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The end of year 2016 witnessed a paradigm shift in the Indian corporate restructuring front as MCA notified the much awaited sections in the Companies Act,
2013 dealing with amalgamations, compromise , arrangement, liquidation and winding up vide Notification dated December 7, 2016 further notifing the
procedural aspects of these sections in the form of Rules called Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 ( the “Rules”) ,
both of which came into force on December 15, 2016
Chapter XV of the New Act deals with “Compromises, Arrangements, and Amalgamations”, and consolidates the applicable provisions and related issues. The
Old Act required M& A to be sanctioned through a court process. The said process will continue under the New Act (with certain exemptions and relaxations)
but the jurisdiction of court with regard to such Schemes will now vest with NCLT
MCA also notified the Companies (Transfer of Pending Proceedings) Rules, 2016 and the
Companies (Removal of Difficulties) Fourth Order, 2016. Pursuant thereto, all proceedings under the 1956 Act with High Courts shall stand transferred to the
Benches of the National Company Law Tribunal (“NCLT”) exercising respective territorial jurisdiction with effect from December 15, 2016, other than
proceedings relating to winding up which have been dealt with separately. However, proceedings which are reserved for orders for allowing or otherwise of
such proceedings shall not be transferred.
There are pragmatic reforms for M&A under the New Act, which could make the process easier, faster and cleaner for companies involved in M&A. Some of the
highlights include fast track mergers, mergers between Indian Companies and foreign companies and, setting up of National Company Law Tribunal (NCLT) to
hear and decide on M&A proposals, cutting down on the probability and scope of objections to M&A’s and easier as well as wider participation of shareholders
through postal ballot approval.
Also, The Insolvency and Bankruptcy Code was passed by the Parliament on 11th May 2016 and received Presidential assent on 28th may 2016 and notified in
the official gazette on the same day. The law aims to consolidate the laws relating to insolvency of companies and limited liability entities (including limited
liability partnerships and other entities with limited liability), unlimited liability partnerships and individuals, presently contained in a number of legislations,
into a single legislation. The Code seeks to repeal the Presidency Towns Insolvency Act, 19 Act, 1993 and Sick Industrial Companies (Special Provisions) Repeal
Act, 2003, among others.
This project report discusses the Mergers and Amalgamations under the recently notified Companies Act 2013, its procedural aspects, the key differences in
provisions relating Amalgamations under new and the old Act. It further briefly discusses the regulatory aspect of merger in India in present time.
Corporate Restructuring refers to
changes in ownership, business mix,
asset mix and alliances primarily with
aim to increase shareholder value.
Hence corporate restructuring may
involve ownership restructuring,
business restructuring or asset
Simply stated, it implies restructuring
or reorganizing a company or its
business or its financial structure in
such a way as to make it operate
Merger or Amalgamation is one of the
many tools/modes/forms of Corporate
Restructuring which can be further
classified (as explained in the diagram
1 and 2.)
Key Forms of Corporate Restructuring
Acquisition Demerger Others
(Takeover) Asset Purchase
Slump Sale Itemized sale
Reverse MergerForward Merger
Merger/Amalgamation – Meaning
The terms merger and amalgamation are used interchangeably as a form of business organization to seek external growth of business.
A merger is a combination of two or more firms in
which only one firm would survive and the other
would cease to exist, its assets / liabilities being
taken over by the surviving firm.
Amalgamation is combination of two
corporate entities where the assets and
liabilities of both are vested in a third
entity, with the effect that both former
entities lose their identities to form a
ENTITY A ENTITY B ENTITY B
ENTITY A ENTITY B
Merger within same or related
industries . Conglomerate Merger
Involves coming together of two or
more companies engaged in different
industries and/or services . Their
businesses or services are neither
horizontally nor vertically related to
a merger between two
companies that operate at
separate stages of the production
process for a specific finished
product. i.e. merger where two or
more firms, operating at different
levels within an industry's supply
chain, merge operations.
