M&A Notes

Mid-Sem: 1-6

Module 1
Understanding Corporate Restructuring
● Processor to restructure the financial condition of company when company is holding high debt
and unable to pay debt on time
● It shall modify the financial structure of the company to
○ Improve nature of business (explore market, new customer, etc)
○ Improve bottom line (restructuring divisions)
○ Improve Cash Flow (selling off, improving balance sheet)

Forms of Corporate Restructuring

● Expansion & Growth
○ Mergers and Acquisition
○ Joint Venture
○ Alliance Agreement
○ Franchising
● Refocusing- changes in organization and management systems (portfolio restructuring)
○ Demergers
■ Split-off
■ Spin-off
■ Equity carve-out
■ Divestures
● Corporate Control
○ Buy-back of chargers
● Change in Ownership structure
○ Leverage buy-outs

Module 2
Introduction
● Mergers- Scheme of Arrangement
● Amalgamation- Scheme of Arrangement/Amalgamnation
● Acquisition- Bid/open offers

Types of Mergers
● Horizontal Merger:
○ A horizontal merger is a merger between two or more businesses that offer similar products
or services and work in the same industry
○ Example: Merger of Vodafone India and Idea Cellular Limited
 ● Vertical Mergers:
○ when two companies, each working at different stages of the production of same good,
combine.
○ Can harm competition by making it difficult for competitors to gain access to an
important component product or to an important channel of distribution.
○ Example: Merger between Zee Entertainment Enterprises Limited (broadcaster) v. Dish
TV India Limited ( distribution platform operation)
● Congeneric Merger:
○ when two merging firms are in the same general industry but have no mutual buyer/
customer or supplier relationship. Both companies have no related products or markets/
no common business ties.
○ Eg: Thomas Cook India and Sterling Holiday Resorts (India) Limited
● Conglomerate Merger
○ A conglomerate merger occurs when two companies that operate in completely unrelated
business sectors or industries come together.
○ This type of merger aims to diversify the business portfolio of the companies involved,
reducing their overall risk by expanding into new markets.
○ In 2001, Tata Group acquired Indian Hotels Company, diversifying from its core steel
and automotive businesses into the hospitality industry.
● Market Extension Merger
○ Merger between companies that sell the same products or services but operate in different
markets.
○ Goal is to gain access to larger market and thus ensure a bigger customer case.
○ Merger between Mittal Steel and Arcelor Steel (Luxeumburg based company)
● Product-extension merger
○ Merger between companies that sell related products or services and that operate in the
same market. The products and services of both companies are not the same but related.
○ Example Zomato and Blinkit
● Reverse Merger
○ A private company acquires a publicly listed company. The owner of the private company
become the controlling shareholders of the company and after finishing the acquisition,
they re-organize the public company’s assets and operations to absorb the formerly private
company.
○ Example, HDFC merging with HDFC bank.

Module 3-4
Section 230 (Compromise and Arrangement)
● Sub-Section (1): Application for Compromise or Arrangement
○ Where compromise/arrangement is proposed between
■ Company and its creditors/any class of them or
■ Between a company and its members/any class of them
 Tribunal may order a meeting between a company and its creditors/members for a
proposed compromise or arrangement.
○ This applies whether the company is in operation or being wound up.
○ Explanation- for this subsection, arrangement includes
■ Reorganisation of company’s share capital by consolidation of shares of different
classes or
■ Division of shares of different classes or
■ Both
● Sub-Section (2): Disclosure Requirements
○ The applicant must disclose to the Tribunal by affidavit:
■ The company’s latest financial position.
■ Latest auditor’s report.
■ Any ongoing investigations or proceedings.
■ Any reduction of share capital involved.
■ Corporate debt restructuring details, including a creditor’s responsibility
statement, safeguards for creditors, auditor's report on liquidity, RBI guidelines (if
adopted), and a valuation report by a registered valuer.
● Sub-Section (3): Notice of Meeting
○ Where a meeting is proposed to be called in purpusance of tribunal’s order under (1), a
notice of the meeting must be sent to all relevant parties (creditors, members,
debenture-holders) with details of the compromise/arrangement.
○ It must include a valuation report and be published on the company’s website, SEBI's
website (for listed companies), and in newspapers.
● Sub-Section (4): Voting Process
○ The notice must allow voting through proxies or postal ballot.
○ Only shareholders with at least 10% shareholding or creditors with 5% outstanding debt
can object.
● Sub-Section (5): Notification to Authorities
○ The notice and documents must also be sent to relevant authorities (e.g., Central
Government, RBI, SEBI, etc.).
○ Authorities have 30 days to make representations, or it is assumed they have no objections.
● Sub-Section (6): Approval Requirement
○ If three-fourths in value of creditors/members agree to the compromise/ arrangement, and
it is sanctioned by the Tribunal, it becomes binding on all parties involved.
● Sub-Section (7): Tribunal's Order Provisions
○ The Tribunal’s order can cover:
■ Conversion of preference shares to equity shares.
■ Protection of creditors.
■ Implementation of shareholders’ rights variation.
■ Abatement of proceedings before BIFR.
■ Other necessary matters for implementation.
 ■ Provided that The Tribunal will require an auditor's certificate confirming
compliance with accounting standards.
● Sub-Section (8): Filing the Order
○ The company must file the Tribunal’s order with the Registrar within 30 days.
● Sub-Section (9): Dispensing with Meetings
○ The Tribunal may dispense with the meeting requirement if 90% of creditors agree to the
scheme by affidavit.
● Sub-Section (10): Buy-Back of Securities
○ The Tribunal cannot sanction a buy-back of securities unless it complies with Section 68.
● Sub-Section (11): Takeover Offers
○ The compromise/arrangement can include a takeover offer, which must follow SEBI
regulations for listed companies.
● Sub-Section (12): Grievances Regarding Takeover
○ An aggrieved party can approach the Tribunal for grievances related to the takeover offer,
and the Tribunal may pass appropriate orders.
● Explanation: Clarifies that the provisions of Section 66 (reduction of share capital) do not apply to
Section 230.

Compromise, Arrangement and Amalgamation Rules, 2016

Rule 3: Application for order of meeting
● An application can be submitted in Form No. NCLT-1 along with:
○ Notice of admission in Form No. NCLT-2.
○ Affidavit in Form No. NCLT-6.
○ A copy of the scheme of compromise or arrangement with required disclosures.
○ Prescribed fee.
● If more than one company is involved in the scheme, they may file a joint application.
● If the company is not the applicant, the notice of admission and affidavit must be served on the
company or its liquidator (if under winding up) at least 14 days before the hearing.
● The applicant must disclose the basis for identifying each class of members or creditors for scheme
approval purposes in the application.

Rule 5: Direction at hearing of application

● Upon hearing an application under Section 230(1) of the Companies Act, 2013, the Tribunal,
unless it dismisses the application, will give necessary directions regarding:
○ Class Determination: Identifying the classes of creditors or members whose meetings are
required, or dispensing with meetings for any class as per Section 230(9).
○ Meeting Details: Setting the time and place for the meetings.
○ Appointment: Appointing a Chairperson and scrutinizer for the meetings and
determining their terms and remuneration.
○ Meeting Procedure: Establishing the quorum, procedure, and methods of voting (in
person, by proxy, postal ballot, or electronic means).
 ○ Value Determination: Determining the values of creditors or members whose meetings are
needed.
○ Notice and Advertisement: Issuing notices for the meetings and advertising them.
○ Regulatory Notices: Notifying relevant sectoral regulators or authorities as required.
○ Reporting: Setting the deadline for the Chairperson to report the meeting results to the
Tribunal.
○ Other Necessary Matters: Addressing any other matters deemed necessary by the Tribunal.

Rule 6: Notice of Meeting

● Notice in Form No. CAA.2 sent individually to creditors/members at least one month before the
meeting.
● Delivery Methods: By Chairperson, company, liquidator, or as directed by Tribunal via post,
courier, email, or hand delivery.
● Included Information:
● Tribunal Order:
○ Date, time, and venue of the meeting.
○ Company Details: CIN/GLN, PAN, name, incorporation date, type
(public/private/OPC), registered office address, email, main business, changes in
name/office/objects, stock exchange listing, capital structure, promoters, and directors.
○ Relationship: Between companies in the scheme.
○ Board Approval: Date and directors' votes on the scheme.
○ Scheme Details: Parties involved, amalgamation/merger details, valuation report summary,
capital/debt restructuring, rationale, benefits, and unsecured creditors' amount.
○ Effect on Stakeholders: Impact on KMPs, directors, promoters, non-promoter members,
depositors, creditors, debenture holders, deposit and debenture trustees, and employees.
○ Material Interests: Effect on material interests of directors, KMPs, and debenture trustees
○ Pending Issues: Investigations or proceedings against the company.
○ Document Access: Availability of financials, Tribunal order, scheme, contracts, auditor’s
certificate, and other relevant documents.
○ Regulatory Approvals: Required, received, or pending approvals.
○ Voting: Options to vote in person, by proxy, or electronically.
● Explanation:
○ Interest: Includes interests beyond shareholding.
○ Valuation Report: By a registered valuer, merchant banker, or experienced chartered
accountant.
● Disclosure: Required for all companies involved in the scheme.

Rule 7: Advertisement of the Notice of the Meeting

● Advertisement: Notice must be advertised in at least one English newspaper and one vernacular
newspaper with wide circulation in the company's registered office state.
● Online Posting: Must be posted on the company's website, SEBI's website, and the recognized stock
exchange website for listed companies.
 ● Timing: At least thirty days before the meeting.
● Joint Advertisement: Allowed for separate meetings of different classes of creditors or members.

Rule 8: Notice to Statutory Authorities

● Notice Requirements: In Form No. CAA.3, includes the scheme of compromise or arrangement,
explanatory statement, and disclosures as per Rule 6.
● Authorities to Notify: Central Government, Registrar of Companies, Income-tax authorities, and
other relevant authorities like RBI, SEBI, CCI, and stock exchanges as applicable.
● Delivery Method: Sent by registered post, speed post, courier, or hand delivery.
● Representation Period: Authorities have thirty days to send representations to the Tribunal. If no
representation is received, it's assumed they have none.

Rule 9: Voting
● Voting Methods: Recipients can vote in person, by proxy, postal ballot, or electronic means within
one month of receiving the notice.
Rule 12: Affidavit of Service
● Affidavit Submission: The Chairperson (or other designated person) must file an affidavit with the
Tribunal at least seven days before the meeting, confirming compliance with notice and
advertisement directions.
● Default Consequence: If the affidavit is not filed, the matter will be brought before the Tribunal for
further orders.

13. Result of the Meeting to be Decided by Voting

● Voting Process: Voting at the meeting is conducted by poll or electronic means, as directed by the
Tribunal.
● Result Reporting: The report must be in Form No. CAA.4 and accurately state the number of
participants, how they voted (in person, by proxy, or electronically), and the value of their votes.

14. Report of the Result of the Meeting by Chairperson

● Report Submission: The Chairperson must submit a report on the meeting’s outcome to the
Tribunal within the timeframe fixed by the Tribunal, or within three days after the meeting if no
time is specified, using Form No. CAA.4.

15. Petition for Confirming Compromise or Arrangement

● Petition Filing: If the compromise or arrangement is agreed upon, the company (or its liquidator)
must file a petition for Tribunal sanction in Form No. CAA.5 within seven days of the
Chairperson's report.
● Additional Requests: The petition may include requests for orders or directions related to company
reconstruction or amalgamation.
● Alternative Filing: If the company fails to file the petition, any creditor or member may do so with
the Tribunal's permission, and the company will bear the costs.
16. Date and Notice of Hearing
● Hearing Date: The Tribunal will set a date for the hearing of the petition, and notice must be
advertised in the same newspaper as the meeting notice, or another as directed, at least ten days
before the hearing.
● Notice Service: The notice of hearing will also be served to objectors, their representatives, the
Central Government, and other authorities who made representations and requested to be heard.

e order.
Company Schemes in light on Companies about to be wound up

Under the Sick Industrial Companies (Special Provisions) Act, 1985- a Company under the BIFR could not
apply for a Scheme of Arrangement. However, after the enactment of IBC- a Company that may be
liquated, can apply for a Scheme of Compromise- through the Liquidator. However, the Company can only
apply for a Scheme of Compromise/Arrangement- within 90 days of the passage of the liquidation order.

The NCLT through various caselaws- has come up with certain principles which are required to be followed
by the Company that may go into liquidation.

In Meghal Homes v Shree Niwas Girni Samiti, it was held that it must be checked whether the Scheme
by which liquidation proceedings would be stayed, is for the revival of the Company/ a means to dispose of
the assets of the Company through private arrangement.

Thus, with respect to the Schemes for a Company under liquidation- the following principles shall be
checked:
- Whether the intention of the scheme is the revival of the Company and is in the interest of its
members/creditors ?
- Whether the statutory provisions have been complied
- Whether the Schemes are of such nature- that a man of reasonable business would approve.
- Whether the intention of entering into the Scheme is bona fide and that no malicious intent is
involved.
- The Scheme provides for purchase of minority/dissenting shareholders by the majority
shareholders.
Reconciliation between S. 29 A of the IBC and S. 230 of the Companies Act

Section 29A of the IBC, 2016 disqualifies certain persons from presenting a resolution plan under the IBC,
2016.

The following persons are disqualified:

- An undischarged insolvent
- Wilful defaulter in accordance with the RBI Guidelines of the BR, 1949.
- Has an account/ an account of the Corporate Debtor under the management/control of such
person/ or of whom such person is a promoter- classified as a Non-Performing Asset.
The NCLAT, in Jindal Steel and Power Ltd. v Arun Kumar Jagatrama & Gujarat NRE Coke Ltd.-
held that- a person ineligible to submit a resolution plan under S. 29A- cannot apply for a Scheme of
Compromise/Arrangement under S. 230 of the Act.
Given the recent NCLAT ruling in Gujarat NRE (supra), as of now, the settled position is that a
creditor/member who is otherwise ineligible under section 29A is not qualified to be a proposer of a scheme.
As such, schemes under section 230 cannot be said to be “surrogate” route for the defaulting promoters to
acquire the corporate debtor after a failed resolution.

NCLT’s Power to dispense with the meetings of Creditors under S. 230 (9) of the Act
230(9) allows the NCLT to dispense with the meetings of secured/unsecured creditors upon the receipt of
consent affidavits from 90% of the creditors in value.

Recently, the NCLT Chandigarh Bench in the DLF Phase-IV case, the Company applied for the
dispensation of the meetings of the unsecured creditors of the demerging company, and the dispensation of
meetings of the unsecured creditors, and shareholders of the transferee company.

They argued for the dispensation to be granted on account that the Scheme was between a wholly owned
subsidiary and its holding company- and did not affect the creditors.

However, NCLT Chandigarh refused to grant such dispensation.

