Fast Track Merger

FAST TRACK MERGER

Fast Track Merger is a provision that permits a streamlined and accelerated merger process for certain classes of companies. It seeks to simplify the merging process, save money, and guarantee that it is finished by the deadline. This provision is governed by Section 233 of the 2013 Companies Act.

For particular classes of companies, the fast-track merger mechanism offers a streamlined process. These consist of:

1. A merger between two or more small Companies.
2. A merger between a holding company and a wholly owned subsidiary company.
3. Merger of two or more start-up Companies, or of one or more start-up Companies with one or more small Companies.

Section 2 (85):- “small company” means a company, other than a public company,

• paid-up share capital of which does not exceed fifty lakh rupees, or such higher amount as may be prescribed which shall not be more than ten crores rupees; and
• Turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crores rupees or such higher amount as may be prescribed which shall not be more than one hundred crores rupees:

Provided that nothing in this sub section shall apply to—

• A holding company or a subsidiary company;
• A company registered under section 8; or
• A company or body corporate governed by any special Act.

Section 2 (46) :- “holding company”, in relation to one or more other companies, means a company of which such companies are subsidiary companies.

A wholly owned subsidiary is a company that is 100% owned by the holding company and is under the complete control of the holding company

New Changes :-

A substantial change to the Fast Track Merger procedure was recently implemented by an MCA notification with the number G.S.R 367(E) and the date 15^th May, 2023. It sets a stringent deadline of 60 days for the Central Government’s (Regional Director) consideration of the fast-track merger application. It’s vital to remember that this notification will be in effect starting on 15^th June, 2023. Therefore, the new regulation will apply to any application submitted after this date.

The importance of completing fast track merger applications within a certain deadline is emphasized in the new notification. Companies may suffer from increased costs and protracted uncertainty if the merger process is delayed. The new notification requiring a 60-day deadline for fast-track merger applications to be completed demonstrates a clear intention to avoid irrational delays and set concrete deadlines for the merger process. The government wants to speed up the merger process and encourage efficiency, so it has set these rigid deadlines. This action fits nicely with the government’s overarching goal of encouraging ease of doing business in India’s corporate environment. If the fast-track merger application isn’t finished within the required 60 days, it will be assumed that there are no objections to the scheme. Consequently, in response, a confirmation order will be sent. This aims to promote prompt decision-making and prevent unneeded delays in the merger process.

New deadlines and actions:

A precise timeframe has recently been created by the Ministry of Corporate Affairs (MCA) in order to increase the effectiveness of the Fast Track Merger process:

• After receiving the plan, the ROC/OL (Registrar of Companies/Official Liquidator) has 30 days to express any complaints or suggestions.
• If the ROC/OL does not submit any suggestions or objections within the allotted time, the CG (RD) has 15 days to issue a confirmation order (Form No. CAA.12).
• It will be assumed that the government has no objections to the merger scheme in cases where the CG (RD) fails to issue the confirmation order within 60 days of receiving the merger plan. A confirmation order will be sent out as a result.
• The RD has an extra 30 days to issue a confirmation order (Form No. CAA.12) if objections or proposals are made within 30 days but are unsustainable.
• The RD has 60 days to file an application (Form No. CAA.13) before the Tribunal, expressing the objections or opinion and asking consideration of the scheme under section 232 of the Act if objections or recommendations are made within 30 days and are viable.

Advantages of Fast Track Merger :-

• The fast-track merger process has the notable benefit of not requiring the National Company Law Tribunal’s (NCLT) involvement. The fast-track merger process runs apart from the tribunal from more typical mergers, which may need NCLT permission and supervision.
• Additionally, the fast-track merging process does not necessitate a special audit or involve a lot of administrative paperwork. As a result, the process is made simpler and the strain on the merging companies is lessened.
• In contrast to standard mergers, there is no requirement to run newspaper ads or release a statement about the merger. This not only saves money and time but also ensures privacy and keeps unwanted attention at bay.