a merger between business
competitiors who maunfacture
similar products or provide similar
services. It occurs when
competition tends to be higher and
the synergies and potential gains in
market share are much greater
for merging firms in such an
When a company merges or
combines with supplier of
When a company merges or
combines with customer
Merger of parent company into its
Merger of subsidiary company into its
Merger of a company into subsidiary
of another company by virtue of
which shareholders get shares of
However Section 2(1B) of the Income-Tax Act, 1961 defines amalgamation as follows:
Amalgamation in relation to companies means the merger of one or more companies with
another company or merger of two or more companies to form one company (the company
or companies which so merge being referred to as the amalgamating company or companies
and the company with which they merge or which is formed as a result of the merger, as the
amalgamated company) in such manner that
i. all the property of the amalgamating company or companies immediately before the
amalgamation becomes the property of the amalgamated company by virtue of the
ii. all the liabilities of the amalgamating company or companies immediately before the
amalgamation become the liabilities of the amalgamated company by virtue of the
iii. shareholders holding not less than three-fourths in value of the shares in the
amalgamating company or companies (other than shares already held therein
immediately before the amalgamation by, or by a nominee for, the amalgamated
company or its subsidiary) become shareholders of the amalgamated company by
virtue of the amalgamation
E.g. Say X Ltd. Merges with Y Ltd. In a scheme of amalgamation and immediately before
the amalgamation , Y Ltd. Held 20% shares in X Ltd. The condition mention in (iii)
above will be satisfied if shareholders holding not less than 75% in value of remaining
80% of shares of X. Ltd i.e. 60% thereof become shareholders in Y Ltd by virtue of
In Indian context, the terms amalgamation or merger have neither been defined in the Companies Act, 1956 nor in Companies Act 2013.
Also both the terms i.e. Merger and Amalgamation are often used synonymously and intended to mean the same.
Merger/Amalgamation – In India
AS 14 prescribed by ICAI (Institute of Chartered Accountants Of India) which has been
used for accounting of amalgamation in India until now and has only recently been
substituted by new accounting standards called IND AS 103 for certain category of
companies; classifies and defines amalgamation as:
1. AMALGAMATION IN THE NATURE OF MERGER is an amalgamation which satisfies all
the following conditions.
(i) All the assets and liabilities of the transferor company become, after
amalgamation, the assets and liabilities of the transferee company.
(ii) (ii) Share holders holding not less than 90% of the face value of the equity shares
of the transferor company (other than the equity shares already held therein,
immediately before the amalgamation, by the transferee company or its
subsidiaries∗ or their nominees) become equity shareholders of the transferee
company by virtue of the amalgamation.
(iii) (iii) The consideration for the amalgamation receivable by those equity
shareholders of the transferor company who agree to become equity
shareholders of the transferee company is discharged by the transferee company
wholly by the issue of equity shares in the transferee company, except that cash
may be paid in respect of any fractional shares. (iv)
(iv) The business of the transferor company is intended to be carried on, after the
amalgamation, by the transferee company.
(v) No adjustment is intended to be made to the book values of the assets and
liabilities of the transferor company when they are incorporated in the financial
statements of the transferee company except to ensure uniformity of accounting
2. AMALGAMATION IN THE NATURE OF PURCHASE is an amalgamation which does
not satisfy any one or more of the conditions specified above
Section 230-231 Compromise or Arrangements
Section 232 Mergers and Amalgamation including Demergers
Section 233 Amalgamation of small companies (Fast track mergers)
Section 234 Amalgamation with Foreign Company (Cross Border Mergers)
Section 235 Acquisition of Shares of dissenting shareholders
Section 236 Purchase of minority shareholding
Section 237 Power of central government to provide for amalgamation of companies in public interest
Section 238 Registration of offer of schemes involving of shares
Section 239 Preservation of books and papers of amalgamated companies
Section 240 Liability of officers in respect of offences committed prior to merger amalgamation etc.
Until November 2016, Companies Act 1956 (Section 391-396) dealt with Compromises, Arrangement and Amalgamations. Thereafter, in
December 2016 the sections governing Arrangement and Amalgamation under Companies Act 2013 were notified.
