The presentation captures the vitalities of mergers and acquisition in India, briefly laying down the crux of the important and wide area of expertise.

1. Business reorganization / consolidation - Our services
Neha Singhi & Co
Practising Company Secretary

2. Modes of M&A in India

3. 3Neha Singhi & Co
Practising Company Secretary
Acquisitions
Share Purchase
M&A
Merger / Demerger
Amalgamation Demerger Business Purchase
Slump
Sale
Itemized
Sale
Modes of M&A in India

4. Merger / Demerger

5. 5Neha Singhi & Co
Practising Company Secretary
Merger
• Merger refers to consolidation of two or more entities
• Involves transfer of assets and liabilities from one or more
transferor companies to a transferee company and in
consideration, the transferee company issues shares to the
shareholders of transferor company
• High Court approval required (section 391-394 of Companies
Act)
• Time frame - around 4 - 6 months
What is a Merger?
• Income tax neutral
• Losses can be carried forward and set-off by the transferee
company
The transaction
Shareholders
Company A Company BMerger
Consideration in
the form of shares
of Company B
Alternative structure
Company A Company B
Shareholders
Merger
Company C
ShareholdersShareholders
Key tax aspects:

6. 6Neha Singhi & Co
Practising Company Secretary
• Demerger involves transfer of identified business
undertaking from one company to another
• In consideration, the company which acquires the
business, issues shares to shareholders of the selling
company
• High Court approval required (section 391-394 of
Companies Act)
• Time frame - around 4 - 6 months
What is a demerger?
Business A Business B
Shareholders of
selling company
Selling company
(‘Demerged Company’)
Buyer
company
(‘Resulting Company’)
Demerger of
business B
Consideration in the
form of shares of
buyer company
The transaction
The resultant structure
Business A
Selling company
(‘D Co’)
Business B
Buyer company (‘R Co’)
Shareholders
Demerger
• Income tax neutral
• Losses can be carried forward and set-off by the
transferee company
Key tax aspects:

7. Modes of acquisitions

8. 8Neha Singhi & Co
Practising Company Secretary
Slump sale / Hive-off
• Involves transfer of identified business undertaking on
a lock stock and barrel basis from one company to
another for a lump sum consideration
• Buyer to pay consideration (typically, in the form of
cash) to the seller company. Values can not to be
assigned to individual assets / liabilities
• No Court approval required - can be achieved through
shareholder resolution and a business transfer
agreement
• Time frame - 1 – 2 months
What is a hive off/ slump sale? The transaction
The resultant structure
Business A
Selling company
Business B
Buyer company
Shareholders
Business A Business B
Selling company
Buyer
company
Consideration
Shareholders
Sale of
business B
• Capital gains arises to the seller, unless buyer is a 100
per cent subsidiary or parent
• Arguable that the provisions of section 50C (i.e. land and
building to be transferred at stamp duty valuation) not
applicable
Key tax aspects:

9. 9Neha Singhi & Co
Practising Company Secretary
Itemised sale
• Involves transfer of business where consideration is
identified against each asset
• In consideration, the buyer company to pay cash to the
seller company
• No Court approval required - can be achieved through
shareholder resolution and a business transfer agreement
• Time frame - 1 – 2 months
What is an itemised sale?
Selling company
Buyer
companyItemized sale
of assets
Consideration
• Capital gains to be computed on each item / asset sold
• Provisions of section 50C (i.e. land and building to be
transferred at stamp duty valuation) applicable
Key tax aspects:

10. 10Neha Singhi & Co
Practising Company Secretary
Target company
Existing
shareholder(s)
Structure 1
Acquirer
company
Buy out of equity stake from existing shareholders
Structure 2
Preferential issue by Target company
Certain acquisition structures
Cash
Transfer of shares
Target company
Existing
shareholder(s)
Acquirer
company
Cash infusion
Issue of
shares
Share Purchase

11. Our services

12. 12Neha Singhi & Co
Practising Company Secretary
Our services
Newton redefined - Every action has a tax and regulatory reaction
SEBI Income Tax Stamp Act
FEMA
Companies Act
Accounting

