MCA notifies provisions relating to merger or amalgamation of a foreign company
On 7 December 2016, the Ministry of Corporate Affairs (MCA) notified certain sections of the Companies Act, 2013 (2013 Act) which, inter alia, relate to compromises, arrangements and amalgamations.
Further, the rules in relation to compromises, arrangements and amalgamations came into effect on 15 December 2016.
On 13 April 2017, MCA issued the following notifications:
Overview of the notified provisions
Securities market is a signatory to International Organisation of Securities Commission’s MultilateralMemorandum of Understanding (Appendix A Signatories) or a signatory to bilateral Memorandum of Understanding with Securities and Exchange Board of India (SEBI)
Central bank is a member of Bank for International Settlement (BIS) and
Jurisdiction which is not identified in the public statement of Financial Action Task Force(FATF) as:
a) A jurisdiction having a strategic anti-money laundering or combating the financing of terrorism deficiencies to which counter measures apply or
b) A jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the FATF to address the deficiencies.
(*’Foreign company’ means any company or body corporate incorporated outside India whether having a place of business in India or not.)
The MCA had notified the suite of sections relating to compromises, arrangements and amalgamations on 7 December 2016. However, Section 234 relating to merger or amalgamation of a company with a foreign company was pending. The recent notification of Section 234 of the 2013 Act completes the enforcement of the entire suite of sections relating to compromises, arrangements and amalgamations.
The notification of Section 234 and the related Rules is expected to pave way for Indian companies intending to merge with foreign companies (domiciled in the jurisdictions given above). Further, the requirement of approval by the RBI is expected to ensure regulatory supervision over the proposed merger including safeguarding of interest of the concerned stakeholders.
The companies would need to carefully evaluate the regulations of the jurisdiction of the foreign company with which a merger is intended and may have to comply with additional requirements that may be specified by the foreign jurisdictions.
Additionally, companies should also consider and evaluate the tax impact as per the Income-tax Act, 1961 of merger with a foreign company.
To access the text of MCA notifications on:
© 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.