Chapter XV (Section 230-240) of Companies Act 2013 contains the provisions on Compromises, Arrangements and Amalgamations. The
procedural aspects involved and format of applications to be made to NCLT are covered under rules called Companies (Compromises,
Arrangements and Amalgamations) Rules, 2016 ( the “Rules”) made under the Act.
A gist of sections is as follows.
Merger/Amalgamation – Companies Act 2013
1. National Company LawTribunal to assume jurisdiction of HighCourt.
2. Section 230(2) – Application for compromise or arrangement to be accompanied
by an affidavit, disclosing
i. All material facts relating to the company.
ii. Reduction of capital if any included in the compromise or arrangement;
iii. . Any scheme of corporate debt restructuring consented to by not less than 75% of
iv. creditors in value along with creditors responsibility statement, report of the
auditor as to the funds requirement after CDR and the conformity to liquidity test
3. Proviso to Section 230(3) – Notice relating to compromise or arrangement and
other documents to be placed on the website of the company.
4. Section 230(5) – Notice of meeting for approval of the scheme of compromise or
arrangement be sent to various regulators including:
i. 1.The Central Government;
ii. 2. Income-taxAuthorities;
iii. 3. Reserve Bank of India (`RBI’);
iv. 4. Securities Exchange Board of India (`SEBI’);
v. 5.The Registrar;
vi. 6. Respective Stock Exchange;
vii. 8.TheCompetition Commission of India; if necessary; and
Other Sectoral regulators which could likely be affected by the scheme. Representation,
if any, by the above authorities will have to be made within a period of 30 days from
receipt of notice.
5. Proviso to Section 230(4) – Persons holding not less than 10% of
the shareholdings or persons having outstanding debt amounting to not
less than 5% of the total outstanding debt as per the latest audited
financial statement, entitled to object the scheme of compromise or
6. Proviso to Section 230(7) – No sanction for Compromise or
arrangement if accounting treatment is no AS compliant.
7. Section 234 – Cross border Merger permitted.The 1956 act permits
merger of foreign company wit h Indian company and not vice versa.
8. Section 233 (10) – Abolishing the practice of companies holding their
own shares through a trust (Treasury Stock) in case of merger of holding
and subsidiary companies. Ultimately the shares are to be cancelled.
9. Section 233 – Fast track mergers introduced. –The new Act enables
fast track merger without the approval of NCLT, between:
i. Two or more small companies. Small company is defined under the
ii. Holding and wholly owned subsidiary company
iii. Other class of companies as may be prescribed
10. Section 230(6) – Approval of scheme by postal ballot thereby
involving wider participation;
11. Section 230(11) – Any compromise or arrangement may also
include takeover offer made in prescribed manner. In case of listed
companies, takeover offer shall be as per the regulations
framed by SEBI.
Salient Features of Companies Act, 2013 relating to Corporate Restructuring
S.No PROCEDURE TIMELINE FORMS
Company Specific Steps/ Procedure
1. Board Meeting of the Company to Consider the proposal of amalgamation and authorize the Committee or Directors to
appoint Consultants, Valuers, Merchant Bankers, Lawyers etc
2. Intimate Stock exchange on the decision of the board within 30 minutes of the meeting.
3. Consultants prepare Roadmap and submit analysis report of structuring
Valuation of company and determination of exchange ratio
Finalize draft scheme of merger
Valuation report placed before Audit committee and Audit committee to give its recommendation on draft scheme,
taking into consideration the Valuation report.
4. Board Meeting to be held to :
Approve the scheme of merger
Accept the report of Auditor on valuation and share exchange ratio
Consider fairness opinion of merchant banker
Authorize Directors to take all action for implementing Scheme of merger
Procedure as prescribed under Rules:
5. Company to file following documents with NCLT
An application (joint application at discretion of all the parties if registered office under same jurisdiction) to order that
meeting of shareholders/members, creditors or class of creditors be called and conducted in such manner as Tribunal
A notice of admission
A copy of scheme of compromise or arrangement which shall include disclosures as given in Section 230(2)
Procedure for Amalgamation – Section 230-232 of Companies Act 2013
6. Tribunal may at its discretion give directions to convene the meeting of shareholders and creditors or dispense
with the meeting of creditors of transferor and transferee company.