13. 13Neha Singhi & Co
Practising Company Secretary
Our services
Our scope of work would be divided into 3 Phases:
Phase Scope of work
Phase I Advice on the suitable options for achieving the consolidation and
other specific queries of the management.
Phase II Assistance in re-locating the registered office, if required, (specifically,
from stamp duty costs perspective) and pre-implementation high level
diagnostic review
Phase III Implementation - Assistance in the consolidation process adopted
(including assistance in post implementation intimations)

14. 14Neha Singhi & Co
Practising Company Secretary
• Analysis in analyzing the suitable options for achieving the consolidation from a tax and regulatory stand point, specifically from
the following perspective:
− Income-tax Act, 1961
− Companies Act, 1956
− Foreign Exchange Management Act, 1999
− Foreign Direct Investment Regulations
− SEBI regulations
− Service tax
− Value Added Tax
− Stamp Duty regulations
• Comments on specific queries of the management from a tax and regulatory perspective on each of the options identified.
Phase I

15. 15Neha Singhi & Co
Practising Company Secretary
• Assistance in relocating the registered office, if required (specifically, from stamp duty costs perspective)
• Undertaking tax due diligence for verifying the quantum of tax losses (business loss and unabsorbed depreciation) incurred since
the date of incorporation and the eligibility to carry forward the same.
• Highlighting the safeguards/ issues/ fiscal impacts (incentives or detriments), if any, that would need to be considered both pre
and post consolidation / acquisition to maximize the efficiency of consolidation / acquisition, to the extent feasible.
• Identifying the approvals required under the aforesaid legislations/ regulations.
• Obtaining a list of pending litigation, arbitration or investigation involving the Companies before any Court or regulatory body
that may impact the consolidation / acquisition process.
• Obtaining a list of executed and pending agreements. Hold discussions with the management of the Companies to understand
restrictions, if any, relating to such agreements that may impact the consolidation / acquisition process.
• Discussions with the management of the Companies to understand any other specific issues that may significantly impact the
proposed consolidation / acquisition.
Phase II

16. 16Neha Singhi & Co
Practising Company Secretary
• During the entire implementation exercise, we would act as ‘Project Leader’ who would assist in implementing the proposed
merger. More specifically, as Project Leaders we would carry out the following:
− Co-ordinate between the various agencies involved to facilitate smooth implementation i.e., We will be the single point
contact between the Companies and the Legal Counsel;
− Ensure that the time frames for implementation are adhered to; and
− Proactively identify issues and ensure that roadblocks in the implementation process are addressed.
• Holding preliminary meetings and discussions with the management of the Companies for preparation of the Scheme to be
filed with the High Court / Applications to be filed with various regulatory authorities
• Holding discussions with the management of the Companies in relation to the following key decision points and assisting the
Companies in the determination of the following:
− The ‘Appointed Date’ for the proposed merger;
− Whether the books need to be closed and the financial statement is required to be drawn as on the ‘Appointed Date’;
− The consideration and mode of discharge of the same;
− Whether valuation of the businesses is required for the purpose of arriving at the consideration; and
− The accounting treatment to be adopted in the books of the amalgamated company under India GAAP for reflecting the
business transferred.
Phase III

17. 17Neha Singhi & Co
Practising Company Secretary
• Liaising with the Legal Counsel and assisting him in relation to the following:
- Drafting of scheme of merger / demerger and preparation of notice/ explanatory statement to shareholders;
- Preparation and filing of the first petition with the High Court;
- Calling for meetings with shareholders, creditors on approval of the scheme or obtaining dispensation of the same;
- Drafting the second petition to be filed with the High Court and filing the same with the High Court along with the Final Scheme;
- Drafting public notices, explanatory statements, advertisements to be published etc in connection with approval of the scheme;
- Follow up for the sanction of the Scheme by the High Court after necessary modifications, if any.
• Liaising with RoC and RD for forwarding their respective reports to the High Court.
• Post consolidation / acquisition process viz. Filing with the ROC & Intimation to relevant authorities etc.
Phase III (cont..)

18. 18Neha Singhi & Co
Practising Company Secretary
Thank You