The NCLAT referred to several precedents namely:

JVA Trading Pvt. Ltd and C & S Electric Ltd.: , JVA Trading Private Limited, the transferor company,
and C&S Electric Limited, the transferee company, filed an application before the NCLT Principal Bench
(New Delhi) under sections 230 and 232 of the Act read with the Companies (Compromise, Arrangements
and Amalgamation) Rules, 2016 (“CAA Rules”) wherein it prayed to allow dispensation of meeting with
regards to its scheme of amalgamation. The Bench held that its power under section 230(9) for granting
dispensation of the meeting is limited only to the creditors meeting and therefore it could not, in any way,
dispense the meeting of shareholders even in this scenario where the consent of all the shareholders had been
obtained by the company.

Coffee Day Overseas Pvt. Ltd. with Coffee Day Enterprises Ltd:. the transferor company made an
application before NCLT Bengaluru Bench for dispensing with shareholder and creditor
meetings for the reason that it had only two shareholders and two unsecured creditors. The Bench relied on
the consent letters from the shareholders and creditors in dispensing with the formal requirement of
conducting a meeting. Additionally, it stated that the shareholders and creditors.

Thus, the NCLAT strongly criticized the Chandigarh Bench for not following established precedents and
therefore, not adhering to the judicial discipline of maintaining consistency in legal reasoning. Accordingly,
the appeal was allowed, and the matter was sent back to the Chandigarh Bench for fresh consideration based
on established legal precedents as set by co-ordinate and larger benches.
Section 231: Power of Tribunal to enforce compromise or arrangement
● The Tribunal may supervise the implementation of the compromise or arrangement.
● The Tribunal may, at the time of making such order or at any time thereafter, give such directions
in regard to any matter or make such modifications in the compromise or arrangement as it may
consider necessary for the proper implementation of the compromise or arrangement.
● If the Tribunal is satisfied that the compromise or arrangement sanctioned under section 230
cannot be implemented satisfactorily with or without modifications, and the company is unable to
pay its debts as per the scheme, it may make an order for winding up the company. Such an order
shall be deemed to be an order made under section 273.
● The provisions of this section shall, so far as may be, also apply to a company in respect of which an
order has been made before the commencement of this Act sanctioning a compromise or an
arrangement.

Section 232: Power of Tribunal to enforce compromise or arrangement

● When an application is made under section 230 for a compromise involving merger or
amalgamation, and it is shown that the scheme involves the transfer of undertaking, property, or
liabilities from one or more companies (transferor companies) to another (transferee company), the
Tribunal may order meetings to be called and conducted as directed. The provisions of section 230
(sub-sections 3 to 6) shall apply.
● Merging companies must circulate:
● Draft terms of the scheme adopted by the directors.
● Confirmation that the draft scheme has been filed with the Registrar.
● Report by directors explaining the effect on shareholders, managerial personnel, and
others, including share exchange ratios and valuation difficulties.
● Expert valuation report, if any.
● Supplementary accounting statement if the last accounts are over six months old.
● Upon satisfaction of procedural compliance, the Tribunal may order:
○ Transfer of undertaking, property, or liabilities to the transferee company from a date
decided by the parties or otherwise decided by the Tribunal.
○ Allotment of shares, debentures, etc., by the transferee company, with restrictions on
holding shares in its own name.
○ Continuation of legal proceedings involving transferor companies.
○ Dissolution of transferor companies without winding-up.
○ Provision for dissenting persons.
○ Allotment of shares to non-resident shareholders as per foreign investment norms.
○ Transfer of employees to the transferee company.
○ If a listed transferor company merges with an unlisted transferee company, the transferee
must remain unlisted until it becomes listed, and provisions for opting out or payment for
shares must be made.
○ Set-off of fees related to authorized capital between transferor and transferee companies.
○ Other necessary incidental matters.
 ● No scheme shall be sanctioned unless an auditor’s certificate confirms compliance with accounting
standards.
● The Tribunal’s order will transfer property and liabilities to the transferee company, and any charges
may be freed as directed.
● A certified copy of the Tribunal’s order must be filed with the Registrar within 30 days of receipt.
● The scheme must specify an appointed date from which it is effective and will be deemed effective
from that date.
● Companies must file an annual statement with the Registrar, certified by an accountant or company
secretary, confirming compliance with the scheme until its completion.
● Companies contravening the provisions face fines ranging from one lakh to twenty-five lakh rupees.
Defaulting officers may face imprisonment up to one year or fines ranging from one lakh to three
lakh rupees, or both.

Section 233: Merger or amalgamation of certain companies

● A scheme of merger or amalgamation between small companies, a holding company and its
wholly-owned subsidiary, or other prescribed classes of companies can be entered into, subject to:
○ Issuing a notice inviting objections or suggestions from the Registrar, Official Liquidators,
or affected persons within 30 days.
○ Considering and approving the objections and suggestions at general meetings by at least
90% of the total shares.
○ Filing a declaration of solvency with the Registrar.
○ Approval by a majority representing 90% in value of creditors or classes of creditors in a
meeting or in writing.
● The transferee company must file a copy of the approved scheme with the Central Government,
Registrar, and Official Liquidator.
● If there are no objections or suggestions from the Registrar or Official Liquidator, the Central
Government shall register the scheme and issue confirmation to the companies.
● If there are objections or suggestions, the Registrar or Official Liquidator must communicate them
within 30 days; otherwise, it is presumed there are no objections.
● If the Central Government believes the scheme is not in public interest or creditors' interest, it may
file an application with the Tribunal within 60 days of receiving the scheme, requesting
consideration under section 232.
● Registration of the scheme will result in the dissolution of the transferor company without
winding-up.
● The Tribunal may either direct that the scheme be considered under section 232 or confirm the
scheme as it deems fit, based on reasons recorded in writing. If no application is filed by the Central
Government, it is deemed to have no objection
● A copy of the Tribunal’s order confirming the scheme must be communicated to the Registrar of
the transferee company and other concerned persons. The Registrar will register the scheme and
issue confirmation.
● Upon registration:
○ Transferor company’s property and liabilities become those of the transferee company.
 ○ Charges on the transferor’s property continue on the transferee’s property.
○ Ongoing legal proceedings by or against the transferor continue with the transferee.
○ Liabilities for purchase of shares or settlement of debts to dissenting shareholders or
creditors become the transferee’s responsibility.
● The transferee company must cancel or extinguish any shares held in its own name or in the name
of any trust.
● The transferee company must file an application with the Registrar indicating revised authorized
capital and pay fees. Fees paid by the transferor on its capital before merger will be set off against fees
for the transferee’s enhanced capital.
● Provisions apply mutatis mutandis to schemes of compromise or arrangement under section 230
and to divisions or transfers of companies under section 232(1)(b).
● The Central Government may prescribe further provisions for the merger or amalgamation of
companies.
● Companies covered under this section may use section 232 for approving any scheme for merger or
amalgamation.

Rule 25 of

● Notice of Proposed Scheme: A notice inviting objections or suggestions from the Registrar, Official
Liquidator, or affected persons must be issued in Form No. CAA.9.
● Declaration of Solvency:Each company involved in the merger or amalgamation must file a
declaration of solvency in Form No. CAA.10 along with the prescribed fee before convening the
meeting of members and creditors.
● Notice of Meeting: The notice of the meeting to members and creditors must include:
○ A statement as per Section 230(3).
○ The declaration of solvency (Form No. CAA.10).
○ A copy of the scheme.
● Filing of Scheme Post-Meeting: The transferee company must file a copy of the agreed scheme
within seven days after the conclusion of the meetings in Form No. CAA.11 with the Central
Government and Registrar of Companies (Form No. GNL-1).
○ A copy must also be sent to the Official Liquidator.
● Confirmation by Central Government: If no objections are raised, or objections are deemed
unsustainable, and the scheme is considered in the public interest, the Central Government will
confirm the scheme in Form No. CAA.12.
● Objections to the Scheme: If objections are raised, the Central Government may file an application
before the Tribunal in Form No. CAA.13 to have the scheme considered under Section 232.
● Filing of Confirmation Order: The confirmation order by the Central Government or Tribunal
must be filed in Form INC-28 with the Registrar of Companies within 30 days of receiving the
order.
 ● Optional Application Under Sections 230-232: Companies may opt to undertake schemes under
Sections 230 to 232 if they prefer, even if conditions under Section 233(1)(d) are unmet.

Matters looked into by NCLT for sanctioning of scheme of arrangement

● Wiki Kids Ltd v. R.D

○ Can NCLT Reject scheme for arrangement even if all the shareholders consent if the
scheme is not in public interested?
○ Facts
■ Wiki Kids Limited (a non-listed company) [transferor company) proposed
amalgamation with Avanted Ltd (A listed company) [transferee company]
■ Scheme was presented with all documents to Hyderabad NCLT
○ Scheme was rejected on ground that it was beneficial to the common promoters and no
public interest was served.
○ NCLT observed that transferor company had value worth 22 lakhs rupees only.
○ The transferee company relying on the valuation of an Independent CA approved share
exchange ratio of 100 equity shares in transferee company of FV 10 each for every 289
equity share of Rs. 10 held by member of transferor company.
○ Eligible number of shares to be issued by the transferee company to transferor company
worked out to approximately 4 lakh share.
○ Total shares issued to share holders of transferor company = 12.4 cr
○ Major Concern of NCLT
■ Appellants (transferor co and transferee co) had common promoters and
promoters of transferee co/ held 99.90% share holding of transferor company
■ NCLT observed that the entire scheme was designed in a manner to extend
financial benefit of 12 cr to common promoter event though the transferor co had
no business and little value
○ NCLT held the scheme to be against public interest.
○ Appellants approached NCALT
○ Arguments
■ All applicable requirements and directions were complied with
■ No objection to the scheme from BSE, SEBI, ROC, RD, OL, IT
■ Share exchange ratio was computed by Independent CA in accordance with self
reporting principles of valuation and law including
● Value of potential business model
● Projected revenue of cash flow
■ Referred to Mihir Mafatlal Case- NCLT could not act or sit in judgement over
informed view of concerned parties to the scheme and its commercial wisdom of
concerned parties
■ Role of NCLT is limited to ensure that all stakeholders have consulted in proper
manner and NCLT is Acting beyond jurisdiction.
○ NCALT Held
 ■ Disclaimer in valuation report issued by Independent CA stated that the entire
valuation provided in report was b ased on documents provided by management.
■ Shareholders could not be said to have been conveyed sufficient assurance merely
by placing reliance on such valuation report
■ Scheme should be fair and in interest of all share holders
■ Constitution of NCLT comprises of both Technical Members and Judicial
Members, thus enough expertise to examine a scheme to se fair through is not for
NCLT to look into mathematical details
■ But Scheme appears to be unfairly beneficial and its fails to uphold public interest.
■ Net-worth of transferor to serving 22L, 12crs was following to common
promoters

Power To Dispense With Meetings Of Shareholders And Creditors In A Scheme Of Arrangement

● In the past, High Courts have usually dispensed with the meetings of shareholders and creditors in
cases where a majority of members had granted their consent in writing.
● In Callidora Merchantiles Pvt. Ltd. (2010), the applicants argued that a meeting of shareholders
should be dispensed with as there were only two shareholders, both of whom gave their written
consents for the same.
● In Adobe Properties v. AMP Motors Pvt. Ltd, the Delhi High Court pointed towards the relevance
of the expression ‘may’ in sub-section (1) of section 391 in the 1956 Act which confers
discretionary power on the court.
● The new provision under the current Act which deals with the NCLT’s powers to dispense with a
shareholder and creditor meeting with regards to an amalgamation or arrangement is sub-section
(9) of section 230.
● DLF Case
○ DLF Phase – IV Commercial Developers (Transferor 1), DLF Real Estate (Transferor 2),
DLF Residential Builders Ltd (Transferor 3), and DLF Utilities Ltd. (Demerger) proposed
a scheme involving DLF Limited (Transferee Company).
○ DLF sought dispensation from meetings of unsecured creditors and shareholders.
○ NCLT Chandigarh Bench Ruling:
■ Denied dispensation, stating the Companies Act, 2013 does not permit such
dispensation for meetings and Section 230(9) applies only to creditors.
■ Granted dispensation for some meetings based on written consents but not for
others where consents were not obtained.
○ Precedents Referenced:
■ JVA Trading Pvt. Ltd.: NCLT Principal Bench held dispensation powers under
Section 230(9) are limited to creditor meetings, not shareholders, despite written
consents.
 ■ Coffee Day Overseas Pvt. Ltd.: NCLT Bengaluru Bench accepted consent
letters from a few shareholders and creditors for dispensation, allowing the scheme
to proceed.
■ Jupiter Alloys & Steel (India) Ltd.: NCLT Kolkata Bench allowed dispensation
for shareholder meetings when all shareholders consented and the amalgamation
was deemed beneficial.\
○ NCLAT Decision:
■ Criticized Chandigarh Bench for not aligning with precedents, which led to
inconsistent legal reasoning.
■ Sent the case back to Chandigarh Bench for reconsideration in line with
established precedents.

Module 5
Section 234: Merger or Amalgamation of Company with Foreign Company

● (1): The provisions of this Chapter apply mutatis mutandis to schemes of mergers and
amalgamations between companies registered under this Act and companies incorporated in
jurisdictions of such countries as may be notified by the Central Government. The Central
Government, in consultation with the Reserve Bank of India, may make rules regarding mergers
and amalgamations under this section.
● (2): Subject to the provisions of any other law in force, a foreign company may, with the prior
approval of the Reserve Bank of India, merge into a company registered under this Act, or vice
versa. The merger scheme may include terms for the payment of consideration to the shareholders
of the merging company, which can be in cash, Depository Receipts, or a combination of both, as
outlined in the scheme.
○ Explanation The term "foreign company" refers to any company or body corporate
incorporated outside India, regardless of whether it has a place of business in India or not.

Rule 25A: Merger or amalgamation of a foreign company with a Company and vice versa:

● (1) A foreign company incorporated outside India may merge with an Indian company after
obtaining prior approval of RBI and after complying with S 230 to 232 of the Act and these rules.
● (2) (a) A company may merge with a foreign company incorporated in any of the jurisdictions
specified in Annexure B after obtaining prior approval of RBI and after complying with provisions
of S 230 to 232 of the Act and these rules.
● (b) Transferee Company shall ensure that valuation is conducted by valuers who are members of a
recognised professional body in the jurisdiction of Transferee Company and is in accordance with
internationally accepted principles on accounting and valuation. A declaration to this effect shall be
attached with the application made to RBI for obtaining its approval under clause (a) above.
● (3) The concerned company shall file an application before the Tribunal as per provisions of S 230
to 232 and these rules after obtaining approvals specified in sub-rule (1) and (2) above.

Annexure B
 ● Jurisdictions -
● (I) whose securities marker regulator is a signatory to International Organization of Securities
Commissions Multilateral Memorandum of Understanding (Appendix A Signatories) or a
signatory lo bilateral Memorandum of Understanding with SEBI, or
● (II) whose central bank is a member of Bank for International Settlements (BIS), and
● (iii) a Jurisdiction, which is nor identified in the public statement of Financial Action Task Force
(FATF) as:
○ (a) a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing
of Terrorism deficiencies to which counter measures apply; or
○ (b) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has
not committed to an action plan developed with the Financial Action Task Force to
address the deficiencies. *

FEMA (Cross Border Merger) Regulations, 2018

Particulars Inbound Merger Outbound Merger

Definition Cross border merger in which the Cross border merger in which the
Resultant Company is an Indian Resultant Company is a foreign-
company. Company.

