The Ministry of corporate affairs has amended the rules to make it easier for small companies and start-ups to secure approvals for mergers by way of deemed approvals.
Small companies and start-ups seeking approvals for mergers and amalgamations will now have deemed approval for the transaction if the Centre does not issue a confirmation order within 60 days from it receiving a request, showed the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2023 issued by the ministry late on Monday.
The move brings more accountability to the authorities, cuts red tape and helps to improve the ease of doing business.
The rules formulated in 2016 have been partly amended by the ministry to facilitate time-bound decision-making and to bring about clarity in the procedure of dealing with comments and objections received regarding a particular case, said Jyoti Prakash Gadia, Managing Director at Resurgent India Ltd., a merchant bank.
The government now has an upper limit of 60 days within which it has to either approve the merger scheme or place its views before the appellate authority after the receipt of objections if any, failing which it will be treated as a deemed approval in the particular case, explained Gadia.
Earlier, there was no specified time period for the approval from the Registrar of Companies (RoC), Official liquidator and the Central Government where the transferee company has filed a scheme copy for the approval of the merger or amalgamation.
As per the amended provision, if no objection or suggestion is received within thirty days from the Registrar of Companies (RoC) and Official Liquidator, the central government has the authority to issue a confirmation order within 15 days provided that it is in the public interest or in the interest of creditors.
If any objections or suggestions are received from the RoC and Official Liquidator and the government found these objections to be unsustainable and the scheme is determined to be in the public interest, the government may issue a confirmation order within sixty days. Wherever the scheme is not beneficial to the public interest, then it is to be intimated to a tribunal. Where the government fails to issue a confirmation order within sixty days, it is to be deemed that the merger or amalgamation scheme is duly approved, explained Jitin Aggarwal, Director (Audit & Advisory) at SW India.
“By expediting the merger process, companies can pursue their strategic goals efficiently while adhering to legal requirements and protecting the interests of various stakeholders,” said Aggarwal.