Companies Act, 2013: What's in the box for Mergers & Amalgamations (M&A) and Corporate Restructuring?

The Companies Bill, 2012 has finally become the Companies Act, 2013. See the official Gazette Notification here. Further, we already had an overview of the Companies Bill, 2012 here. But it must be noted that all the substantive sections are yet to be notified in due course of time by the Central Government. Only section 1 of the Act has come into effect, and section 1(3) provides:-

This section shall come into force at one and the remaining provisions of this Act shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act and any reference in any provision to the commencement of the Act shall be construed as a reference to the coming into force of that provision.

Thus, the substantive sections would be notified by the Government later. Now, I would be delineating, in this post, the key provisions relating to Mergers & Acquisitions in the new Companies Act, 2013. The new Companies Act, 2013 has sought to streamline and make M&A more smooth and transparent. The newly added provisions have made it easier for companies to implement ‘Schemes of Arrangement’ (mergers & acquisitions (M&A), de-merger, corporate debt restructuring etc) and at the same time impose checks & balances to prevent abuse of these provisions.

Now, the key provisions relating to M & A transactions and corporate restructuring are as follows-

Objection to Scheme of Arrangements on Taxation Grounds

Schemes of arrangement initiated under Sections 391-394 of the Companies Act are often being objected to by the Income Tax Authorities on the ground that such schemes are unearthed with the sole objective of non payment of taxes at the applicable rates.

Professor V. Umakanth, in a brilliant post in the Indian Corporate Law Blog, has explained the recent judicial trend towards the same.