1. Introduction
Mergers, Acquisitions (M&A), and Amalgamations are strategic corporate restructuring tools that enable companies to expand, consolidate, or reorganize operations to achieve economic, operational, or legal benefits.
In India, such arrangements are primarily governed by:
- Companies Act, 2013 (Sections 230–240)
- SEBI Regulations (for listed companies)
- Income Tax Act, 1961
- Competition Act, 2002
2. Definitions
Merger
A merger refers to the combination of two or more companies into one, where one survives and the other(s) cease to exist.
Amalgamation
Amalgamation involves the blending of two or more companies to form a new company, and all merging companies lose their identity.
Acquisition
An acquisition occurs when one company takes over the controlling interest in another company, usually by acquiring shares or assets.
3. Objectives of M&A
- Achieve economies of scale
- Enhance market share and competitiveness
- Enter new markets or industries
- Acquire new technologies or expertise
- Tax planning or asset restructuring
- Synergy in operations
4. Legal Framework under Companies Act, 2013
A. Sections 230–232: Compromise, Arrangement & Amalgamation
- Allows companies to restructure through court-approved schemes
- Tribunal (NCLT) approval required for any merger or amalgamation
- Process involves:
- Application to NCLT
- Shareholder and creditor approval (75% in value)
- Filing of the scheme with ROC and Official Liquidator
- Final NCLT approval and order sanctioning the scheme
B. Section 233: Fast Track Merger
Applies to:
- Two or more small companies
- Holding and wholly-owned subsidiary
- Merger of startups (recognized under DIPP)
No NCLT approval needed; only ROC and Official Liquidator approval required.
C. Section 234: Cross-Border Mergers
Permits:
- Indian companies merging with foreign companies (subject to RBI approval)
- Only with companies in notified jurisdictions
5. SEBI (LODR) Regulations & M&A
For listed companies, SEBI imposes additional obligations:
- Prior approval of stock exchanges
- Disclosures to shareholders
- Valuation report by a registered valuer
- Fairness opinion by a merchant banker
- Postal ballot and e-voting for shareholder approval
6. Role of NCLT in M&A
The National Company Law Tribunal (NCLT) ensures:
- Scheme is fair and reasonable
- No unfair advantage to any party
- All statutory approvals and procedures are followed
7. Stamp Duty & Taxation Aspects
- Stamp duty is state-specific and applies to transfer of assets
- Under the Income Tax Act, tax neutrality is provided if:
- All assets and liabilities are transferred
- Shareholders holding at least 75% in value continue as shareholders post-merger
8. Key Steps in M&A Process
| Stage | Description |
|---|---|
| 1. MoU/LOI | Preliminary understanding between parties |
| 2. Due Diligence | Financial, legal, and operational investigation |
| 3. Valuation | Independent valuation of assets and shares |
| 4. Scheme of Arrangement | Drafting the restructuring proposal |
| 5. Approvals | NCLT, shareholders, creditors, SEBI (if listed) |
| 6. Filing & Registration | Final order filed with ROC |
9. Landmark Cases
- Mahindra & Mahindra Ltd. v. Union of India: Validated powers of Tribunal in overseeing fair mergers
- Re: Reliance Industries Ltd.: Approved the demerger of telecom business, setting precedence for restructuring via NCLT
- Sun Pharma – Ranbaxy Merger: A complex cross-border merger scrutinized under SEBI & CCI norms
10. Challenges in M&A
- Lengthy approval timelines
- Regulatory overlaps (NCLT, SEBI, CCI)
- Valuation disputes
- Employee and shareholder resistance
- Stamp duty burden in some states
11. Recent Developments
- Streamlined fast-track merger provisions
- Cross-border mergers made easier with RBI liberalization
- SEBI guidelines for enhanced transparency in listed entity mergers
- Digital filings for NCLT procedures to reduce delays
12. Conclusion
Mergers, Acquisitions, and Amalgamations play a vital role in corporate restructuring and economic growth. While legal compliance remains stringent, recent reforms aim to simplify processes and promote transparent corporate consolidation. For successful M&A, strategic intent, legal compliance, and stakeholder confidence are key.