Mergers / Demergers / Acquisitions of Shares
- Merger: A merger is the combination of two or more companies into a single legal entity, where one company survives and the others cease to exist. It helps to achieve synergies, expand operations, or consolidate market presence.
- Demerger: A demerger refers to the transfer of one or more undertakings of a company into another entity. It helps in unlocking value, strategic separation of business units, or compliance with regulatory directives.
- Acquisition of Shares: Refers to acquiring significant or controlling interest in another company by purchasing its shares. This helps in gaining control or ownership without affecting the target company’s legal identity.
Key Benefits:
- Operational synergies and economies of scale.
- Geographic and market expansion.
- Enhanced value for shareholders.
- Tax efficiencies in strategic combinations.
Applicable Laws & Regulations:
- Companies Act, 2013 – Sections 230-232 govern compromise, arrangement, and amalgamation.
- SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 – Applicable for listed companies.
- Income Tax Act, 1961 – Tax neutrality provisions under Section 47.
- FEMA/RBI Regulations – If foreign entities or cross-border transactions are involved.
Ideal For:
- Companies seeking strategic consolidation or vertical/horizontal expansion.
- Startups preparing for acquisition.
- Group entities aiming for simplification of structure, etc.
Procedure:
- Board Meeting and approval of draft Scheme.
- Conduct due diligence and valuation.
- File application to NCLT for convening meetings.
- Obtain shareholders and creditors approval.
- File petition with NCLT for sanction of scheme.
- Obtain final NCLT order and file with ROC.
- Implement scheme and complete post-merger compliances.
How LTC Helps:
- Drafting and vetting the Scheme of Arrangement.
- Conducting legal and financial due diligence.
- Representation before NCLT, ROC, SEBI.
- Ensuring timely compliance with regulatory and tax requirements.