote e-voting, to vote on a show of hands at the first instance, unless a poll is validly demanded.

A Proxy cannot vote on a show of hands.

7.4     Poll

The Chairman shall order a poll upon receipt of a valid demand for poll either before or on the declaration of the result of the voting on any Resolution on show of hands.

Poll in such cases shall be through a Ballot process.

While a Proxy cannot speak at the Meeting, he has the right to demand or join in the demand for a poll.

The poll may be taken by the Chairman, on his own motion also.

7.5     Voting Rights

7.5.1 Every Member holding equity shares and, in certain cases as prescribed in the Act, every Member holding preference shares, shall be entitled to vote on a Resolution.

Every Member entitled to vote on a Resolution and present in person shall, on a show of hands, have only one vote irrespective of the number of shares held by him.

A Member present in person or by Proxy shall, on a poll or ballot, have votes in proportion to his share in the paid up equity share capital of the company, subject to differential rights as to voting, if any, attached to certain shares as stipulated in the Articles or by the terms of issue of such shares.

Preference shareholders have a right to vote only in certain cases as prescribed under the Act.

7.5.2 A Member who is a related party is not entitled to vote on a Resolution relating to approval of any contract or arrangement in which such Member is a related party.

7.6     Second or Casting Vote

Unless otherwise provided in the Articles, in the event of equality of votes, whether on show of hands or electronically or on a poll, the Chairman of the Meeting shall have a second or casting vote.

Where the Chairman has entrusted the conduct of proceedings in respect of an item in which he is interested to any disinterested Director or to a Member, a person who so takes the chair shall have a second or casting vote.