The foreign company should be

incorporated in a jurisdiction specified
in Annexure B to Co.
Rules.

Condition for issue of Compliance with FEMA Compliance with FEMA

security by resultant regulations concerning inbound regulations concerning outbound
company investments, including pricing investments
guidelines, entry routes, sectoral
caps, attendant conditions and ⁠In case shareholder of transferor Indian
reporting requirements. company is a resident individual, the fair
market value of foreign securities should
Additionally, compliance required be within the limits prescribed under the
with FEMA regulations concerning Liberalised Remittance Scheme.
outbound investments' in the
following cases:
● Where transferor foreign
company is a joint venture
(JV)/ Wholly owned
subsidiary (WOS) of the
Indian company.
● Where the merger results in
acquisition of step-down
subsidiary (SDS) of
IV/WOS outside India.
Treatment of office of Any office of the transferor foreign Any office of the transferor Indian
transferor company company outside India will be company in India will be deemed to be
deemed to be the branch/ office the branch/ office in India of the
outside India of the resultant Indian resultant foreign company.
company.
Relevant FEMA regulations: to be
Relevant FEMA regulations to be complied with post-merger.
complied with, post-merger.

Guarantees and ⁠ uarantees and borrowings of the

G ⁠ esultant foreign company would not
R
outstanding amounts transferor foreign company from acquire any liability payable to local
overseas sources, which become Indian lenders, which is not in
guarantees and borrowings of the conformity with FEMA or guidelines
resultant Indian company to comply issued thereunder - NOC to be obtained
with the relevant FEMA regulations. from lenders in India.

Timeline of two years prescribed for Guarantees and borrowings of the

above compliance. No remittance transferor Indian company to be repaid
for repayment can be made within as per terms of the scheme that may be
these two years. sanctioned by the National Company
Law Tribunal (NCLT).
⁠ onditions with respect to end-use
C
would not apply.

Bank Account in ⁠ esultant Company permitted to

R ⁠ he Resultant Company is permitted to
T
country of transferor open a bank account in foreign open a Special Non-Resident Rupee
entity currency in the overseas jurisdiction Account (SNRR
for putting through transactions Account) in accordance with relevant
incidental to the merger. FEMA regulations.

This bank account can be ⁠ his bank account can be maintained

T
maintained for a maximum period for a maximum period of two years from
of two years from the date of the date of sanction by the NCLT.
sanction by the NCLT.

Acquisition/ holding Resultant Company permitted to Resultant Company permitted to

of any other asset of acquire and hold asset outside India acquire an hold any asset in India to the
transferor entity to the extent permitted under extent permitted
FEMA guidelines. under FEMA guidelines.

Asset or security not permitted to be Asset or security not permitted to be

acquired or held under FEMA acquired or held under FEMA
guidelines should be sold within guidelines should be sold within two
too years from the date of sanction years from the date of sanction ly the
by the NCLT. NCLT.

Proceeds to be repatriated to India Proceeds to be repatriated outside India

 immediately on sale immediately on sale
● Proceeds could be utilised for
● Proceeds could be utilised repayment of Indian liability
for payment of an overseas within the two-year period.
liability not permitted to be
held under FEMA
guidelines within the
two-year period.

Other Condition Valuation

Valuation of the Indian company and the foreign company to be in accordance
with Rule 254 of the prescribed Co. Rules, i.e., internationally accepted
principles on accounting and valuation.

⁠ ompensation
C
Payment of compensation by the Resultant Company, to a holder of a security
of the Indian company or the foreiga company to be in accordance with the
Scheme sanctioned by the NCLT.

⁠ egularisation of non-compliances
R
Companies to ensure completing requisite regulatory actions prior to merger
with respect to any non-compliance, contravention, violation under FEMA.

Reporting compliances
Certifieate confirming compliance with above guidelines to be furnished by the
managing director/ whole-time director and company secretary (if available) to
be submitted to the NCLT.

Other reporting guidelines to be prescribed by the RBI in consultation with the

Goverament of India.

Transition Cases Merger cases pending before the competent authority as on 20 March, 2018 to
be governed by the above guidelines.

Module 6
Section 235: Power to Acquire Shares of Dissenting Shareholders
● Approval of Scheme: If a scheme or contract involving the transfer of shares from a transferor
company to a transferee company is approved by at least 90% in value of the shareholders (excluding
shares already held by the transferee company or its subsidiaries) within four months of the offer,
the transferee company can proceed to acquire shares from dissenting shareholders.
 ● Notice to Dissenting Shareholders: The transferee company must give notice to dissenting
shareholders within two months after the four-month approval period, stating its intention to
acquire their shares.
● Application to Tribunal: Dissenting shareholders have one month from the date of notice to apply
to the Tribunal if they wish to oppose the compulsory acquisition of their shares. If the Tribunal
does not rule otherwise, the transferee company is obligated to acquire the shares on the same terms
as those of approving shareholders.
● Transfer of Shares: If no application is made or if the Tribunal does not intervene, the transferee
company must, after one month from the notice, send a copy of the notice and an instrument of
transfer to the transferor company. The transferor company will then register the transferee
company as the holder of the shares and notify the dissenting shareholders.
● Payment and Trust: The transferee company must pay the consideration to the transferor company,
which will hold the sum in a separate bank account in trust for the dissenting shareholders. The
transferor company must disburse the payment to the entitled shareholders within 60 days.
● Modifications for Pre-Act Offers: For offers made before the commencement of the Companies
Act, 2013, certain modifications apply, including:
○ Substituting certain language related to shares.
○ Omission of the requirement for an instrument of transfer to be executed on behalf of
shareholders by the transferee company.

Section 236: Power to Acquire Shares of Minority Shareholders

● Threshold for Purchase of Minority Shares: When an acquirer or group of persons obtains 90% or
more of the issued equity share capital of a company, they must notify the company of their
intention to buy the remaining shares held by minority shareholders.
● Valuation and Offer: The acquirer must offer to purchase the minority shares at a price determined
by a registered valuer, following prescribed rules.
● Rights of Minority Shareholders: Minority shareholders may also offer to sell their shares to the
majority shareholders at the price determined by the registered valuer.
● Payment Deposit: Majority shareholders must deposit an amount equivalent to the value of the
shares they intend to acquire in a separate bank account. This amount must be disbursed to
minority shareholders within 60 days.
● Transfer Agent Role: The transferor company acts as an agent for the majority shareholders,
facilitating the payment to minority shareholders and the transfer of shares.
● Cancellation of Shares: If minority shareholders do not physically deliver their share certificates
within the specified time, the company can cancel the certificates and issue new ones to complete
the transfer.
● Handling of Deceased or Unrepresented Shareholders: Majority shareholders must continue to
allow the offer for sale of shares by the heirs or successors of deceased shareholders for three years
from the acquisition date.
● Sharing Additional Compensation: If the majority shareholders negotiate a higher price for their
shares after acquiring the minority shares, they must share the additional compensation with the
minority shareholders on a pro-rata basis.
 ● Continuing Obligations: The obligations of the majority shareholders under this section continue
to apply to any residual minority shareholders, even if the company's shares have been delisted or a
specific period has elapsed.

Section 230(11) (Read along with rule 80A and 3)

● Any compromise or arrangement may include takeover offer made in such manner as may be
prescribed:
● Provided that in case of listed companies, takeover offer shall be as per the regulations framed by the
Securities and Exchange Board.

Rule 80A of NCLT Rule

● An application under sub-section (12) of section 230 may be made in Form NCLT-1 and shall be
accompanied with such documents as are mentioned in Annexure B .

Rule 3, Compromise, Arrangement and Amalgamation Rules, 2016 (Mentioned already)

Procedure
● The application with the takeover offer is required to contain the report of a registered valuer
disclosing the details of the valuation of the shares proposed to be acquired as well as details of a
bank account, to be opened separately by the offeror, wherein a sum of not less than 50% of the
total consideration of the takeover offer is deposited.
● The valuation report must take into account the highest price paid by any person or group of
persons for acquisition of shares during the last 12 months and the fair price of shares of the
company, determined after taking into account valuation parameters including return on net
worth, book value of shares, earning per share, price earning multiple vis-a-vis the industry average,
and such other parameters as are customary for valuation of shares of such companies.
● The framework set in place by the above provisions does not envisage any inherent right of minority
shareholders to retain their shares in the face of fair consideration being offered to them.
● This is in line with the ruling of the Hon’ble Bombay High Court in Sandvik Asia Limited v.
Bharat Kumar Padamsi, where the Division Bench held that “once it is established that
non-promoter shareholders are being paid fair value of their shares...and that even overwhelming
majority of the non-promoters shareholders having voted in favour of the resolution shows that the
court will not be justified in withholding its sanction to the resolution.”
● In a landmark judgment in Cadbury India Limited, the Bombay High Court set out the principles
a court should take into account while determining if selective reduction of share capital is fair, and
the new framework appears to have taken these principles into account. The Cadbury principles
emphasise the importance of ensuring fair valuation, including by reference to the rate at which past
offers were effected, as provided for in the present rules with the requirement to provide in the
application the highest price
● The Cadbury judgment sets a high standard to dismiss a valuation report or conclude that minority
shareholders have been discriminated against or prejudiced – it states, “Prejudice” here must mean
 something more than just receiving less than what a particular shareholder may desire. It means a
concerted attempt to force a class of shareholders to divest themselves of their holdings at a rate far
below what is reasonable, fair and just. Prejudice in this context must connote a form of
discrimination, a stratagem by which an entire class is forced to accept something that is inherently
unjust.

Both Routes Available

Rule 236 Rule 230(11)

Acquirer/PAC holds 90% of Equity Share, can If Majority Shareholders hold 75% or more
notify the intention to buy the remaining share shareholding, they can make application to NCLT
to squeeze out minority

Entire amount of consideration equal to value of Only 50% of amount shall be put in reserve.
share shall be deposited in a separate bank account Timeline not provided
for 1 year

No timeline within which minority acept offer Once NCLT approve, minority bound to sell
rather no clarity whether they are bound to accept
or not

Does not provide for redressal v/s section 236 Section provides for redressal

Module 7: Due Dilligence

Overview
● During legal DD, lawyers pay attention to the assessment of corporate and commercial agreements,
insurance agreements, employment contracts, and loan agreements.
● With DD, an acquiring entity protects itself from potential financial, commercial, and legal
problems before finalizing a deal.
● A DD report puts an acquiring company in a position to accurately assess the advantageousness of
its investment decision.
● In this regard, a DD report contributes to the negotiations on the determination of transaction
value and the necessary representations and warranties that should be obtained from the seller.
● Therefore, M&A transactions require proper DD including risk and compliance matters, both
prior to and following a transaction.
● M&A compliance enables an acquiring entity to identify, analyze and assess a target company's
compliance risk profile to reveal red-flags that may give rise to successor liability.
● Among other legal compliance liabilities detected under legal DD, the main areas of M&A
compliance cover:
○ anti corruption and anti-bribery,
○ antitrust,
○ money laundering,
○ conflicts of interest,
 ○ government relationships,
○ export controls and trade sanctions,
○ labor and employment,
○ data protection, privacy, and cyber security,
○ sanctions,
○ environment,
○ workplace health and safety,
○ human rights
○ and other binding regulations and high-risk areas associated with a
○ target company according to its industry and geography.

Due Diligence Steps

1. Corporate Structure and Authority

● Verify legal status

● Check alignment with articles of incorporation
● Confirm authority of representatives

2. Financial Due Diligence

● Examine financial records

● Identify discrepancies
● Assess financial health

3. Assets and Liabilities

● List tangible/intangible assets

● Review existing contracts and commitments
● Evaluate environmental/IP liabilities

4. Employment and Labor

● Review contracts, benefits, pension plans

● Identify potential disputes
● Ensure compliance with labor laws

5. Intellectual Property

● Assess patents, trademarks, copyrights

● Verify ownership
● Evaluate infringement claims

6. Regulatory Compliance
 ● Review industry regulations adherence
● Identify investigations/fines

7. Litigation

● Review current/past disputes

● Assess potential liabilities

8. Tax Obligations

● Examine records and liabilities

● Ensure legal compliance

Post M&A DD
● Circumstances may dictate that comprehensive DD cannot be conducted prior to a transaction, or
there may be obstacles limiting access to information and the scope of the DD process. Therefore,
the risk assessment process may have to be left until after a transaction is completed.
● In these circumstances, an acquiring entity is advised to guarantee the necessary protections
through post-transaction clauses and to conduct immediate post- transaction DD.
● Acquiring companies must monitor and remediate the risks identified during the DD process. New
legal requirements and risks associated with new third-party relationships, and activities involving
potential violations must be duly reflected in a successor company's compliance policies,
procedures, and internal control mechanisms.

Case Laws
HP-Compaq case
● Question
○ The basic objections- why was there a merger move between HP and compaq
○ Possible reasons for unsuccessful merger
○ How merger failed to create shareholder’s value
○ Factual essentials for a successful merger
● 4 Sept 2021 - HP and Compag- leading players in global computer industry- approved their merger.
HP was to buy Compag for $24 billion in stock - biggest deal in history of computer industry.
Merger entity was to have operations in over 160 countries
● However the stock markets reacted negatively to the merger announcement with the shares of both
companies collapsing in 2 days.
○ HP’s share decline by 21%
○ Compaq by 15%
● Together the pair cost $13 billion on the stock exchange and within the next 2 weeks HP’s stock fell
by 17%.
● Furthermore there were a lot of negative comments about the merger from analysts and
competition
 ● The details of the merger were revealed in an HP press release. The new entity was to retain the
name HP na d would have revenue of $87.4 billion, almost equivalent of that of IBM
● Under the terms of the deal, Compaq shareholders would receive 0.6325 shares of the new
company for each share of Compq.
● HP shareholders would have owned approximately 64% of co and Compaq shareholders aprox 36
of the merger co. HP’s CEO would continue as the merger co’s new CEO
● The merged entity support Compaq broad name for its servers while it continued with HP for
work-stations. The shopping site of both co were to be integrated.
● Does the Merger make Business Sense
○ Industry Analysts termed the merger as a strategic blunder. They ridiculed the HP CEO by
saying that the one bad pc business merging with another bad pc business did not make a
good pc company.
○ Analyst felt that the merged entities had to drastically cut costs to beat dell and ibm.
○ IBM at the time constantly was introducing products in the hinger end of the marker and
since HP’s sales came from the lower margin PC’s, would not have enough cash to
investment in R&D.
○ Operating profits was just 7%
● After merger
○ HP’s ceo was asked to step down due to her inability to revive the performance in 2005.
The day she resigned, HP’s shares rose by 6.9% on NYSE.

