India to Clear M&A Proposals Between 15-60 Days: In Effect June 15, 2023

Fast-track mergers and acquisition (M&A) proposals in India will now benefit from an even more simplified process. This will be implemented via the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2023, which will come in effect from June 15, 2023.

In a notification released by the Ministry of Corporate Affairs on May 15, the government indicated the changes to streamline the M&A approval process further. This reform will boost dealmaking opportunities in the dynamic startup sector. Large and medium sized enterprises in the country are also expected to benefit from the expedited M&A approval process.

Key terms related to the dealmaking space in India are:

• Merger: Defined as the collaboration of two or more companies to form a new company in an expanded form.
• Acquisition: Refers to the process of selling one company to another.
• Amalgamation: A combination of two or more companies to form a new entity.

How will M&A approvals get expedited in India?

Per the government’s amendment to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, a merger or amalgamation will be considered approved if the government fails to issue a confirmation order within a maximum period of 60 days from the receipt of the scheme.

Previously, there was no time period specified to secure the approval from the Registrar of Companies or official liquidators.

The latest changes

If no objection or suggestion is received within 30 days from the Registrar of Companies and Official Liquidator by the Central Government, after the receipt of the scheme under sub-section (2) of section 233 of the Companies Act, 2013, and if the Central Government determines that the scheme is in the public interest or the interest of creditors, it may issue a confirmation order for the merger or amalgamation scheme in Form No. CAA.12 within 15 days after the expiration of the aforementioned 30-day period.

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However, if the Central Government fails to issue the confirmation order within 60 days of receiving the scheme under sub-section (2) of section 233, it will be considered as having no objection to the scheme, and a confirmation order will be issued accordingly.

In the event that objections or suggestions are received within 30 days from the Registrar of Companies or Official Liquidator, or both, by the Central Government, and if the objections or suggestions are deemed unsustainable and the Central Government determines that the scheme is in the public interest or the interest of creditors, it may issue a confirmation order for the merger or amalgamation scheme in Form No. CAA.12 within 30 days after the expiration of the 30-day period mentioned above.

However, if the Central Government, based on the objections or otherwise, concludes that the scheme is not in the public interest or the interest of creditors, it may file an application before the Tribunal [National Company Law Tribunal (NCLT)] in Form No. CAA.13 within 60 days of receiving the scheme, stating the objections or opinion and requesting the Tribunal to consider the scheme under section 232 of the Companies Act, 2013.

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It should be noted that if the Central Government fails to issue a confirmation order under clause (a) or does not file an application under clause (b) within 60 days of receiving the scheme under sub-section (2) of section 233 of the Act, it will be presumed that it has no objection to the scheme, and a confirmation order will be issued accordingly. See here for the official notification.

Background

The implementation of Section 233 of the Companies Act, 2013, in conjunction with Rule 25 of The Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, took effect from December 15, 2016.

This provision introduced the concept of simplified mergers. The fast-track merger process was facilitated by the elimination of court intervention, specifically the mandatory approval of the NCLT. Unlike under the Companies Act, 1956, where mergers and restructurings necessitated lengthy proceedings and intervention from the High Court, this new process would save time and reduce costs.

What industry stakeholders are saying

According to industry stakeholders speaking to the media, the government’s announcement represents a positive step that holds great potential, particularly for enterprises seeking an exit strategy and start-ups or software companies facing funding constraints. These entities can explore M&A opportunities as a means for expanding their operations and achieving further growth.

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Moreover, in India, disruptive tech trends, such as automation, AI, machine learning (ML), internet of things (IoT), and data analytics, are reshaping traditional business models.

In an era marked by financial uncertainty, geopolitical instability, and rapidly evolving consumer preferences, C-suite executives know that business agility and adaptability is essential to company survival and growth. As a result, companies, regardless of size or industry across India and globally, are increasingly adopting technology, diversifying non-core businesses, and exploring new markets through M&A, amalgamation deals, and fundraising.

Government reforms to expedite deal activity will therefore boost India’s commercial environment and investment appeal.

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