Section 232 of CA 2013 : Section 232: Merger And Amalgamation Of Companies

Explanation using Example

Imagine ABC Ltd. and XYZ Ltd. are two companies that plan to merge into a single entity, PQR Ltd. The directors of ABC and XYZ propose a scheme where ABC Ltd. will transfer all its assets, liabilities, and undertakings to XYZ Ltd., which will then be renamed PQR Ltd. To proceed with this merger, they apply to the National Company Law Tribunal (NCLT) under section 230 of the Companies Act, 2013, seeking approval for their proposed arrangement.

The NCLT, under Section 232 of the Companies Act, 2013, directs a meeting of the shareholders and creditors of both companies to approve the merger. The directors prepare all the necessary documents, including a draft scheme, and file them with the Registrar of Companies.

At the meeting, the shareholders of ABC Ltd. are concerned about the share exchange ratio and how the merger will affect their investments. The directors present a detailed report explaining the effects of the merger on shareholders and provide an expert valuation report to address these concerns.

After the meeting, the majority of shareholders and creditors approve the scheme. The NCLT then sanctions the merger, allowing for the transfer of assets and liabilities from ABC Ltd. to XYZ Ltd. (now PQR Ltd.), the issuance of new shares to ABC's shareholders, and the dissolution of ABC Ltd. without winding up.

PQR Ltd. is required to file a certified copy of the NCLT's order with the Registrar within 30 days. The merger is deemed effective from the 'appointed date' specified in the scheme. PQR Ltd. will also need to file annual compliance reports with the Registrar until the merger is fully realized.

If PQR Ltd. fails to file the order with the Registrar within the specified time, the company and its officers may face penalties as per subsection (8) of Section 232.