Daichi Sankyo and Ranbaxy

● In 2008, Daichi had bough the Singh brothers 32.8% shares for $2.4 billion in a seal valued at total
fo $4.6 billion.
● Soon after the acquisition, Ranbaxy’s plants came under scrutiny by the US Food and Drug
Administration (FDA)
● Owners of Ranbaxy Ranbir and Gurbax Singh were accused by Daichi of hiding critical
information regarding the investigation by the FDA and US Department of justice.
● Daichi had paid $500 Million to the DOJ for the settlement of the charges related to drugs.
● In May 2016, an Arbitration Court in Singapore asked Ranbaxy Ltd. to pay 25.62 billion to Diachi
for concealing and misrepresenting information about Ranbaxy during the sale of the stake in 2008.
● Did Daichi Sankyo make a rational judgement for merger- what went wrong?
○ Trust but Verify
■ Accept all the information and claims in food faith but put in honest effort to
verify them
■ Go beyond event based fginancial audit
■ Speak to the stakeholders and industry experts who know the company
■ Don’t just love the target- will impair your rational judgement
● Both companies had complementary skills, fast-growing, low cost research and manufacturing
facilities.
● Daichi suffered from 3 issues
○ Selective hearing
 ○ Confirmation hearing
○ Illusion of attention

IDFC and Shriram Finance

● The proposed merger pre-determined to get two Non-Banking Financial Company, a bank, and an
infrastructure finance company come under a roof.
● The shareholding pattern of Shriram Limited, a listed entity during the merger time was 33.77%
held by the promoters, Domestic Institutional Investor (5.58%) and Foreign Institutional Investor
(22.42%). Few of the investors included Dynasty Acquisitions Ltd (FPI), Piramal Enterprise
Limited.
● Shriram Group is an Indian Conglomerate. Shriram Capital is the holding company for two listed
companies Shriram City Union Finance Ltd Shriram Transport Finance Company Ltd
● Shriram Capital consisted of
○ Shriram City Union Finance Ltd.
○ Shriram Transport Finance Company Ltd.
● IDFC Ltd consisted of
○ IDFC Finance holding company
○ IDFC Bank Ltd
● Old Structure
○ Shriram Transport Finance would be delisted and become a subsidiary of IDFC Ltd
○ Shriram City Union Finance would Merge with IDFC Bank
○ Shriram Life and General Insurance would become subsidiaries of IDFC Ltd
● New Structure
○ Shriram Transport Finance remains an independent listed entity
○ Shriram Capital merge with IDFC Ltd
○ Shriram City Union Finance merge with IDFC Bank
● In this merger, Shriram holding company and its subsidiaries would be absorbed in IDFC.
● Rationale: IDFC had a legacy burden, creating a drag on the financial statements, the Return on
Asset (RoA), Return on Equity (RoE) and the Pre-Tax Profit. It was determined to cut the journey
of coming out of legacy through inorganic growth and looked forward to diversification.
● Failure:
○ Some of the investors from IDFC demanded 60 percent premium on fear of diminution of
their holdings in the swap. IDFC Ltd could not lessen below the 40% shareholding and
therefore could not give a good value to Shriram Transport. The shareholders of Shriram
feared Holding Company Discount. The structure and valuation were not mutually
acceptable to both the parties. The RBI stance was critical for Piramal Enterprise Limited
to hold more than 5% in IDFC whereas it held a reasonable stake in Shriram and its
subsidiaries
○ The reason for calling off the merger was-
■ Disagreement in Share swap Ratio
■ No value for Shareholders
Apollo Tyres and Cooper Tire & Rubber Co.

● Shareholding Pattern:
Cooper Tire & Rubber Co. is a US-listed company, ranked as the second-largest tire manufacturer
in the US and 11th globally. Major investors include BlackRock Institutional Trust Co. and
Vanguard Group Inc.
Apollo Tyres, an Indian listed company, headquartered in Haryana, generates 69% of its revenue
from India, 26% from Europe, and 5% from other regions.
● Structure:
Apollo sought to acquire Cooper, which was three times its size, in an all-cash deal, with a 40%
premium on Cooper's common shares. This deal would give Apollo significant international
market entry without equity dilution. The acquisition was supported by Indian financial
institutions.
● Reason for Failure:
○ Cooper Chengshan Tire: Cooper could not provide financials for its Chinese subsidiary,
and Chinese workers, after hearing of the deal, halted work, reducing revenue. Cooper's
lack of control over its subsidiary raised concerns.
○ Steelworkers Union: The Steelworkers Union had the power to block ownership changes
and filed a grievance. While Apollo agreed to a new bargaining agreement, it demanded a
price adjustment, leading to conflicts.
The deal fell through, and Cooper sued Apollo to enforce the buyout agreement, leading
to arbitration and a Supreme Court appeal. Both companies eventually withdrew, with
Cooper paying a $50 million termination fee, and Apollo a $112 million breakup fee.

Sun Pharma and Taro Pharmaceuticals

● Background:
Sun Pharma, an Indian listed company, entered a definitive agreement to acquire a large stake in
Taro, an Israeli pharmaceutical company, when the latter faced liquidity issues.
● Legal Dispute:
Taro accused Sun Pharma of non-disclosure and undervaluation, leading to a lengthy legal battle in
both US and Israeli courts, lasting three years. Taro remains a subsidiary of Sun Pharma, but Sun's
intention of delisting Taro from the New York Stock Exchange for better dividends and cash flows
was not realized.

Bharti Airtel and Zain

● Background:
Bharti Airtel acquired Zain's telecom assets in 15 African countries. However, five years after the
acquisition, the company struggled with low EBITDA, and several factors, including Africa's
economy, contributed to the failure.
 ● Reason for Failure:
Airtel lacked due diligence before the acquisition and later discovered that Zain had underinvested
in African assets, preventing Airtel from achieving its intended goals with the acquisition.

Google and Motorola Mobility

● Background:
In 2011, Google acquired Motorola Mobility for $12.5 billion to enter the mobile hardware market
and enhance its Android platform. Google bought Motorola for $40 per share (63% above its
market price), securing 24,500 valuable patents and regulatory approval from the US, EU, and
China.
● Strategic Gain:
Although Google sold Motorola to Lenovo for $2.91 billion in 2014, resulting in what appeared to
be a $10 billion loss, the acquisition was strategically successful. Google used Motorola to promote
Android and maintain control over the platform. The acquisition allowed Google to fend off
competitors like Samsung, gain valuable patents, and acquire Motorola's talented R&D team.

Module 7: Compliance under LODR

Reg 23: Corporate governance requirements with respect to subsidiary of listed entity.

● The listed entity must not reduce its shareholding in a material subsidiary (either individually or
with other subsidiaries) to less than or equal to 50% or cease exercising control over the subsidiary
without passing a special resolution at the General Meeting.
○ Divestment is allowed if approved under a scheme of arrangement by a Court/Tribunal or
under a resolution plan approved under section 31 of the Insolvency Code, with the event
disclosed to the recognized stock exchanges within one day of approval.
● Selling, disposing of, or leasing more than 20% of the material subsidiary’s assets on an aggregate
basis during a financial year requires prior approval by shareholders through a special resolution.
○ Such transactions are allowed if approved under a scheme of arrangement by a
Court/Tribunal or under a resolution plan approved under section 31 of the Insolvency
Code, with disclosure to the stock exchanges within one day of approval.

Regulation 28: In-principle approval of recognized stock exchange(s) for the listed entity, before
issuing securities
● This regulation shall not be applicable for securities issued pursuant to the Scheme of Arrangement
for which the listed entity has already obtained No- Objection Letter from recognized stock
exchange(s) in accordance with regulation 37.

Regulation 30: Disclosure of Event or Information (From CG Notes)

● Listed entities must disclose any events or information deemed material by their board of directors.
 ● Events in Para A of Schedule III are automatically considered material and must be disclosed.
● Disclosures for events in Para B of Schedule III depend on materiality, based on:
○ If omitting the event may lead to discontinuity of information.
○ If omission could cause significant market reaction later.
○ Omission whose impact exceeds the lower of the following:
■ 2% of turnover (last audited consolidated financial statements).
■ 2% of net worth (last audited consolidated financial statements, except when net
worth is negative).
■ 5% of average profit or loss after tax (last three audited consolidated financial
statements).
○ If the board deems the event material even if the above criteria do not apply.
● The company must establish a materiality policy based on these criteria, approved by the board
and published on the company’s website.
● Key managerial personnel (KMP) must be authorized by board to determine materiality and make
disclosures to stock exchanges. Contact details of these personnel should be disclosed on the
company’s website and to the stock exchange.
● Events must be disclosed to stock exchanges within 24 hours. If delayed, an explanation must be
provided.
● Ma’am’s Notes:
○ Immediate Disclosure:
■ Board Decisions: Within 30 minutes of board meeting closure.
■ Internal Events: Within 12 hours of occurrence.
■ External Events: Within 24 hours of occurrence.
■ Explanation for Delay: Required if disclosure is delayed.
● Regular updates on material events must be made until the issue is resolved or closed.
● All disclosed events must be published on the company’s website for at least five years.
● Any material information from subsidiaries must also be disclosed by the listed entity.
● The company must respond to stock exchange queries regarding events.
● The entity may voluntarily confirm or deny any reported event and must disclose any non-listed
events that could have a material effect.

Penalty for Non-Compliance with Reg 30

● There is no specific provision under SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015 for imposing penalty for non-compliance of Regulation 30 of the said
Regulations.

PC Jeweller Limited (PCJ)

● Issue: PC Jeweller Limited (PCJ), a company listed on BSE and NSE, failed to disclose material
objections from SBI regarding its proposed buy-back offer. Specifically, SBI raised concerns in
letters dated July 7 and July 12, 2018, but PCJ did not disclose these until July 13, 2018, when it
 informed the exchanges that it was withdrawing the buy-back offer due to non-receipt of the
No-Objection Certificate (NoC) from SBI.
● Regulatory Violation: PCJ's failure to disclose SBI’s objections violated the disclosure obligations
under:
○ Regulation 30(1): Requires prompt disclosure of material events or information.
○ Regulation 30(4)(i): Materiality must be determined by the board based on its potential
impact on the company.
○ Regulation 30(7): Disclosures to stock exchanges must be updated regularly.
● Adjudication: SEBI considered the non-disclosure a serious lapse in corporate governance. An
adjudicating officer was appointed under Section 23-I of the Securities Contracts (Regulation) Act
(SCRA), 1956, to investigate and adjudicate under Section 23E (penalties for failure to furnish
required information).
● Settlement: PCJ engaged with SEBI for a settlement and proposed a payment of ₹19.12 lakh,
which was accepted as full and final settlement of the charges. The company remitted the settlement
amount on October 21, 2019.

D S Kulkarni Developers Ltd. (DSKDL)

● Issue: D S Kulkarni Developers Ltd (DSKDL) repeatedly failed to disclose material information,
such as:
○ Defaults on loans to banks and financial institutions.
○ Revisions in credit ratings.
○ Regulatory actions taken against it by various authorities.
● Failure to Respond to Stock Exchange Queries: DSKDL also ignored queries raised by BSE
regarding certain negative articles in the media, which further aggravated the situation.
● Regulatory Violations: DSKDL breached the following regulations:
○ Regulation 30(1), 30(2), 30(6), 30(10): These provisions mandate timely and accurate
disclosure of material events and developments to the exchanges.
○ Schedule III, Para A: Provides guidelines on the type of information that needs to be
disclosed.
○ SEBI Circular CIR/CFD/CMD/4/2015: Lays down the disclosure framework for listed
companies.
○ Regulation 4(1)(h), (i), (j) and 4(2)(b), (e): Emphasize corporate governance and
transparency.
● Adjudication: The adjudicating officer imposed a penalty of ₹10 lakh on DSKDL under Section
23A(a) (penalties for failure to furnish information) and Section 23E of SCRA for the failure to
comply with disclosure obligations. DSKDL was ordered to pay the penalty within 45 days.

Five Core Electronics Limited (FCEL)

● Issue: SEBI, following complaints, investigated FCEL and found several disclosure lapses:
○ The company conducted a board meeting on April 27, 2019, but failed to disclose the
outcome of the meeting on the exchange.
 ○ Senior management resignations, including the CFO, Company Secretary, and
Independent Directors, were not reported to the stock exchanges.
○ The company did not provide updates or announcements regarding delays in financial
results submission after April 27, 2019.
● Misuse of Funds & Investor Fraud: Beyond disclosure failures, SEBI also identified concerns
about mis-utilization of IPO funds and potential intent to defraud investors.
● Regulatory Violations:
○ Regulation 30 of LODR Regulations: Requires companies to disclose all material
events and information that affect stakeholders' decision-making.
○ SEBI Circular dated November 19, 2018: Outlines the responsibility of companies to
disclose reasons for delayed submission of financial results.
● Enforcement Action:
○ SEBI restrained the company, its promoters, and non-independent directors from accessing
the securities market, buying, or selling securities until further orders.
○ The concerned parties were prohibited from associating with any SEBI-registered
intermediary or any listed company or its material subsidiary.
○ The promoters and directors were prohibited from disposing of or alienating any assets and
were barred from diverting funds until further notice.
○ SEBI directed NSE to appoint an independent forensic auditor to investigate the
company’s books, especially concerning the use of IPO proceeds. The forensic audit report
was to be submitted within three months.
● Adjudication: This case illustrates SEBI's stringent measures to safeguard investor interests and
market integrity, including imposing restrictions and ordering an audit to uncover any financial
irregularities.

Regulation 37: Draft Scheme of Arrangement & Scheme of Arrangement

● Before submitting a scheme of arrangement (under Sections 391-394 and 101 of the Companies
Act, 1956, or Sections 230-234 and Section 66 of the Companies Act, 2013) to a Court or
Tribunal, the listed entity must first file the draft scheme with the stock exchange(s) for a
No-objection letter.A non-refundable fee, as specified in Schedule XI, must be paid at the time of
submission.
● The listed entity cannot submit any scheme of arrangement to a Court or Tribunal unless it has
received the No-objection letter from the stock exchange(s).
● The No-objection letter must be presented to the Court or Tribunal when seeking approval for the
scheme of arrangement.
○ The No-objection letter is valid for six months from the date of issuance, during which the
draft scheme must be submitted to the Court or Tribunal.
● The listed entity must ensure compliance with any additional requirements that may be prescribed
by the Securities and Exchange Board of India (SEBI) or the stock exchange(s).
● After the scheme has been sanctioned by the Court or Tribunal, the listed entity must submit the
necessary documents to the stock exchange(s), as required by SEBI or the stock exchange(s).
 ● The regulations do not apply to draft schemes that solely provide for the merger of a wholly owned
subsidiary with its holding company.
○ However, these draft schemes must still be filed with the stock exchange(s) for disclosure
purposes.
● The requirements of this regulation and regulation 94 do not apply to restructuring proposals
approved under a resolution plan by a Tribunal under Section 31 of the Insolvency and Bankruptcy
Code (IBC).
○ The details of such resolution plans must be disclosed to the stock exchange(s) within one
day of the plan being approved.