7. Send the notice of the meeting to class of shareholders and members whose meeting has been directed by
Tribunal in manner provided under Section 230(3) and shall be sent individually to each creditor and member.
i. The notice shall be accompanied by:
a. Details of order of Tribunal directing the calling, convening and conducting the meeting
b. Date of order
i. Date time and venue of meeting
ii. Date of board meeting at which such scheme was approved, name of directors who voted in favor and against
the resolution and those who did not vote.
iii. The facts and details of any relation between parties to amalgamation
iv. explanatory statement disclosing details like parties involved, appointed date, effective date, share exchange
ratio,, summary of valuation report etc.
v. Disclosure about the effect of the compromise or arrangement on:
key managerial personnel;
debenture holders; deposit trustee and debenture trustee; employees of the company.
Advertisement of the notice of the meeting
The notice of the meeting shall be advertised in Form No. CAA.2 in at least one English newspaper and in at least
one vernacular newspaper having wide circulation in the State in which the registered office of the company is
Further the notice shall be placed on the website of the company (if any) and in case of listed companies also on
the website of the SEBI and the recognized stock exchange where the securities of the company are listed
At least 30
9. Notice to statutory authorities CAA.3,
Post sending notices to members/creditors company to send notice of meeting to regulators like the Central
Government, Registrar of Companies, Income Tax authorities, Reserve Bank Of India, SEBI, CCI, Stock Exchange, as
10. Filing of affidavit of service of notice by the respective chairperson of the meetings of shareholders and/or secured
and unsecured creditors with the Hon'ble NCLT
11. Convening the meeting of the members & creditors and approve the scheme of Merger by voting and passing the
resolution by poll or by voting through electronic means.
12. Filing of Chairman’s Report of result of the meeting with the NCLT CAA.4
13. Filing of the petition for confirming amalgamation/arrangement with tribunal Within 7 days
of report of
14. The tribunal shall fix a date for hearing of the petition and notice of hearing shall be published in the same newspaper
in which notice of meeting was published earlier
At least 10 days
before the date
15. Filing of copies of Petition with Registrar of Companies, Regional Director and Official Liquidator
16. Final Hearing at the tribunal
17. Receipt of Certified True Copy of the Order of the NCLT.
18. Filing of e Form INC- 28 with the Registrar of Companies
Section 230 – Section 240 Section 390-396A
BODY OF APPROVING
National Company Law
Tribunal will deal with matters
related to Mergers &
Scheme of arrangement to be approved
by respective High Court which has jurisdiction
CROSS BORDER MERGERS Inbound mergers (Foreign Company merging into Indian
Company as well as outbound foreign company mergers
(Indian Company merging into foreign Company with RBI
approval) are allowed.
Permits only inbound foreign Company merger (Foreign
Company merging into Indian Company)
FAST TRACK MERGER Fast track merger is merger between two or more small
companies, holding company and its wholly owned
subsidiary and such other company as may be prescribed,
where approval of NCLT shall not be required. The
scheme must be approved by 90% of shareholders and
90% of creditors(in value) , and after approval of scheme
notice must be given to Central Governemnt, NCLT, ROC
and official liquidator.
No provisions for exemption from court process for
corporate reorganizations like
amalgamation, merger etc.
The provisions relating to Compromise,Arrangement and Amalgamations under CompaniesAct 1956 and Companies Act 2013 more or less remain same in
substance with a few very pragmatic changes like FastTrack merger of small companies, merger of Indian company into foreign company, introduction of
threshold for raising objection to amalgamation scheme.The key changes in the new act has been discussed hereunder while making comparisons with the old
Key changes in Comparison to Companies Act 1956.
Section 230 – Section 240 Section 390-396A
OBJECTION TO THE SCHEME OF
Such scheme can be objected only by shareholders
having not less than 10% shareholding or creditors whose
debt is not less than 5% of total outstanding debt as per
the last audited financial statement.
