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Fast Track Merger- finally on a faster track

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– Barsha Dikshit, Partner | resolution@vinodkothari.com

The objective of promoting ‘ease of doing business in India’ had made the Ministries introduce some really momentous concepts and corresponding changes in law. One of such moves taken by the Ministry of Corporate affairs (‘MCA’), was introduction of section 233 of the Companies Act, 2013 (‘Act’) dealing with “Merger and amalgamation of certain types of companies” vide notification dated 7th December, 2016, [1] thereby offering an alternative mode to certain classes of companies for entering into scheme of merger or amalgamation. The idea was to process the scheme of arrangements involving wholly owned subsidiaries or small companies in a cost effective and comparatively swift way. However, upon the practical implementation of the provision, it was seen that the time taken by the authorities for disposal of such applications and issuing confirmation orders to the schemes was longer than expected and therefore, the provision was losing its relevance.

It is in the backdrop of such delays, MCA, vide notification dated 15th May, 2023 (yet to be published in e-gazette) has introduced certain amendments in the Companies (Compromise, Arrangements, and Amalgamations) Rules, 2015 (‘CAA Rules’) ensuring faster disposal of applications u/s 233 of the Act. The amendments shall be effective w.e.f. 15th June, 2023.

This article intends to discuss the amendments introduced by MCA and to gauge the effectiveness of the same.

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Corporate succession events: Treatment of unspent or overspent CSR obligations

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CS Aisha Begum Ansari, Manager & Payal Agarwal, Deputy Manager | corplaw@vinodkothari.com

Background

The identity of a corporate entity may undergo various restructurings, either in the form of merger, demerger, sale of one or more divisions or undertakings. conversion of a company into LLP etc. Let us, for the sake of convenience, call them a “corporate succession” event, implying a situation where a corporate entity is succeeded by another entity, or its business, operations or undertaking shifts to another entity.  In some cases, say, amalgamation, the erstwhile corporate entity gets dissolved. In case of a demerger, the transferor entity continues. In case of conversion into LLP or vice versa, a company gets transformed into an LLP or other way round.

Usually, in corporate succession events, the assets and liabilities forming part of an undertaking are shifted to another undertaking, say, the successor entity.  The assets and liabilities that are comprised in an undertaking are mostly defined to include all liabilities existing on pertaining to a certain date, let us call it “appointed date”.

One of the perplexing aspects of this process of transfer of assets and liabilities may be the treatment of the unspent CSR obligations, or excess spending,  by the corporate entity which is undergoing a change in its identity. The question becomes increasingly significant in the present day regulatory environment due to the shift in CSR from COPEX (Comply or Explain) to COPP (Comply or Pay Penalty).

In the present write-up, we discuss the treatment of CSR obligations as a result of the following actions resulting into a change in the identity of a corporate –

  1. Merger
  2. Demerger
  3. Sale of a division/ undertaking (“Slump sale”)
  4. Conversion of a company into LLP
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