La concejala y el diputado Del sindicato a la tarea legislativa.

Highlights of the revised process are as under:

• Fast track merger: 2013 Act contains provisions that would expedite merger process between 2 or more ‘small companies’ and between a holding company and its WOS. This process can be extended, under the Rules, to class of companies. Such a fast track merger would require approval of ROC, OL, members holding at least 90% of total number of shares and majority of creditors representing 9/10th in value. This will considerably reduce the time that takes in the High Court (NCLT under 2013 Act) process and will facilitate smooth and swift completion of the process.

"Small company" has been defined to mean a company, other than a public company, whose paid-up share capital does not exceed Rs 5 million or such higher amount as may be prescribed which shall not exceed Rs 50 million; or whose Turnover as per its last profit & loss account does not exceed Rs 20 million or such higher amount as may be prescribed which shall not exceed Rs 200 million.

• Outbound merger: Presently, while foreign company is allowed to merge with Indian company, vice versa is not allowed. 2013 Act permits an Indian company to be merged with a foreign company and vice versa. This will require prior approval of RBI under FEMA to be issued separately. The consideration for such a merger, subject to conditions, can be paid in cash and / or depository receipts. The Cross border merger will pave way for more interest amongst Indian and global players to operate under a single integrated entity. Necessary amendments may be required under the tax laws, to consider the same as a tax neutral merger.

• Exit by minority shareholders: Acquirer and / or PAC or person or group of persons who holds 90% or more of the issued equity capital of the company by virtue of amalgamation, share exchange, conversion of securities or for any other reason, can notify the company of his intention to purchase the remaining equity shares of the company from minority shareholders. In such case, the exit price is to be determined by RV. The minority shareholders of the company may also offer to sell their equity shares to the majority shareholders at a price determined under the Rules.

• Approval threshold: Compromise or arrangement would require approval by a majority representing 3/4th in value of the creditors and members. Presently, it also requires simple majority in terms

of number for both creditors and members. Creditors meeting may be dispensed with if at least 90% in value thereof, agree and confirm, by way of an affidavit, to the scheme of compromise or arrangement.

• Accounting treatment: Accounting treatment in the scheme of compromise and arrangement need to be compliant with the Accounting Standards and Auditor’s Certificate to that effect needs to be filed with NCLT. Listed companies were required to follow this in terms of the Listing Agreement, now even unlisted companies are brought at par with this requirement.

• Valuation report to be given to shareholders / creditors along with notice convening meeting for a compromise or arrangement.

• Let the Regulators beware!: The notice for compromise or arrangement would need to be given to CG, Income tax, RBI, SEBI, Stock exchanges, ROC, OL, CCI, if necessary, and other sectoral regulators / authorities, to enable them to make representations. • Wider participation through Postal Ballot voting: Resolution for compromise or arrangement can also be passed through Postal ballot.

• Treasury stock: Holding of shares in its own name or in the name of trust whether through subsidiary or associate companies by the transferee company as a result of the compromise or arrangement will not be allowed and any such shares shall be cancelled / extinguished.

• Objection by minority: Objection to the compromise or arrangement can be made only by persons holding not less than 10% of the shareholding or having outstanding debt of not less than 5% of total outstanding debt as per the latest audited balance sheet. This will save the companies from being dragged in long drawn court (NCLT under 2013 Act) process by minority holders who is holding even single share. Threshold will ensure that merger / demerger etc. process moves smoothly and swiftly in accordance with the law.

• Takeover offer under scheme: Takeover Offer may be included as a part of the scheme of compromise and arrangement in the manner as may be prescribed in Rules. In case of listed companies such takeover offer shall be as per the guidelines issued by SEBI. • Merger of listed into unlisted company: In case

of compromise / arrangement between a listed transferor company and an unlisted transferee company, NCLT may provide that the transferee

company shall remain unlisted company until it becomes listed and those shareholders of the transferor company who opts to exit be given an exit at a price which should not be less than the price under SEBI Regulations.