Objection to scheme compromise or arrangement can be
made by any shareholder
and/or creditor, as the case maybe irrespective of their
shareholding /outstanding debt
DISCLOSURES TO BE MADE VIDE
AFFIDAVIT AT THE TIME OF FILING
APPLICATION BEFORE THE
Along with all material facts like latest financial position,
auditors report, investigation against company if any
i. Reduction of share capital of the company,
if any, included in the compromise or arrangement;
i. Any scheme of Corporate Debt Restructuring
consented to by not less than 75% of secured
All material facts relating to company, such as latest
financial position of the company, the latest auditor’s report
on the accounts of the company, the pendency of any
investigation proceedings in relation to the company.
NOTICE CONVENING MEETING
Notice convening meetings shall be sent to all
shareholders /creditors / debenture holders
of the company individually at the address registered
with the company.
Notice to be served to the Central Govt.,
IncomeTax Authorities, RBI, SEBI, the Registrar,
respective stock exchanges, Official Liquidator,
Competition Commission of India, if necessary, and such
other sectoral regulators or authorities.
Notice convening meeting to be sent to
the shareholders / creditors and shall be
given by advertisement.
No specific provisions for serving of notice to IncomeTax
and other regulators.
VALUATION REPORT The 2013 Act now mandatorily requires the scheme to
contain the valuation certificate. The valuation report
also needs to be annexed to the notice for meetings for
approval of the scheme.
The 1956 Act does not mandate disclosing the valuation
report to the shareholders. Though in practice, valuation
reports are included in documents shared with the
shareholders and also to the Court as part of the appraisal
process of the scheme by the Courts.
Section 230 – Section 240 Section 390-396A
CERTIFICATE OF COMPANY’S
No compromise or arrangement shall be
sanctioned unless a certificate by the company's auditor
has been filed with the NCLT to the effect that the
accounting treatment, if any, proposed in the scheme of
compromise or arrangement is in conformity with the
accounting standards prescribed under section 133 viz.
by the Central Govt. as recommended bythe Institute of
Accountants of India
No specific provision with respect to filing of
the certificate of the company’s auditor.
VOTING BY POTAL BALLOT Scheme of compromise / arrangement needs to be
approved by majority representing 3/4th in value of the
creditors and members or class thereof present and
voting in person or by proxy and by Postal Ballot.
Scheme of compromise / arrangement needs to be
approved by majority representing 3/4th in value of the
creditors and members or class thereof present and voting
in person or by proxy only.
TAKEOVER OFFER A scheme of compromise or arrangement may include
“takeover offer” in a prescribed manner. In the case of
such takeover offer shall be as per the SEBI regulations
A scheme of compromise or arrangement cannot include a
OFFER TO SELL BY MINORITY
The minority shareholders of the company may also
offer to sell their shares to the majority shareholders at a
price determined in accordance with the rules as may be
No specific provision for offer to sell by
the minority shareholder to the majority
Due to introduction of Postal Ballot there shall be wider participation of the shareholders of the company in voting and will protect
The requirement of presenting Valuation Report to shareholders will enable the shareholders to understand the business
rationale of the transaction and take an informed decision
The new threshold limit for raising objections inregard to scheme or arrangement will protect the scheme from small shareholders’
and creditors’ frivolous litigation and objection.
The 2013 Act will provide an opportunity of growth and expansion to Indian Company by permitting amalgamation with foreign
company or vice versa. This will provide opportunity to form corporate strategies on a global scale.
Internal Restructuring will increase due to separate provision for Small Companies (Only Private Companies) and Holding and
Wholly Owned Subsidiary Company under Fast Track Merger.
Dissenting Shareholder will easily exit the Compromise, Arrangement, Merger and Amalgamation
Role of other authority like Income Tax, Reserve Bank of India, etc. becomes important but this mul;ti authority appraisal may also
make the procedure lengthy.
It is expected that these important changes would bring in substantial efficiency in the manner in which amalgamation,
compromise, arrangement, liquidation, winding up, etc. are carried out.
Basic requirements relating to Scheme of Arrangement are covered under Clauses 11, 37 And 94 of the SEBI LODR Regulations.