Regulation 42: Record Date or Date of closure of transfer books

● The listed entity shall intimate the record date to all the Stock Exchanges where it is listed in case of
Corporate Actions like Mergers, Demergers where stock derivatives are available on the stock of
listed entity or where listed entity stocks form part of an index on which derivatives are available.
● Notice in advance of at least seven (7) clear working days shall be given (excluding the date of
intimation and the record date) to stock exchanges of record date specifying the purpose of record
date.
● The listed entity shall ensure the time gap of at least thirty (30 days) between two record dates.

Regulation 94: Draft Scheme of Arrangement & Scheme of Arrangement [in case of entities that
have listed their specified securities]

● The designated Stock Exchange, upon receipt of the draft scheme of arrangement and the
documents prescribed by the Board as per Regulation 37, shall forward the same to the Board, in
the manner prescribed by the Board.
● The Stock Exchange shall submit to the Board its “Objection Letter” or “No Objection Letter”
within thirty (30) days of the receipt of the draft scheme
● The Stock Exchange shall issue the said letter to the Listed Entity within seven (7) days of receipt of
comments from the Board, after suitably incorporating the changes in the said letter.
● The Stock Exchanges shall bring the observations or objections, as the case may be, to the Notice of
the Court or Tribunal at the time of approval of the scheme of arrangement.
● Upon sanction of the scheme by the Court or Tribunal, the designated stock exchange shall forward
its recommendations to the Board, on the documents submitted by the listed entity in the terms of
regulation 37.

Module 9: Merger Control & Role of Competition Commission

Provisions under Competition Act, 2002

Section 5: Combination

A combination occurs when:

 ● Acquisition: A person or entity acquires control, shares, or assets of another entity if:
○ The combined assets or turnover of the parties or their group exceed certain thresholds:
■ In India: Assets > ₹1,000 cr or turnover > ₹3,000 cr.
■ Internationally: Assets > $500 mn (including ₹500 cr in India) or turnover > $1.5
bn (including ₹1,500 cr in India).
○ The acquiring group exceeds similar thresholds after the acquisition.
● Control Over Similar Enterprises: Control is acquired by a person or group over an enterprise
that is similar to another enterprise already controlled by that person or group, if the combined
assets or turnover exceed the same thresholds as mentioned above.
● Merger or Amalgamation: A merger or amalgamation occurs when:
○ The surviving or newly created enterprise or group has combined assets or turnover
exceeding the specified thresholds mentioned above.
● Definitions:
● Control: Refers to the ability to manage or direct affairs of another enterprise, either singly
or jointly.
● Group: Two or more enterprises that can exercise significant voting rights, appoint board
members, or control management.
● Asset Valuation: Determined by the book value as shown in audited accounts, excluding
depreciation but including various commercial rights.

Test for Groups

● The Act defines a group' as:

○ two or more enterprises that are directly or indirectly in a position to (Group Tests):
■ exercise 50% or more of the voting rights in the other enterprise (Voting Rights
Test); OR
■ appoint more than 50% of the members of the board of directors in the other
enterprise (Board Test):
■ control the management or affairs of the other enterprise (Control Test)

Control Test:

● A key test for determining management or control over another enterprise.

● Material influence has become part of the control assessment, evaluating whether an entity can
influence decisions based on its shareholding or board representation, even with minority stakes.

Group Thresholds:

● One of the eight jurisdictional thresholds used to assess whether a transaction is notifiable to the
Competition Commission of India (CCI).
● This involves evaluating the combined assets and turnover of the group to which the merged or
acquired entity will belong post-transaction.
● The onerous self-assessment requires identifying enterprises where the notifying party may exert
direct or indirect material influence to determine if Group Thresholds are breached.
 Example of Enterprise A, B & C:

● Enterprise A holds 51% in Enterprise B and 25% in Enterprise C, with one board director
appointment in Enterprise C. Both B and C operate in the same relevant market.
● Enterprise A does not meet the Voting Rights Test or Board Test for control over Enterprise C.
However, the material influence test could infer control over Enterprise C, based on the Decision by
the CCI.
● This expanded interpretation may lead to a false aggregation of minority investments, potentially
breaching Group Thresholds.

Intra-Group Exemption & Regulations:

● The Intra-Group Exemption is provided under Item 8 of Schedule I of the CCI (Procedure in
regard to the transaction of business relating to combinations) Regulations, 2011 (Combination
Regulations).
● The expanded Control Test could prevent the Intra-Group Exemption from applying if the target
entity (Enterprise C) is considered to belong to more than one group after the transaction.
● Where a target is under joint control by multiple groups, the exemption would not apply,
complicating the notification process.

Regulatory Impact:

● The expanded scope of control may result in notifications for transactions where the CCI might
lack jurisdiction.
● This could particularly affect cases involving minority stakes and joint control structures.

Section 6: Regulation of Combinations

● No person or enterprise can enter into a combination that likely causes appreciable adverse effects
on competition within the relevant market in India; such combinations are void.
● Entities proposing a combination must notify the Competition Commission of India (CCI) within
30 days after:
○ Board approval of a merger or amalgamation.
○ Execution of an acquisition agreement.
● No combination can take effect until 210 days after the notice to the CCI, or until the CCI passes
an order under Section 31.
● The section does not apply to share subscriptions or acquisitions by financial institutions under
loan agreements, which must still be reported to the CCI within 7 days.
● Foreign Institutional Investor and Venture Capital Fund are defined in relation to provisions
of the Income Tax Act.

Gun Jumping
Gun jumping refers to actions taken by the parties to a merger or acquisition before the Competition
Commission of India (CCI) approves the transaction, which can affect market competition.

● Section 6(1) :Prohibits combinations that cause or are likely to cause an appreciable adverse
effect on competition.
● Section 6(2): Parties must notify the CCI of the proposed combination before implementation.
● Section 6(2A): After filing the notification, the combination cannot be implemented for 210
days or until CCI approval, whichever is earlier (amended).

Types of Gun Jumping

● Hard Gun Jumping:

○ Occurs when parties implement a notifiable transaction without first notifying the CCI.
● Soft/Substantive Gun Jumping:
○ Occurs when parties violate suspensory obligations, i.e., taking actions that reduce
competition or affect the independence of parties before the CCI’s approval.

CCI's Approach to Gun Jumping:

● The CCI views gun jumping as the consummation of a combination, or part of it, before receiving
CCI approval, which undermines the CCI’s ability to evaluate the combination.
● In the Ultratech Cement case, CCI clarified that any action leading to consummating the
combination before approval (express or implied) constitutes gun jumping.
● Penalties can be imposed for implementing the combination without notifying the CCI or
breaching the waiting period after notification. Such breaches may reduce competitive
independence of the parties, potentially lessening competitionin the market.

Section 20: Inquiry into Combinations

● The Commission may inquire into acquisitions (clause (a) of section 5), control (clause (b)), or
mergers/amalgamations (clause (c)) that may have caused or likely cause an appreciable adverse
effect on competition in India.
○ Time Limitation: No inquiry can be initiated after 1 year from the combination's effect
date.
● Upon receiving a notice under sub-section (2) of section 6, the Commission shall inquire whether
the combination has caused or is likely to cause an appreciable adverse effect on competition.
● The Central Government shall, after 2 years from the commencement of the Act and every 2 years
thereafter, adjust the value of assets or turnover for section 5 based on the wholesale price index or
exchange rate fluctuations
● In assessing potential adverse effects on competition, the Commission shall consider:
○ Actual and potential competition through imports.
○ Barriers to entry into the market.
○ Level of combination in the market.
 ○ Degree of countervailing power.
○ Likelihood of significant price or profit margin increases.
○ Effective competition sustainability.
○ Availability of substitutes in the market.
○ Market share of the enterprises in a combination.
○ Removal of a vigorous competitor.
○ Nature and extent of vertical integration.
○ Possibility of a failing business.
○ Nature and extent of innovation.
○ Relative advantage in economic development.
○ Whether benefits outweigh adverse impacts.

Section 29: Procedure for Investigation of Combination

● Where the Commission is of the prima facie opinion that a combination is likely to cause, or has
caused, an appreciable adverse effect on competition within the relevant market in India, it shall
issue a notice to show cause to the parties to the combination, calling upon them to respond within
30 days of receipt of the notice.
● After receipt of the parties' response, the Commission may call for a report from the Director
General, which shall be submitted within such time as the Commission may direct.
● If the Commission is prima facie of the opinion that the combination has, or is likely to have, an
appreciable adverse effect on competition, it shall, within 7 working days from the date of receipt
of the response or the receipt of the report from the Director General (whichever is later), direct the
parties to publish details of the combination within 10 working days of such direction.
● The Commission may invite any person or member of the public affected or likely to be affected by
the combination to file written objections within 15 working days from the date on which the
details of the combination were published.
● The Commission may call for additional or other information from the parties within 15 working
days from the expiry of the objection period.
● The parties shall furnish the requested information within 15 days from the expiry of the
additional request period.
● After receiving all information, the Commission shall proceed to deal with the case within 45
working days from the expiry of the information response period.

Section 30: Procedure in Case of Notice under Sub-section (2) of Section 6

● Where any person or enterprise has given a notice under sub-section (2) of section 6, the
Commission shall examine such notice and form its prima facie opinion as provided in sub-section
(1) of section 29 and proceed as per the provisions contained in that section.

Section 31: Orders of Commission on Certain Combinations

 ● Where the Commission is of the opinion that any combination does not, or is not likely to, have an
appreciable adverse effect on competition, it shall, by order, approve that combination.
● Where the Commission is of the opinion that the combination has, or is likely to have, an
appreciable adverse effect on competition, it shall direct that the combination shall not take effect.
● Where the Commission is of the opinion that the combination has, or is likely to have, an
appreciable adverse effect but such adverse effect can be eliminated by suitable modification, it may
propose modifications to the combination.
● The parties accepting the modification proposed by the Commission shall carry it out within the
period specified by the Commission.
● If parties fail to carry out the modification within the specified period, the combination shall be
deemed to have an appreciable adverse effect on competition.
● Parties may submit amendments to the proposed modification within 30 working days of the
modification proposed by the Commission.
● If the Commission agrees with the amendment submitted by the parties, it shall, by order, approve
the combination.
● If the Commission does not accept the amendment, parties shall have a further 30 working days
within which to accept the modification proposed by the Commission.
● If the parties fail to accept the modification within the specified periods, the combination shall be
deemed to have an appreciable adverse effect on competition.
● If the Commission has directed that the combination shall not take effect, it may order that the
acquisition or merger shall not be given effect to.
● If the Commission does not, on the expiry of a period of 210 days from the date of notice given
under sub-section (2) of section 6, pass an order or issue direction, the combination shall be deemed
to have been approved.
● Where any extension of time is sought by the parties to the combination, the period of 90 working
days shall be reckoned after deducting the extended time granted at the request of the parties.
● Where the Commission has ordered a combination to be void, the acquisition or merger shall be
dealt with by the authorities under any other law as if such acquisition or merger had not taken
place.
● ]Nothing in this Chapter shall affect any proceeding initiated or which may be initiated under any
other law for the time being in force.

Section 43A: Power to impose penalty for non-furnishing of information on combinations

● If any person or enterprise who fails to give notice to the Commission under sub- section(2) of
section 6, the Commission shall impose on such person or enterprise a penalty which may extend to
one percent, of the total turnover or the assets, whichever is higher, of such a combination.
Key Changes under the 2017 Notification

1. Extension of the De-minimis Threshold:

● The 2017 Notification expands the de-minimis exemption, allowing more situations to be covered
for small enterprises and transactions.
● Exemptions now apply to all combinations under Section 5 of the Competition Act, including
acquisitions and mergers/amalgamations.
● The asset value must not exceed ₹3.5 billion, and turnover must not exceed ₹10 billion for
exemptions to apply.
● The exemption period is extended by 5 years from March 27, 2017.
2. Acquisition of a Portion of the Business:

● The 2017 Notification allows for a relaxed approach when determining financial thresholds.
● Instead of considering the entire enterprise's asset value, only the value of the portion being
acquired is relevant for calculating thresholds under Section 5.
● This is beneficial for small transactions, as acquiring even a fraction of a business previously
required CCI approval.

3. Determination of Value and Turnover:

● When a portion of an enterprise is acquired:

○ Asset Value: Calculated as the book value for the preceding financial year based on audited
accounts or the statutory auditor's report if accounts are not filed.
○ Turnover: Determined based on the turnover of the acquired portion, certified by the
statutory auditor from the last available audited accounts.
● This determination only applies when a portion is acquired, not for investments in the enterprise.

4. Principle of Attribution:

● Regulation 5(9) states that in combinations with inter-related transactions, the value of the assets
and turnover from the transferor enterprise will be attributed to the transferee for calculating
thresholds under Section 5.
● However, this principle has been diluted, now considering only the portion being acquired along
with the assets and turnover of the acquiring entity.

5. Practical Implications:

● The new rules reduce regulatory burdens and uncertainties for small acquisitions, allowing greater
flexibility for corporate transactions in India.
● The interpretation of what constitutes relevant assets and turnover is now clearer, aiding
compliance for companies engaging in mergers and acquisitions.

Module 10: Ease of doing Business & Green Channel Route

What is Green Route Channel
● The ‘Green Channel Route’ is a first-of-its-kind system where qualifying transactions, meeting the
prescribed thresholds under the Competition Act, 2002 which have no overlaps, are approved upon
filing.
● This initiative allows certain combinations that meet specific criteria to be automatically approved
upon filing a valid short form notification (Form-I) with the CCI. Consequently, these transactions
can proceed without waiting for a formal approval notification from the CCI.
● The CCI has introduced the ‘The Competition Commission of India (Procedure in regard to the
transaction of business relating to combinations) Regulations, 2011’
 ● On 07 October 2019, the CCI approved its first combination under this route: the acquisition of
Essel Mutual Fund by BAC Acquisitions Private Limited, owned by Sachin Bansal. This
marked a significant milestone in the CCI's regulatory framework.

Green Channel Criteria

To qualify for the Green Channel, the following conditions must be met:

● No Overlaps: The parties to the combination, including their respective group entities and any
entity in which they hold shares or control (directly or indirectly), must not have any:
○ Horizontal Overlaps: Direct competition in the same market segment.
○ Vertical Overlaps: Relationships in the supply chain (e.g., supplier and buyer).
○ Complementary Overlaps: Products or services that are often used together (e.g., printers
and ink cartridges).

Procedure for 'Green Channel' Filings

1. Self-Assessment: The notifying parties must conduct a thorough self-assessment to ensure

compliance with the Green Channel Criteria.
2. Filing Requirements:
○ A valid and complete Form-I must be submitted, including:
■ A declaration confirming that the proposed combination satisfies the Green
Channel Criteria.
■ A statement asserting that the transaction is not likely to cause any adverse effect
on competition.
3. Acknowledgment of Filing:
○ Upon receipt of the filing, the CCI typically issues an acknowledgment on the same day.
This acknowledgment serves as the deemed approval, allowing the parties to proceed with
the transaction.
○ It is essential to note that the Green Channel filings involve fewer disclosure requirements,
specifically, market size, share, or competitor information is not mandated.

