Fast Track Merger Under Section 233 of Companies Act 2013

The fast track merger process under Section 233 of the Companies Act, 2013, offers a simplified path for merging small companies, start-ups, and certain holding and subsidiary companies. It streamlines procedural requirements, enabling eligible companies to complete a merger without the time-consuming regulatory demands of traditional mergers. Here’s a breakdown of the eligibility, steps, and important timelines involved:

Eligibility:

To qualify for the fast track merger under Section 233, entities must meet specific criteria:

• Small Companies: Should not be public, with paid-up capital under ?4 crore and turnover below ?40 crore. Excludes holding companies, Section 8 companies, or entities under special acts.
• Start-ups: Private companies, incorporated within the last 10 years, with turnover under ?100 crore. Must be focused on innovation, product or service development, or improving existing offerings. The business model should demonstrate high scalability, with potential for significant job creation or wealth generation.
• Other Combinations: Mergers are also allowed between holding companies and wholly-owned subsidiaries, as well as combinations involving small companies and start-ups.

Key Steps in the Fast Track Merger Process:

1. Review Memorandum of Association (MOA): Ensure both companies' MOAs permit the merger, allowing for a seamless transition of purposes and objectives.
2. Board Meeting & Approval: Each company’s Board of Directors must hold a meeting to review and approve the proposed merger scheme.
3. Submission of Proposed Scheme: File the scheme with the Registrar of Companies (ROC) and the Official Liquidator (OL) in Form CAA-9. Both entities have 30 days to raise objections if needed.
4. Declaration of Solvency: Each company must submit a solvency declaration using Form CAA-10 to assure creditors and the government of financial stability.
5. Shareholder & Creditor Approvals: Notices are sent to shareholders and creditors 21 days before their respective meetings. Approval from at least 90% of both is mandatory to proceed.
6. Scheme Submission to Central Government: Within seven days of the meetings, the transferee company must file the approved scheme and meeting results in Form CAA-11 to the Central Government and OL.
7. Finalizing with ROC & Central Government: The ROC must provide feedback on the scheme within 30 days. If there are significant objections, the Central Government may refer the matter to the National Company Law Tribunal (NCLT) via Form CAA-13 within 60 days. If there are no issues, the scheme proceeds.
8. Approval and Registration: Once the scheme is approved, the company has 30 days to notify the ROC through Form INC-28.

Key Forms Used:

• CAA-9: Proposed scheme submission
• CAA-10: Declaration of solvency
• CAA-11: Submission of scheme to Central Government
• CAA-12: Central Government’s approval of the scheme
• CAA-13: Referral of objections to NCLT
• GNL-1: Copy of approved scheme to ROC
• INC-28: Notification of scheme approval

Timelines:

• Board Meeting: Within 7 days
• Submission of Scheme to ROC: 30 days
• Shareholder & Creditor Meetings: 21 days prior notice
• Submission of Scheme & Meeting Results: Within 7 days post-approval
• Objection Period for ROC: 30 days
• Objection Period for Central Government: 60 days
• INC-28 Notification: 30 days post-approval

This fast track process significantly reduces the timeline of traditional mergers, with a total duration of around 206 days if all steps proceed smoothly. This structured yet streamlined approach under Section 233 offers eligible companies an efficient avenue to merge and grow with fewer regulatory hurdles.