Regulation 11 :
The listed entity shall ensure that any scheme of arrangement /amalgamation /merger /reconstruction /reduction of capital etc. to be presented to any Court or
Tribunal does not in any way violate, override or limit the provisions of securities laws or requirements of the stock exchange(s):
Regulation 37 :
The listed entity desirous of undertaking a scheme of arrangement or involved in a scheme of arrangement, shall file the draft scheme of arrangement proposed
to be filed before any Tribunal under Sections 230- 234 of Companies Act, 2013, with the stock exchange(s) for obtaining Observation Letter or No-objection
letter, before filing such scheme with any Tribunal.
The listed entity shall not file any scheme of arrangement under Sections 230-234 of Companies Act, 2013 with any Court or Tribunal unless it has obtained
observation letter or No-objection letter from the stock exchange(s).
The listed entity shall place the Observation letter or No-objection letter of the stock exchange(s) before the Tribunal at the time of seeking approval of the
scheme of arrangement: The validity of the Observation Letter or No-objection letter of stock exchanges shall be six months from the date of issuance, within
which the draft scheme of arrangement shall be submitted to the Tribunal .
Upon sanction of the Scheme by the Tribunal, the listed entity shall submit the documents, to the stock exchange(s), as prescribed by the Board and/or stock
exchange(s) from time to time.
Merger/Amalgamation of Listed Entity – LODR Regulations
Regulation 94 :
The designated stock exchange, upon receipt of draft schemes of arrangement and the documents prescribed by the Board, as per regulation 37, shall forward
the same to SEBI (Board)
The stock exchange(s) shall submit to the Board its Objection Letter or No Objection Letter on the draft scheme of arrangement after inter-alia ascertaining
whether the draft scheme of arrangement is in compliance with securities laws
within thirty days of receipt of draft scheme of arrangement or
within seven days of date of receipt of satisfactory reply on clarifications from the listed entity
The stock exchange(s), shall issue Observation Letter or No-objection letter to the listed entity within seven days of receipt of comments from the Board, after
suitably incorporating such comments in the Observation Letter or No-objection letter:
Since the order of the Court merging two or more companies has the effect of transferring property to the surviving company, the order of the Court may be required
to be stamped. The stamp laws of most states require the stamping of such orders. The amount of the stamp duty payable would depend on the state specific stamp
Infact the incidence of stamp duty is an important consideration in the planning of any merger. In fact, in some cases, the whole form in which the merger is sought to
take place is selected taking into account the savings in stamp duty.
Stamp duty is levied in India on almost all, except a few documents, by the States and hence the rate and incidence of stamp in different states varies. The State
Legislature has jurisdiction to levy stamp duty under entry 44, List III of the Seventh Schedule of the Constitution of India and prescribe rates of stamp duty under
entry 63, List 11
The applicability of stamp duty in case of amalgamation is determined on two grounds:
i. the State/states(s) in which the registered office of the Companies is situated and the
ii. sites of the properties being transferred under the Scheme.
Whether order of the Court for amalgamation is an instrument of conveyance under the Stamp Act or not?
Maharashtra, Gujrat, Karnataka, Rajasthan, Chhattisgarh, Madhya Pradesh, Andhra Pradesh, West Bengal and Uttar Pradesh –have included the orders passed u/s 394
of the Companies Act 1956 in the definition of ‘Conveyance’
Hindustan Lever Vs. State of Maharashtra (2004) 1 CLJ 148 (SC) - held that order of the Court is an instrument constituting a transfer inter-vivos and therefore, falls
within the ambit of the definition of conveyance
The Hon’ble High Court of Calcutta vide its order dated 8th February, 2012, in the matter of Emami Biotech Limited (CP. No. 627 of 2011) held that an order
sanctioning a scheme of amalgamation or demerger under Section 394 of the Companies Act answers to the description of the words "instrument" and "conveyance"
within the meaning of the Indian Stamp Act, 1899 as applicable in the State of West Bengal and is, accordingly,exigible to stamp duty.
DelhiTowers Limited vs. G.N.C.T. of Delhi [(2010) 159 Comp Cas 129 (Del)] it was held that the order of the HighCourt under section 394 of the CompaniesAct
constitutes an instrument by virtue of which the assets and liabilities of the transferor/demerged company are transferred and vested in the transferee/resulting
company disregarding the fact that there is no specific entry in the schedule-I of the Delhi StampAct and hence, made such order eligible to stamp duty.