Post-Filing Review and CCI’s Authority

● If the CCI later determines that a transaction does not qualify for the Green Channel
route—whether due to incorrect or incomplete information provided in the filing—it may declare
the deemed approval void ab initio(from the beginning).
● The CCI retains the authority to examine the filing in accordance with the Competition Act,
2002. However, the CCI will provide the parties an opportunity to be heard before passing any
order to cancel the deemed approval.

Combinations Approved Under 'Green Channel'

As of 14 September 2020, a total of 16 combination notifications had been filed under the Green
Channel route, representing approximately 19% of the total 84 combinations notified since the inception
of this route. Initial concerns arose regarding whether a meaningful volume of combinations would qualify
due to ambiguities surrounding the Green Channel Criteria and uncertainties in procedural aspects.

● These concerns were addressed by the CCI's updated 'Notes to Form-I' issued on 27 March
2020, which clarified:
○ The definition of 'group companies'.
○ The assessment of complementary overlaps.

Encouragement for Pre-Filing Consultation (PFC)

The CCI encourages parties to take advantage of pre-filing consultations (PFCs), where they can seek
non-binding guidance from CCI case officers regarding the potential applicability of the Green Channel
route to their transaction.

● Important Note: The advice provided during PFCs is strictly recommendatory and
non-binding. The responsibility for self-assessment regarding the satisfaction of the Green
Channel Criteria lies solely with the parties involved.

Key Considerations for Self-Assessment

1. Complementary Overlaps:
○ The Green Channel Criteria explicitly requires parties to confirm that there are no
complementary overlaps, in addition to horizontal and vertical overlaps.
○ Complementary products or services are those typically used together (e.g., printers and
ink cartridges). The competition assessment for such products will be conducted similarly
to vertically related products.
2. Overlaps in India:
○ The Green Channel Criteria necessitate that the parties to the combination, their
respective group entities, or entities in which they hold shares or control must not have any
horizontal, vertical, or complementary overlaps in their activities within India.
○ However, based on the CCI’s decisional practice, if the parties to the combination (or their
respective group companies) are engaged in similar or related businesses without overlaps
in India, they may still be eligible for the Green Channel route, pending consultation with
the CCI.

Penalties for Non-Compliance

If the CCI determines the deemed approval to be void ab initio, it may impose penalties under Sections
44 and 45 of the Competition Act for making a false declaration. These penalties can extend to one crore
rupees.

● Uncertainty in Post-Approval Consequences:

 ○ The consequences for transactions that were consummated based on a deemed approval,
which is later declared void, remain unclear.
○ It is uncertain whether the parties will be required to 'unscramble' the combination,
maintain separate operations, or file a fresh notification under the Competition Act,
potentially incurring gun-jumping penalties.

Module 11-12: Bank Mergers

Section 44A. Procedure for amalgamation of banking companies.

● No banking company shall be amalgamated with another unless a draft scheme is approved by a
resolution passed by a majority in number representing two-thirds in value of the shareholders of
each company, present in person or by proxy at a meeting convened for this purpose.
● Notice of the meeting must be given to every shareholder in accordance with the articles of
association and published at least once a week for three consecutive weeks in two newspapers
circulating in the locality of the registered offices, one being in a language commonly understood in
that area.Central Board of Director
● A shareholder who votes against the scheme or gives prior written notice of dissent is entitled to
claim the value of their shares as determined by the Reserve Bank, with such determination being
final.
● If the scheme is sanctioned by the Reserve Bank, it becomes binding on all banking companies
concerned and their shareholders.
● Upon sanctioning, the assets and liabilities of the amalgamated banking company transfer to the
acquiring company as per the scheme.
● The Reserve Bank may order the dissolution of the amalgamated banking company, which takes
effect regardless of any contrary law, and the Registrar shall strike off the name of the dissolved
company.
● An order under this section, certified by the Reserve Bank, serves as conclusive evidence that all
requirements have been met and is admissible in all legal proceedings.
● The Central Government retains the power to amalgamate banking companies under the
Companies Act, subject to consultation with the Reserve Bank.

Section 45. Power of Reserve Bank to apply to Central Government for suspension of business by
a banking company and to prepare scheme of reconstruction or amalgamation

● The Reserve Bank (RBI), if it deems necessary, can apply to the Central Government for a
moratorium on the business of a banking company, overriding any existing laws or agreements.
● The Central Government may impose a moratorium, halting all actions and proceedings against the
banking company for a fixed period, extendable up to six months, with specific terms and
conditions.
● During the moratorium, unless directed otherwise by the Central Government, the banking
company is prohibited from making payments to depositors, settling liabilities, or engaging in new
credit activities.
 ● If the RBI determines that it is necessary in the public interest, for depositors' protection, proper
management, or the banking system's stability, it can draft a scheme for the reconstruction or
amalgamation of the banking company with another institution.
● The scheme may include provisions concerning the constitution, assets, liabilities, and management
of the banking company or transferee bank; transfer of business and liabilities; board changes;
amendments to the company's constitution; continuation of legal actions; reduction of
stakeholders' interests; payment to depositors and creditors; share allotment; employee conditions;
and any other necessary terms for effective reconstruction or amalgamation.
● The RBI sends the draft scheme to concerned banking companies and solicits suggestions and
objections, making modifications as necessary before submitting it to the Central Government for
sanction.
● The Central Government, upon sanctioning the scheme (with or without modifications), sets the
scheme in motion from a specified date, making it binding on all involved parties.
● Once in effect, the scheme is binding on all relevant entities, including the banking company,
transferee bank, stakeholders, employees, and associated persons or funds.
● The properties, assets, and liabilities of the banking company are transferred to the transferee bank
as outlined in the scheme.
● The Central Government may issue orders to resolve any difficulties in implementing the scheme.
● Copies of the scheme or any related orders are laid before both Houses of Parliament.
● The transferee bank must continue the acquired business in accordance with its governing laws,
subject to any modifications or exemptions granted by the Central Government.
● The section allows for a single scheme to amalgamate several banking companies under
moratorium.
● The provisions of this section and any resulting scheme override any conflicting laws, agreements,
or instruments.
● "Banking institution" includes any banking company, the State Bank of India, or a corresponding
new bank.
● The section clarifies that references to "terms and conditions of service" do not extend to an
employee's rank and status.

Case Laws

Shiv Kumar Tulsiyan vs Union of India

● Issue: Whether this process of forced merger under Section 45 is constitutionally valid?
○ Court upheld constitutional validity and looked into reasonable restrictions under Article
14 and 19-
■ Public Interest,
■ Depositors’ Interest,
■ To avoid the regulatory forbearance;
● Issue: Can bank forced to being merged come for judicial review under Section 45?
 ○ Judicial Review is permissible if you are fulfifllig the doctrine of legitimate exception. If the
merger can be proved to be arbitrary and unreasonable, you can ask for a judicial review.
■ Refer to another case: Davis Kuriapae vs Union of India
● The case involved employees of Bank of Cochin Limited challenging their
absorption into State Bank of India under a Section 45 amalgamation
scheme, specifically disputing the Reserve Bank of India's decision that 2
years of service in Bank of Cochin would be equivalent to 1 year in SBI
for determining their placement and benefits.
● The Court upheld RBI's equivalence decision, ruling that as an expert
body in banking operations, RBI's judgment on experience equivalence
under Section 45(5)(i) cannot be interfered with unless shown to be
arbitrary or unreasonable.
■ High Court may not be equipped with the technical expertise to decide.

M&A of Banking Company and NBFCs

RBI Master Direction – Amalgamation of Private Sector Banks, Directions, 2016

Rule 5: Statutory Provisions:

● The amalgamation of an NBFC with a banking company is governed by Sections 232 to 234 of the
Companies Act, 2013, requiring the approval of the Tribunal for the amalgamation scheme.

Rule 14

● Where an NBFC is proposed to be amalgamated with a banking company, the banking company
shall obtain the approval of the Reserve Bank of India (RBI) after the scheme of amalgamation is
approved by its Board and the Board of the NBFC, but prior to submission to the Tribunal for
approval.

Rule 15

● When granting approval, the Board of the banking company shall give consideration to the matters
outlined in Rule 9, Chapter III, including asset valuation, swap ratio, and any potential effects on
shareholding, profitability, and capital adequacy.

Rule 16

● Furthermore, the Board shall ensure:

● The NBFC has not violated any RBI or SEBI norms, and any such violations are rectified
before the scheme of amalgamation is approved.
● The NBFC has adhered to "Know Your Customer" (KYC) norms for all accounts
transferring to the banking company.
 ● If the NBFC has borrowed from banks or financial institutions (FIs), whether loan
agreements require consent for the merger, and that such consent is obtained where
necessary.

Rule 17

● To enable the Reserve Bank of India to consider the application for approval, the banking company
shall furnish to the Reserve Bank of India the information as specified in the Schedule to these
Directions (excluding item 4) and also the information and documents listed in paragraph 13 at
Chapter III B above.

Rule 18

● The provisions of Chapter IV / IVA (Rule 14-17) above shall apply mutatis mutandis in cases
where a banking company is amalgamated with an NBFC.

Rule 19

● SEBI regulations on Prohibition of Insider Trading shall be strictly complied with regarding
promoter buying or selling of shares, directly or indirectly, before, during, and after the discussion
period. In cases of amalgamation involving unlisted banks/companies, SEBI guidelines should be
followed in spirit and to the extent applicable.

Amalgamation of Public Section Company

Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 & 1980

Section 9: Power of Central Government to make scheme (summary)

● The Central Government, in consultation with the Reserve Bank, may create schemes
for implementing the provisions of this Act.
● Such schemes may include matters related to the capital structure of new banks,
constitution of boards of directors, reconstitution or amalgamation of banks, and
incidental matters for carrying out the provisions of the Act.
● Boards of Directors for new banks shall consist of:
○ Up to four full-time directors appointed by the Central Government after
consultation with the Reserve Bank.
○ One representative of the Central Government.
○ One director with expertise in banking regulation or supervision.
○ Employee representatives, including both workmen and non-workmen.
○ One chartered accountant with a minimum of fifteen years of experience.
○ Shareholder-elected directors based on the bank’s paid-up capital.
● Directors should possess expertise in agriculture, rural economy, banking, economics,
and finance.
● Shareholder-elected directors must have fit and proper status as determined by the
Reserve Bank.
 ● The Reserve Bank may remove directors who do not meet the fit and proper criteria.
● The Central Government may amend or vary schemes, which, once in force, shall be
binding on all stakeholders, including bank employees and depositors.
● The assets and liabilities of banks affected by reconstitution or amalgamation shall be
transferred as specified in the scheme.
● Any scheme shall be laid before Parliament for approval, with provisions for
modification or annulment.
● The Reserve Bank may appoint additional directors for a term not exceeding three
years if necessary in the interest of banking policy or public interest.
● Such additional directors shall not be required to hold qualification shares and shall
not be liable for acts done in good faith.

Section 14: Custodian to be public servant

● Every Custodian of a corresponding new bank shall be deemed to be a public servant
for the purposes of Chapter IX of the Indian Penal Code (45 of 1860).

Regulation 9?

Acquisition of Private Sector Bank by Central Government

36AE. Power of Central Government to acquire undertakings of banking companies in
certain cases.
● (1) The CG may acquire the undertaking of a banking company if it receives a report from the RBI
indicating that the company has repeatedly failed to comply with directives related to banking
policy or is being managed detrimentally to depositors' interests. This acquisition can occur if
necessary for the interests of depositors, banking policy, or provision of credit. The banking
company must be given a reasonable opportunity to contest the action before the acquisition.
● (2) On the appointed day, the undertaking of the acquired bank, along with all its assets and
liabilities, shall transfer to and vest in the CG.
● (3) The undertaking and its assets and liabilities include all rights, powers, authorities, privileges,
movable and immovable property, cash balances, reserve funds, investments, deposits, and all related
debts, liabilities, and obligations existing before the appointed day.
● (4) If the CG believes that the undertaking and its assets and liabilities should vest in a company
established under a scheme made under this Part or a corporation (transferee bank), it may order
that these shall vest in the transferee bank on the notified order's publication or a specified date.
● (5) When the undertaking of the acquired bank and its assets and liabilities vest in the transferee
bank, it shall be deemed the transferee of the acquired bank, inheriting all rights and liabilities from
that date.
● (6) All contracts, deeds, bonds, agreements, and instruments involving the acquired bank before the
appointed day shall remain in effect against the CG or the transferee bank, allowing them to enforce
or act upon these as if they were parties to them.
● (7) Any pending suit, appeal, or proceeding involving the acquired bank on the appointed day shall
not be abated or affected by the transfer. Such proceedings may continue against the CG or the
transferee bank.
36AF. Power of the Central Government to make scheme

● (1) The CG, after consulting the RBI, may create a scheme for the purposes of this Part regarding
any acquired bank.
● (2) The scheme may provide for matters including:
○ (a) The corporation or company to which the undertaking of the acquired bank may be
transferred, including its capital, constitution, name, and office.
○ (b) The constitution of the first Board of management of the transferee bank and related
matters.
○ (c) Continuance of services for employees of the acquired bank (except those specifically
mentioned) in the CG or transferee bank on existing terms and conditions.
○ (d) Continuance of pension or allowances for eligible persons from the acquired bank,
with conditions to be determined by the CG.
○ (e) Manner of payment of compensation to shareholders of the acquired bank, or to the
acquired bank if incorporated outside India.
○ (f) Provisions for effectual transfer of any asset or liability of the acquired bank in other
countries.
○ (g) Incidental and supplemental matters to ensure complete transfer of the business,
property, assets, and liabilities.
● (3) The CG may, after consulting the RBI, amend any scheme by notification in the Official
Gazette.
● (4) Every scheme shall be published in the Official Gazette.
● (5) Copies of every scheme shall be laid before each House of Parliament after being made.
● (6) The provisions of this Part and any scheme made under it shall have effect notwithstanding any
conflicting provisions in any other law or agreement.
● (7) Every scheme made shall be binding on the CG, the transferee bank, and all members, creditors,
depositors, employees, and any person with rights related to the acquired or transferee bank.

36AG. Compensation to be given to shareholders of the acquired bank

● (1) Every person registered as a holder of shares in the acquired bank shall be compensated by the
CG or the transferee bank as determined according to the Fifth Schedule.
● (2) Rights between shareholders and other interested parties remain unaffected; such parties may
enforce their interest against the compensation.
● (3) The amount of compensation shall be determined by the CG or transferee bank in consultation
with the RBI and offered as full satisfaction.
● (4) If the offered compensation is unacceptable, a request for referral to the Tribunal may be made
before a specified date.
● (5) If requests from one-fourth of shareholders are received before the date notified, the CG shall
refer the matter to the Tribunal.
● (6) If no requests are received by the notified date, the offered amount or the Tribunal's decision
will be final and binding.
36AH. Constitution of the Tribunal

● (1) The CG may constitute a Tribunal consisting of a Chairman and two other members.
● (2) The Chairman must be a former High Court or Supreme Court Judge; one member must have
experience in commercial banking, and the other must be a chartered accountant.
● (3) Vacancies may be filled by the CG, allowing proceedings to continue.
● (4) The Tribunal may appoint persons with relevant expertise to assist in compensation
determination.

