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Seven Steps for Legal and Procedural Aspects of Mergers Explained

Hello, What is the legal and procedural aspect of the merger? A merger is a financial instrument. Which is used to increase long-term profitability by expanding their operations? And the merger occurs. When that merger companies have mutual consent. It also uses the term ‘amalgamation’ for the merger of the Income Tax Act of India, 1961. Let’s look at the 4 steps given below for its process.

What is the legal and procedural aspect of the merger?

1. Court Approval:

After the plan is approved, an application for its approval is filed in the court. The court will consider the approach of all parties, if any, before giving its consent. It will see to it that the interests of all concerned are protected in the amalgamation scheme. The court may accept, amend, or reject an amalgamation scheme. And may pass an order accordingly. However, it is up to the shareholders.

Whether or not to accept the revised plan. It can be noted. That no plan of amalgamation can be carried out till then. Unless the Registrar of Companies sends a report to this effect to the court. That the affairs of the company have not been conducted for the interests of its members or for the public interest.

2. Board Approval:

After fully discussing the amalgamation plan and negotiating the exchange ratio, it is placed before the Board of Directors concerned for approval.

3. Determination of exchange ratio:

Amalgamation or merger schemes involve the exchange of shares. The shareholders of the incorporated companies are given shares of the incorporated company. It is very important. And that a reasonable proportion of the exchange of shares is decided. Several factors such as book value per share, the market value per share, potential earnings, and the value of assets taken are usually considered for determining the exchange ratio.

4. Approval of shareholders:

After the scheme is approved by the concerned Board of Directors, it should be placed before the shareholders. As per sec.391 of the Indian Companies Act, the amalgamation scheme must be approved at the meeting of the members or class of members, as the case may be, representing three-fourths in the value and majority of the companies concerned, whether Be it in person or behind the scenes. If the scheme involves the exchange of shares, it is necessary.

That the transfer is effectively approved by not less than 90% of the company’s shareholders in order to deal effectively with the divested shareholders.

5. Considering the interests of creditors:

The consideration of creditors should also be taken into consideration. According to Sce.391, an amalgamation plan must be approved by a majority of creditors in number and three-quarters in value.

6. Analysis of proposals by companies:

Whenever a proposal for merger or amalgamation comes. So the management of the companies concerned looks at the pros and cons of the plan. Potential benefits such as economies of scale, operating economies, efficiency improvements, cost reduction, benefits of diversification, etc. are clearly evaluated. Potential response from shareholders, creditors, and others is also assessed.

The implications of taxation are also studied. After going through the entire analysis work, it is seen. And whether the scheme will be beneficial or not. After going through the entire analysis work, it is seen. Whether the scheme will be beneficial or not. It is only used next. When this would benefit interested parties otherwise the plan is sheltered.

7. Approval of Reserve Bank of India:

With reference to (Sec.19 1/d) The Foreign Exchange Regulation Act, 1973 requires RBI permission for any security issue to a person resident outside India. And, Accordingly, in a merger, the transfer company must obtain permission before issuing shares in exchange for shares held in the transferor. company. Further, sec 29 prohibits the acquisition of the whole or any part of any undertaking in India in which the interest of non-residents exceeds the specified percentage.

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