Similarly, there are various other judgments from different High Courts that provides for references as to the applicability of Stamp Duty on M&A transactions in
Merger/Amalgamation- Stamp Duty Aspect
Merger/Amalgamation- Accounting Aspect
The 2013 Act has introduced a new requirement, that no scheme of compromise or arrangement, whether for listed company or unlisted company shall be
sanctioned unless the company’s auditor has given a certificate that the accounting treatment of the proposed scheme is in conformity with the prescribed
AS 14 notified under Companies(Accounting Standards) Rules 2006 has been used for accounting of amalgamation in India until now .
On 16th February MCA notified the Companies(Indian Accounting Standards) Rules 2015 laying down the roadmap to application of IFRS converged standards
(IND AS) to Indian companies. IND AS 103 shall be applicable on all Amalgamations as per following Roadmap.
TYPES OF COMPANIES BASIS FROM YEAR
Any Company Voluntary Accounting periods beginning on or after 1st
a. Listed and Unlisted Companies having net worth 500 crores or more
b. Holding/Subsidiary/Joint Venture or associate of these companies
Mandatory For Accounting periods beginning on or after
a. Listed Companies having net worth less than 500 crores
a. Unlisted companies having net worth between 250-500 crores.
a. Holding/Subsidiary/Joint Venture or associate of these companies
Mandatory For Accounting periods beginning on or after
Companies not covered under the Roadmap can either adopt IND AS 103 Voluntarily or continue applying existing standards i.e. AS 14 as notified under
Companies(Accounting Standards) Rules 2006.
AS 14 – ACCOUNTING FOR AMALGAMATIONS IND AS 103 – BUSINESS COMBINATIONS
There are two methods of of accounting for amalgamations. The
pooling of interest method and purchase method. Under pooling
method the acquired assets are valued at their book values only.,
asnd in purchase method they are valued either at book value or at
Their was no comprehensive standard to measure fair value.
IND AS 103 prescribes acquisition method where acquired
assets and liabilities are measured at their fair value only.
Fair value is determined by using principles of INDAS 113
In case of an amalgamation in the nature of purchase, difference
between the consideration and the value of the net assets
acquired is recognised as Goodwill (if the difference is positive) or
Capital Reserve (if the difference is negative). Hence, only
assets and liabilities reflected in the books of the acquiree and
acquired by acquirer will be considered while arriving at the
Goodwill is the difference between the fair value of the
consideration and fair values of the identifiable assets
(tangible and intangible) and liabilities as of the acquisition
date. Hence, assets or liabilities even if not appearing in
the books of the acquiree and which can be identified will
be considered at fair values for arriving at the goodwill.
Some commonly identifiable intangibles in purchase price
allocation include customer contracts, customer
relationships, brand and technology.
Goodwill arising on amalgamation is to be
amortised over a period not exceeding five
years unless a somewhat longer period can
Goodwill arising on business
combination is to be tested for
impairment annually. (Ind AS 36)
AS 14 VS. IND AS 103
The provisions relating to regulation of combination as provided under Sections 5 and 6 of the Competition Act, 2002 and the Competition
Commission of India (Procedure in regard to the transaction of Business relating to Combinations) Regulations, 2011 are to be complied with.
Competition law regulates merger(called combinations) deals with threshold limits (domestic/cross border) notice to Competition Commission of
Section 5 of the Competition Act, 2002 provides that amalgamation of enterprises shall be Combination of such enterprises if its above certain
threshold limits in terms of Assets or Turnover as prescribed as provided in the section.
Section 6 provides that any enterprise entering into Combination (as described above) shall give a notice to the Commission disclosing details of
proposed combination, in the form prescribed along with the prescribed fee.; within 30 days of approval of proposal relating to Merger or
Section 6 further prohibits any person or enterprise from entering into a combination (as described above) which causes or is likely to cause an
appreciable adverse effect on competition within the relevant market in India and if such a combination is formed, it shall be void.
Merger/Amalgamation and Competition Act 2002