36AI. Tribunal to have powers of a civil court

● (1) The Tribunal shall have civil court powers under the Code of Civil Procedure, 1908, including:
○ (a) Summoning and examining witnesses.
○ (b) Requiring document discovery.
○ (c) Receiving evidence on affidavits.
○ (d) Issuing commissions for examination of witnesses/documents.
● (2) The Tribunal shall not compel the CG or the RBI to produce confidential documents.

36AJ. Procedure of the Tribunal

● (1) The Tribunal may regulate its own procedure.

● (2) Inquiries may be held in camera.
● (3) Clerical or arithmetical errors in orders may be corrected by the Tribunal at any time.

Module 13-14: Dermergers

● A demerger is a form of restructuring whereby one or more business ‘undertakings’ of a company
are transferred either to a newly formed company or to an existing company and the remainder of
the company’s undertaking continues to be vested in the first company.
● The consideration for such transfer will flow to the shareholders of the demerged undertaking
either through issue of shares by the resulting company or other instruments (for it to qualify as a
tax neutral demerger) or by way of cash.
● A demerger must also be conducted through a scheme of arrangement under the CA, 2013 with
the approval of the NCLT.
● The Income Tax Act defines a demerger under Section 2(19AA) as a transfer pursuant to a scheme
of arrangement under the CA, 2013, by a ‘demerged company’ of one or more of its undertakings
to a ‘resulting company’.
● The ITA provides that a demerger must satisfy all the following conditions:
○ All the properties and liabilities of the undertaking being transferred by the demerged
company, immediately before the demerger, become the property or liability of the
resulting company by virtue of the demerger.
○ The properties and liabilities must be transferred at their book value immediately before
the demerger (excluding increase in value due to revaluation). The Finance Act, 2019
 relaxed this condition by providing that it would not apply where the resulting company
records the assets and liabilities at values different from the values appearing in the books of
account of the demerged company, immediately before the demerger, in compliance with
the Indian Accounting Standards (“Ind AS”).
○ In consideration of the demerger, the resulting company must issue its shares to the
shareholders of the demerged company on a proportionate basis (except where the
resulting company itself is a shareholder of the demerged company).
○ Shareholders holding at least 3/4th in value of shares in the demerged company become
shareholders of the resulting company by virtue of the demerger. Shares in the demerged
company already held by the resulting company or its nominee or subsidiary are not
considered in calculating 3/4th in value.
○ The transfer of the undertaking must be on a ‘going concern’ basis. vi. The demerger must
be in accordance with additional conditions, if any, as notified by the Central Government
under Section 72A (5) of the ITA.
● It is only when a demerger satisfies all the above conditions, that it will be considered a ‘demerger’
for purposes of the ITA.
● Further, subject to fulfilling certain additional conditions, the demerger may be regarded as tax
neutral and be exempt from capital gains tax in the hands of the demerged company, shareholders of
the demerged company and the resulting company.

Types of Demergers

Spin-Off Concept:

● A corporate spin-off involves a parent company separating part of its business to create a new,
publicly traded entity.
● Shares of the new entity are distributed to existing shareholders of the parent company.

Case Study: Bajaj Auto Ltd. Demerger

1. Background:
○ Bajaj Auto Ltd. (BAL) went through a demerger, separating its business into three entities:
■ Bajaj Auto Ltd.: Focus on the auto business.
■ Bajaj Finserv Ltd. (BFSL): Focus on wind energy generation, insurance, and
consumer finance.
■ Bajaj Holdings & Investment Ltd. (BHIL): Focus on investments and new
business opportunities.
2. Post-Demerger Changes:
○ Name changes occurred:
■ The original Bajaj Auto Ltd. was renamed Bajaj Holdings & Investment Ltd..
■ The entity to which the auto business was transferred was renamed Bajaj Auto
Ltd..
○ The record date for the demerger was March 25, 2018.
 3. Shareholders’ Consequence:
○ Shareholders of the original Bajaj Auto Ltd. received one share in each of the three new
companies for every share held in the original Bajaj Auto Ltd.

Tax Implications of Demerger:

1. No Immediate Tax Liability:

○ According to the Income Tax Act, the demerger itself has no tax impact on shareholders
when they receive new shares in the resulting companies.
2. Tax Liability When Shares Are Sold:
○ Capital gains tax liability arises only when shares of Bajaj Auto Ltd. (now BHIL) or the
resulting companies are sold.
3. Key Tax Considerations:
○ Long-Term or Short-Term Assets:
■ To determine if the shares are long-term, the holding period of the original Bajaj
Auto Ltd. shares is added to the new shares’ holding period.
○ Indexation of Capital Gains:
■ The indexation period starts from the allotment date of the new shares (not from
the acquisition date of the original shares).
■ Indexation is relevant for calculating capital gains if shareholders wish to offset
gains against losses.
○ Cost of Acquisition:
■ The original cost of acquisition of Bajaj Auto Ltd. shares is adjusted due to the
demerger.
■ A new cost is allocated to the shares of the resulting companies, based on a
formula provided by the Income Tax Act, which accounts for the proportion of
net worth of Bajaj Auto Ltd. compared to the book value of the transferred
businesses.

Split-Up

● A split-up involves dividing a parent company into two or more entities, where the original parent
ceases to exist.
● Example: Max India Split-Up
○ Max Financial Services: Focuses on life insurance activities with a 72.1% stake in Max Life,
becoming India's first listed company dedicated to life insurance.
○ Max India (New): Focuses on healthcare, senior living, and health insurance investments,
including Max Healthcare, Max Bupa, and Antara Senior Living.
○ Max Ventures & Industries: Engages in manufacturing through Max Speciality Films and
explores new businesses, particularly affordable solutions.
● Post-split, the companies focus on their distinct sectors and streamline their operations in
alignment with their new objectives.
Divestiture

● A divestiture is the sale or closure of a company’s business unit, asset, or subsidiary to focus on core
operations or raise capital.
● It involves some form of contraction and is based on the principle of reducing the non-core or
underperforming units.
● Reasons for Divestiture:
○ Streamlining business focus.
○ Reducing operational losses by selling underperforming units.
○ Raising funds for debt repayment or reinvestment into core operations.
○ Adapting to evolving customer preferences, macroeconomic uncertainties, or shareholder
pressure.
● Market Trends:
○ EY’s India Divestment Study 2019 highlights that 81% of companies planned to undertake
divestments within the next two years.
○ Divestitures are often driven by the need to raise capital and improve competitive
positioning.
● Notable Divestments:
○ Reliance Infra: Sold its power business to Adani Transmission for $2.9 billion.
○ L&T: Sold its electrical business to private equity investors for $2.8 billion.
○ Jaiprakash Cement: Sold a portion of its business to UltraTech Cement for $2.4 billion.
○ Lafarge: Sold its cement business to Nirma Ltd. for $1.4 billion.
● Key Factors for Successful Divestitures:
○ Clear portfolio strategies, addressing functional interdependencies, legal, regulatory, and
tax issues.
○ Flexibility in deal structures.
○ Creating value propositions to maximize proceeds from the transaction.

Equity Carve-Out

● An equity carve-out is a partial separation of a subsidiary into a standalone company while retaining
majority control.
● The new company operates independently with its own board and financial statements, although
the parent provides strategic support.
● Purpose:
○ Diversify into new business areas.
○ Streamline operations by separating business functions (e.g., one for production, another
for marketing).
● Benefits:
○ Both the parent company and the carved-out entity may benefit from increased focus and
profitability.
○ Enhances value by allowing the separated entity to operate independently.
○ Carve-outs are often successful when entities are allowed independence over time.
 ● Issues:
○ Conflicts between the parent company and the carved-out entity may arise over time,
particularly as carve-outs grow faster after an Initial Public Offering (IPO).
○ Short-term shareholder gains often fade, and long-term shareholders may face losses unless
there is a structured plan for full separation.
○ Operational risks such as attrition, loss of business context, and increased costs due to
interdependencies (e.g., IT, financial reporting) may hinder post-closure continuity.
● Examples:
○ GlaxoSmithKline: Carved out its consumer healthcare business and sold it to Hindustan
Unilever.
○ L&T: Exited its electrical and automation business by selling to Schneider Electric.
○ Kalpataru Power: Sold its transmission assets to CLP to reduce debt and focus on strategic
diversification.
● Strategic Outlook:
○ Carve-outs are considered a valuable financial tool, but companies must plan for the
possibility of complete separation, which could otherwise destroy shareholder value.
Companies should avoid illusions of reversing carve-outs once initiated.

Sun Pharma Cross Border Demergers

● In December 2019, Ahmedadad bench of NCLT passed an order rejecting Sun Pharmaceutical
Industries Limited ("Sun Pharma")’s application for proposed demerger and transfer of its two
specified investment undertakings to two overseas resulting companies ("Outbound Demerger
Order").
○ Contradicted an earlier order by Ahmedabad bench in October 2018 wherein the NCLT
had approved an application made by Sun Pharma for inbound demerger involving
transfer of a specified undertaking of Sun Pharma Global FZE ("Global FZE"),
incorporated under the provisions of United Arab Emirates, with Sun Pharma.
● Raised question of whether cross-border demerger is allowed under Section 234 of Companies Act,
2013 ("CA 2013") read with Rule 25A of the Companies (Compromises, Arrangements and
Amalgamations) Rules, 2016 or only cross-boder mergers allowed.
● Facts
● Sun Pharma proposed the demerger of two of its investment undertakings into two overseas
companies based in the Netherlands and the US. As a listed entity, it obtained prior approval from
SEBI through stock exchanges and secured the necessary corporate consents from its shareholders
and creditors.
● The RBI provided implied approval, requiring compliance with applicable regulations. No
objections were raised by stakeholders, including the Registrar of Companies (ROC), regarding the
legality of the demerger during the tribunal process.
● NCLT’s judgement
 ○ Section 234 of the Companies Act, which addresses mergers or amalgamations with
foreign companies, does not include the terms "compromise," "arrangement," or
"demerger," suggesting that cross-border demergers may not be allowed.
○ Rule 25A of the Companies (Compromises, Arrangements, and Amalgamations) Rules,
2016 does not mention demergers, leaving them unaddressed in cross-border contexts.
○ The FEMA Cross Border Regulations initially included demergers in its draft version but
omitted them in the final regulations, indicating an intentional exclusion of cross-border
demergers.
● Analysis
○ Section 230 of the Companies Act addresses compromises and arrangements between a
company and its creditors or shareholders, while Section 231 outlines the tribunal's
enforcement of these orders. Section 232 covers arrangements involving two or more
companies concerning reconstruction, mergers, amalgamations, or demergers, specifically
in connection with the transfer of whole or part of undertakings. Section 233 introduces a
fast-track merger or amalgamation process for certain specified companies, emphasizing
that Section 233 also applies to schemes referred to in Section 230 and to transfers under
Section 232(1)(b).
○ Section 234 of the Act is notably concise, stating that the provisions of Chapter XV, which
deals with compromises, arrangements, and amalgamations, will apply mutatis mutandis
to mergers and amalgamations between Indian companies and foreign companies
registered in specified jurisdictions, unless otherwise provided in any other law.
○ The FEMA Cross Border Regulations define cross-border mergers as any merger,
amalgamation, or arrangement following the Companies (Compromises, Arrangements,
and Amalgamations) Rules. These regulations allow both inbound and outbound mergers,
deeming transactions in accordance with these regulations to have prior approval from the
Reserve Bank of India (RBI). However, there is no mention of demergers in these
regulations.
○ In the Outbound Demerger Order, the National Company Law Tribunal (NCLT)
interpreted the silence of Section 234 and Rule 25A on outbound demergers as a
prohibition. This contrasts with Section 394 of the Companies Act, 1956, which explicitly
prohibited outbound mergers and demergers by limiting the transferee company to those
registered under the 1956 Act. Section 234 of the Companies Act, 2013, removed this
restriction, suggesting that the legislature intended to allow both inbound and outbound
mergers and demergers.
○ The NCLT's reliance on the deletion of the term 'demerger' from the Final CBM
Regulations to conclude that the intention was to prohibit demergers is inconsistent with
its reasoning. The final rules still include 'arrangement,' a broader term that encompasses
'demerger,' indicating that the exclusion may not have been intended as a prohibition.
○ The Companies Act, 2013 is seen as a progressive enactment that reflects the globalized
nature of business in India. Thus, any interpretation that makes the Act regressive
compared to its predecessor should be rejected. The cardinal rule of statutory
 interpretation supports that if a literal reading leads to absurdity, courts should adopt a
more sensible interpretation, especially when the Act's intent is progressive.
○ The disparity in treatment between cross-border mergers and demergers is highlighted by
the JJ Irani Committee Report, which advocated for equal treatment of demergers within
the mergers and acquisitions framework, suggesting that the laws governing mergers
should also accommodate demergers.
○ The NCLT's interpretation of outbound demergers raises questions regarding its prior
ruling on inbound demergers, indicating a lack of consistency. In the Inbound Demerger
Order, the NCLT sanctioned a demerger and transfer under Section 230 and Section 232
read with Section 234, while in the Outbound Demerger Order, it dismissed the
applicability of Section 234 to demergers. This inconsistency points to a potential need for
clearer regulations that enable cross-border demergers to align with the progressive aims of
the Companies Act.

Module 15-16: SAST Code

SEBI (Substantial Acquisition of Shares & Takeover) Code 2011
Reg 2: Definitions
● Acquirer: A person who, directly or indirectly, acquires or agrees to acquire shares, voting rights, or
control over a target company, either by themselves or with persons acting in concert with them.
● Acquisition: The act of directly or indirectly acquiring or agreeing to acquire shares, voting rights,
or control over a target company.
● Control: Includes the power to appoint a majority of directors or to influence management or
policy decisions, either directly or indirectly, through shareholding, management rights, shareholder
agreements, voting agreements, or other means.
○ Provided that the director or officer holding position within the target company alone
does not constitute control.
● Persons Acting in Concert: Refers to individuals or entities who, with a shared objective,
cooperate directly or indirectly for the acquisition of shares, voting rights, or control over a target
company through formal or informal agreements or understandings.
○ Deemed Categories: The following entities are presumed to be acting in concert unless
proven otherwise:
■ A company, its holding or subsidiary companies, and any company under the same
management or control.
■ A company and its directors, as well as anyone managing the company.
■ Directors of companies mentioned above and their associates.
■ Promoters and members of the promoter group.
■ Immediate relatives.
■ A mutual fund, along with its sponsor, trustees, trustee company, and asset
management company.
■ A collective investment scheme, its management company, trustees, and trustee
company.
 ■ A venture capital fund, its sponsor, trustees, trustee company, and asset
management company.
■ An alternative investment fund, its sponsor, trustees, trustee company, and
manager.
■ A merchant banker and its client, if the client is an acquirer.
■ A portfolio manager and its client, if the client is an acquirer.
■ Banks, financial advisors, and stock brokers connected to the acquirer or its related
entities, except banks providing standard commercial banking services.
■ An investment company or fund and any individual holding at least 10% of its
capital, along with any other investment companies or funds where the same
individual or associate holds 10% or more of capital.
○ Explanation of 'Associate':
■ Immediate relatives.
■ Trusts where the person or their immediate relative is a trustee.
■ Partnership firms where the person or immediate relative is a partner.
■ Members of a Hindu Undivided Family (HUF) where the person is a coparcener.

