2020 (3) TMI 1328 - Tri - Companies Law

Sanction of Scheme of Amalgamation - section 230-232 of Companies Act - seeking directions regarding holding and convening of various meetings - HELD THAT - Since the Scheme is an arrangement between the Applicant Company and its shareholders in accordance with the provisions of section 230(1)(b) of the Companies Act 2013 the meeting of the Unsecured Creditors is not required to be convened. In view of the fact that the rights of the Unsecured Creditors are not affected the meeting of Unsecured Creditor is hereby dispensed with. This Bench hereby directs the Applicant Company to issue notice to all its Unsecured Creditors by Courier/RPAD/Speed Post/Hand Delivery or through Email with a direction that they may submit their representations if any to the Tribunal and copy of such representations shall simultaneously be served upon the Applicant Company. Application disposed off.

Summary

Issues:
Scheme of Amalgamation under Sections 230-232 of Companies Act, 2013; Approval of Scheme by Board of Directors; Benefits of Amalgamation; Shareholding structure of Applicant Company; Procedure for Secured and Unsecured Creditors; Notice to Regulatory Authorities and Creditors; Scrutiny of Accounts by Chartered Accountant; Compliance Report Filing.

Scheme of Amalgamation under Sections 230-232 of Companies Act, 2013:
The judgment pertains to a Scheme of Amalgamation presented under Sections 230-232 and other applicable provisions of the Companies Act, 2013. The Scheme involves the Amalgamation between two companies, with the Applicant Company being a 100% subsidiary of the Transferee Company. The rationale for the Scheme includes complementary nature of businesses, simplification of management structure, pooling of resources, strengthening financial position, and increased leverage capacity of the merged entity.

Approval of Scheme by Board of Directors:
The Board of Directors of the Applicant Company approved the Scheme at a meeting held on 11th October 2019. The Scheme proposes the amalgamation of the entire undertaking and business of the Amalgamating Company with the Amalgamated Company, as considered and proposed by the respective Boards of Directors.

Benefits of Amalgamation:
The Scheme aims to bring various benefits, such as extending the business operations, simplifying management structure, reducing costs, optimizing logistics, enhancing operational efficiencies, and strengthening the financial position of the merged entity. These benefits are expected to result from the pooling of resources, synergies of operations, and rationalization of administrative functions.

Shareholding structure of Applicant Company:
The Applicant Company is a 100% subsidiary of the Transferee Company, with the entire share capital held by the Transferee Company. Consequently, the meeting of Equity Shareholders of the Applicant Company is dispensed with, as confirmed by a consent affidavit obtained from the Transferee/Holding Company.

Procedure for Secured and Unsecured Creditors:
As there are no Secured Creditors in the Applicant Company, the requirement to send notices to them does not arise. Regarding Unsecured Creditors, since the Scheme is in accordance with the provisions of section 230(1)(b) of the Companies Act, 2013, the meeting of Unsecured Creditors is not mandated. However, the Applicant Company is directed to issue notices to Unsecured Creditors to submit their representations to the Tribunal.

Notice to Regulatory Authorities and Creditors:
The Applicant Company is directed to serve notices along with a copy of the Scheme to various entities, including the Central Government, Regional Director (Ministry of Corporate Affairs), Registrar of Companies, Income Tax Department, and any other sectoral regulators applicable to the Transferor Company. The purpose is to allow these authorities to submit their representations within a specified timeframe.

Scrutiny of Accounts by Chartered Accountant:
The Tribunal appoints a Chartered Accountant to assist the Official Liquidator in scrutinizing the books of accounts of the Applicant Company for the last five years. The Applicant Company is required to pay the fees of the Chartered Accountant and ensure that the scrutiny report is submitted to the Tribunal within the stipulated period.

Compliance Report Filing:
The Applicant Company is directed to file a compliance report in the registry to demonstrate the dispatch of notices to regulatory authorities and creditors. It is essential to report to the Tribunal that all directions regarding the issuance of notices have been duly complied with to proceed further with the Scheme of Amalgamation.