• Dispensation of meeting of creditors: Meeting of creditors can be dispensed only if 90% of the creditors in value agree to the scheme by way of affidavit.

• Combining authorized capital on amalgamation: Normally on amalgamation, based on judicial decisions, the authorised capital of the transferor company is added to the authorized capital of the transferee company. Now it is expressly provided that fees, if any, paid by the transferor company on its authorized capital shall be allowed to be set-off against fees, if any, payable by the transferee company on its authorized capital subsequent to the amalgamation.

• Corporate debt restructuring: Scheme of Corporate Debt Restructuring shall be approved by at least 75% of the value of the secured creditors.

• The proposal of amalgamation, merger or reconstruction can be considered and approved by Board of directors only by passing resolutions at board meeting and not by circular resolution • The scheme of compromise or arrangement shall

clearly indicate only one appointed date from which date the scheme 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 Capital Reduction

• Capital reduction will require approval of NCLT • Company will not be allowed to carry out capital

reduction if it is in arrears in the repayment of any deposits accepted by it or interest thereon • Capital reduction can be sanctioned by NCTL

only if the accounting treatment proposed by the company for such reduction is in conformity with the accounting standards and auditors certificate to that effect is obtained

Postal Ballot

Voting by Postal ballot through post / electronic mode is made applicable to all companies.

Registered Valuers

Where any valuation is required to be made in respect of any property, stocks, shares, debentures, securities, goodwill or other assets or of net-worth or liabilities under 2013 Act, such valuation shall be done by a person registered with the Government as a valuer. Registered valuer shall be appointed by the audit committee or in its absence by the BOD.

• Fast track mechanism for merger between wholly owned subsidiaries and holding company (or) merger between small companies will facilitate quicker internal reorganization

• Doing away with approval of shareholders and creditors of 3/4th majority (in numbers) and raising the threshold limit for raising objection by shareholders (10% holding) and creditors (5% of outstanding debt) in a scheme of arrangement will obviate the entire process being jeopardized by small stakeholders

• Parent / promoter will get opportunity to increase their stake in unlisted companies where they hold substantial holding by purchasing stake of minority shareholders at fair value determined by the RV. • The process of giving notice to various regulators

like IT, SEBI etc. could delay the process of amalgamation, merger, demerger etc. if there are any pending matters with these regulators.

• 2013 Act envisages establishment of Tribunal to be known as NCLT with principal bench at New Delhi. NCLT will consists of Judicial and Technical members, as CG may deem necessary, to exercise and discharge the powers and functions conferred on it under 2013 Act or any other law

• NCLT to have such number of other benches as may be notified by CG

• NCLT to endeavor to dispose of the proceedings within 3 months

• On the date of the constitution of NCLT

– All matters, proceedings or cases pending before CLB will stand transferred to NCLT;

– All proceedings under 1956 Act, including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending before any District Court or High Court, will stand transferred to NCLT. NCLT may proceed to deal with such proceedings from the stage before their transfer.

• Appeals against the order of NCLT is to be preferred to NCLAT

• An appeal arising out of order of NCLAT on any question of law is to be preferred to the Supreme Court

• A party to any proceeding or appeal before NCLT or NCLAT may either appear in person or authorize CA or CS or CWA or legal practitioners or any other person to present his case

Instances where approval of NCLT is required 2013 Act lays down various instances where approval of NCLT is required to be obtained. Some of these include: • Seeking exemption for having FY of a company

which ends on a day other than 31 March

• Issue of further redeemable preference shares in lieu of arrears of dividend or failure to redeem existing preference shares as per the terms of issue • Preparation of revised financial statement or board

report for past 3 FYs, where BOD believes that they do not comply with the relevant provisions • Conversion of a public limited company to private limited company • Capital reduction • Filing Class action suits • Scheme of compromise, arrangements and reconstruction • Winding up of companies • To declare a company as a sick company etc. • Even CA’s in practice are permitted to appear before NCLT / NCLAT. This is expected to broaden selection of service providers by the companies.