Reg 3: Substantial acquisitionof shares or voting rights.

● No acquirer, together with persons acting in concert, shall acquire shares or voting rights in a target
company that entitle them to exercise 25% or more of the voting rights without making a public
announcement of an open offer for further share acquisition.
● If an acquirer, already holding 25% or more but less than the maximum permissible non-public
shareholding, wishes to acquire more than 5% of voting rights in a financial year, they must also
make a public announcement of an open offer.
● For FY 2020-21, promoters were allowed to acquire up to 10% of voting rights through
preferential issue of shares.
● Acquisitions exceeding the maximum permissible non-public shareholding are not permitted,
unless exempt under a resolution plan approved under the Insolvency and Bankruptcy Code,
2016.
● Gross acquisitions are considered, regardless of any intermittent decrease in shareholding or voting
rights.
● In cases where new shares are issued, the difference between pre- and post-allotment voting
rights is considered the additional acquisition.
● Any acquisition that causes an individual's shareholding to exceed the threshold shall trigger an
open offer, even if there’s no change in aggregate shareholding with persons acting in concert.
● This regulation does not apply to acquisitions made by promoters or shareholders in control, in
accordance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.
● In case of listed entities on the Innovators Growth Platform, the threshold for triggering an open
offer is 49% instead of 25%.
Reg 4: Acquisition of control
● No acquirer, whether holding shares or voting rights in a target company or not, shall directly or
indirectly acquire control over the target company without making a public announcement of an
open offer to acquire shares in accordance with these regulations.

Reg 5: Indirect acquisition of shares or control.

● For the purposes of regulations 3 and 4, acquiring shares, voting rights, or control in a company or
entity that enables a person or persons acting in concert to exercise a certain percentage of voting
rights or control over a target company—triggering a public offer obligation—will be considered an
indirect acquisition of shares, voting rights, or control over the target company.
● If such an indirect acquisition exceeds 80% of either:
○ the target company's net asset value as a percentage of the entity's consolidated net assets,
○ the target company's sales turnover as a percentage of consolidated sales turnover, or
○ the target company's market capitalization as a percentage of the enterprise value of the
acquired entity,
based on the latest audited financials, the acquisition will be treated as a direct acquisition for all
purposes, including obligations on timing, pricing, and open offer compliance.
● Explanation: For computing the percentage in (c), the target's market capitalization is calculated
using the 60-day volume-weighted average market price before the earlier of the date of primary
acquisition or public announcement, on the stock exchange with the most traded volume for the
target’s shares.

Reg 6: Voluntary Offer

● An acquirer, together with persons acting in concert with him, who holds shares or voting rights in
a target company amounting to at least 25% but less than the maximum permissible non-public
shareholding, may voluntarily make a public announcement of an open offer for acquiring shares in
accordance with these regulations. However, the total shareholding after the open offer should not
exceed the maximum permissible non-public shareholding.
○ Provided that if the acquirer or any person acting in concert with him has acquired shares
in the target company during the preceding 52 weeks without triggering an obligation to
make a public announcement of an open offer, they are not eligible to make a voluntary
offer under this regulation.
○ Provided further that during the offer period, the acquirer cannot acquire any shares
outside the open offer.
● An acquirer and persons acting in concert with him, having made a public announcement under
this regulation, are prohibited from acquiring any shares of the target company for six months after
the completion of the open offer, except through another voluntary open offer.
○ Provided that this restriction does not prevent the acquirer from making a competing
offer if another person makes an open offer for the same target company.
● Shares acquired through bonus issues or stock splits shall not be considered for the disqualification
set out in this regulation.
 ● For listed entities on the Innovators Growth Platform, any reference to "25%" in this regulation
shall be read as "49%".

Reg 7: Offer Size

● The open offer made by an acquirer and persons acting in concert with him under Regulation 3 or
4 must be for at least 26% of the total shares of the target company as of the tenth working day from
the closure of the tendering period.
○ Provided that the total shares as of the tenth working day shall include all potential
increases in the outstanding shares contemplated on the date of the public announcement.
○ Provided further that if the number of shares increases after the public announcement,
which was not contemplated, the offer size shall proportionately increase.
● For an open offer made under Regulation 6, the acquirer must acquire at least enough shares to
entitle the holder to exercise an additional 10% of the voting rights in the target company. However,
the acquirer's shareholding post-acquisition must not exceed the maximum permissible non-public
shareholding applicable to the target company.
○ Provided that if a competing offer is made, the acquirer who has made a voluntary public
announcement of an open offer under Regulation 6 may increase the number of shares in
the offer as deemed fit.
○ Provided further that any such increase must be made within 15 working days from the
public announcement of a competing offer. Failing this, the acquirer cannot increase the
offer size.
● If an acquirer opts to increase the offer size under sub-regulation (2), the open offer shall be deemed
to have been made under sub-regulation (2) of Regulation 3, and all relevant provisions shall apply.
● If the shares accepted in the open offer result in the acquirer and persons acting in concert exceeding
the maximum permissible non-public shareholding, they must reduce their shareholding to the
specified level within the time permitted under the Securities Contract (Regulation) Rules, 1957.
○ Provided that if the open offer is made under Regulation 3(1), 4, or 5, and the acquirer
has stated their intention to retain the listing of the target company, the acquirer may
proportionately reduce the shares or voting rights to be acquired under the agreement,
such that their post-offer shareholding does not exceed the maximum permissible
non-public shareholding under the Securities Contract (Regulation) Rules, 1957.
○ Provided further that in the case of preferential allotment under a Share Subscription
Agreement triggering an open offer, the Board and shareholder resolutions must include
the effective date and quantum of allocation/allotment.
● Subject to Regulation 5A, an acquirer whose shareholding exceeds the maximum permissible
non-public shareholding after an open offer cannot make a voluntary delisting offer under the
Delisting Regulations until 12 months have passed since the completion of the offer period.
● Any open offer under these regulations must be made to all shareholders of the target company,
excluding the acquirer, persons acting in concert with him, and parties to any underlying
agreement.
Regulation 10: General Exceptions (Summary)
● Inter Se Transfers: Acquisitions via inter se transfer among qualifying persons (e.g., immediate
relatives, promoters, companies under common control) are exempt, provided certain conditions
are met (e.g., the acquisition price is within 25% of the market price and disclosure requirements are
followed).
● Ordinary Course of Business Acquisitions: Acquisitions by entities like underwriters,
stockbrokers, merchant bankers, or scheduled commercial banks in the ordinary course of business
are exempt, provided they follow the applicable guidelines and regulations.
● Subsequent Stage Acquisitions: If an acquirer has already made a public announcement of an
open offer during disinvestment, further acquisitions by the same acquirer and seller at subsequent
stages are exempt, provided they comply with full disclosure requirements.
● Scheme-Based Acquisitions: Acquisitions pursuant to court-ordered schemes of arrangement,
mergers, or demergers, and under certain financial restructuring acts, are also exempt, provided
certain cash limits and voting right retention conditions are satisfied.
● Insolvency and Bankruptcy Code: Acquisitions pursuant to a resolution plan approved under
the Insolvency and Bankruptcy Code are exempt.
● Debt Restructuring and Securitization: Acquisitions arising from debt restructuring,
conversion of debt into equity under RBI guidelines, or pursuant to the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest Act are exempt under
specific conditions.
● Preferential Issue: Acquisitions of shares or voting rights through a preferential issue in
compliance with SEBI regulations are exempt from making an open offer, especially for companies
with infrequently traded shares.
● Buy-Back of Shares: Increases in voting rights due to buy-backs are exempt, provided the
shareholder reduces their shareholding below the threshold within 90 days.

Chapter III- Open Offer Process

Reg 12: Manager to Open Offer
● Prior to making a public announcement, the acquirer shall appoint a merchant banker registered
with the Board, who is not an associate of the acquirer, as the manager to the open offer.
○ Explanation: For the purposes of this regulation, “associate” has the same meaning as in
the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992.
● The public announcement of the open offer for acquiring shares required under these regulations
shall be made by the acquirer through such manager.

Reg 13: Timing

● The public announcement referred to in regulation 3 and regulation 4 shall be made on the date of
agreeing to acquire shares or voting rights in, or control over, the target company.
● Specific Situations:
○ Announcement shall be made prior to placing the purchase order with the stock broker to
acquire shares that would take the entitlement to voting rights beyond the stipulated
thresholds.
 ○ Announcement shall be made on the same day as the date of exercise of the option to
convert such securities into shares for securities without a fixed date; for securities with a
fixed date, on the second working day preceding the scheduled date of conversion.
○ Announcement shall be made on the same day as the date of executing the agreement for
acquisition of shares or voting rights in or control over the target company.
○ Indirect Acquisition:
■ If none of the parameters in sub-regulation (2) of regulation 5 are met, the
announcement may be made within four working days from the earlier of the
primary acquisition contract date or the date of public announcement intention.
■ If any parameters are met, it shall be made on the earlier of the primary acquisition
contract date or the public announcement intention date.
○ Announcement shall be made on the date on which the board of directors of the target
company authorizes such preferential issue.
○ Announcement for an increase in voting rights due to buy-back not qualifying for
exemption shall be made not later than the ninetieth day from the closure of the buy-back
offer by the target company.
○ Announcement shall be made not later than two working days from the date of receipt of
intimation of having acquired title to such shares, voting rights, or control.
● A public announcement for a proposed acquisition of shares or voting rights through a
combination of agreements and modes of acquisition shall be made on the date of the first
acquisition, provided the acquirer discloses the details of the proposed subsequent acquisition.
● A detailed public statement shall be published by the acquirer through the manager to the open
offer not later than five working days of the public announcement, except for clause (e) of
sub-regulation (2), which shall be made not later than five working days of completing the primary
acquisition.
● If the acquirer does not succeed in acquiring the ability to exercise or direct the exercise of voting
rights or control over the target company, a detailed public statement of an open offer for acquiring
shares under these regulations shall not be required.

Reg 14: Publication

● Public announcement shall be sent to all stock exchanges where the shares of the target company are
listed, and the stock exchanges shall immediately disseminate such information to the public.
● A copy of the public announcement shall be sent to the Board and to the target company at its
registered office within one working day of the public announcement date.
● The detailed public statement, as referred to in sub-regulation (4) of regulation 13, shall be
published in:
○ All editions of one English national daily with wide circulation.
○ One Hindi national daily with wide circulation.
○ One regional language daily with wide circulation at the location of the target company's
registered office.
 ○ One regional language daily at the stock exchange where the maximum trading volume of
the target company's shares occurred during the sixty trading days preceding the public
announcement.
● Simultaneously with the newspaper publication of the detailed public statement, a copy shall be
sent to:
○ The Board through the manager to the open offer.
○ All stock exchanges on which the shares of the target company are listed, which shall
immediately disseminate this information to the public.
○ The target company at its registered office, which shall promptly circulate it to the
members of its board.

Reg 15: Contents

● The public announcement shall include the following specified information:
○ (a) Name and identity of the acquirer and any persons acting in concert with him.
○ (b) Name and identity of the sellers, if applicable.
○ (c) Nature of the proposed acquisition, such as the purchase or allotment of shares or other
means of acquiring shares or voting rights in or control over the target company.
○ (d) Consideration for the proposed acquisition that triggered the obligation to make an
open offer, including the price per share, if any.
○ (e) Offer price and mode of payment of consideration.
○ (f) Offer size and conditions regarding the minimum level of acceptances, if applicable.
○ (g) Intention of the acquirer regarding the delisting or retention of the listing of the target
company. If delisting is proposed under regulation 5A, the open offer price and indicative
price, along with an explanation justifying the indicative price, must be disclosed.
● The detailed public statement following the public announcement shall include sufficient
information to enable shareholders to make an informed decision regarding the open offer.
● The public announcement, detailed public statement, and any related statement, advertisement,
circular, brochure, publicity material, or letter of offer must not omit relevant information or
contain misleading information.
●

Reg 16: Filing of letter of offer with the Board.

● Within five working days of the detailed public statement under regulation 13(4), the acquirer must
file a draft letter of offer with the Board through the manager to the open offer. This includes a
non-refundable fee based on the following scale, payable via direct credit, online payment, or as
specified by the Board:
○ a. Up to ₹10 crore: ₹5,00,000
○ b. More than ₹10 crore, up to ₹1,000 crore: 0.5% of the offer size
○ c. More than ₹1,000 crore: ₹5 crore plus 0.125% of the amount exceeding ₹1,000 crore
 ● The consideration payable is based on the offer price assuming full acceptance, using the highest
offer price if differential pricing applies. If the offer price or size is revised, the fee must be
recalculated and paid within five working days.
● The manager to the open offer must provide soft copies of the public announcement, detailed
public statement, and draft letter of offer according to specified requirements, which the Board will
upload to its website.
● The Board shall comment on the draft letter of offer within 15 working days of receipt. If no
comments are received, it is deemed that the Board has no comments. If clarifications are requested,
the comment period extends to five working days after the satisfactory response is received.
● For competing offers, the Board will comment on each draft letter of offer on the same day.
● If disclosures in the draft letter of offer are deemed inadequate, the Board may request a revised
letter of offer, which will be handled according to sub-regulation (4).
●

Reg 17: Provisions of Escrow

● The acquirer must create an escrow account two working days before the detailed public statement
of the open offer. The amount deposited must be as follows:
○ On the first ₹500 crore: 25% of the consideration.
○ On the remaining balance: 10% of the balance consideration.
○ For conditional open offers, deposit the greater of 100% of the consideration for the
minimum acceptance level or 50% of the total consideration.
○ For indirect acquisitions, 100% of the consideration must be deposited.
● The escrow amount is based on the consideration computed per Regulation 16. In case of an
upward revision of the offer price or size, the escrow amount must be adjusted accordingly, and the
additional funds must be deposited prior to the revision.
● The escrow account can consist of:
○ Cash deposited with a scheduled commercial bank.
○ A bank guarantee issued to the manager of the open offer by a scheduled commercial bank.
○ Deposited securities that are frequently traded and freely transferable, subject to margin
requirements.
● If the escrow includes a bank guarantee or securities, at least 1% of the total consideration must be
deposited in cash.
● The acquirer must empower the manager to instruct the bank to make payments from the cash
component and ensure the bank guarantee remains valid throughout the offer period and for 30
days after payment to shareholders.
● If there is a shortfall in the securities escrow, the manager is responsible for addressing it.
● The manager cannot release the escrow account until 30 days after the completion of payment to
shareholders, except for transfers to the special escrow account as per Regulation 21.
● If the acquirer fails to meet obligations, the Board may direct the forfeiture of the escrow account or
any special escrow amounts.
● The escrow account deposited in cash will be released in the following cases:
○ Entire amount to the acquirer if the offer is withdrawn, certified by the manager.
 ○ Transfer of up to 90% to the special escrow account.
○ Remaining balance to the acquirer after transferring to the special escrow account after 30
days.
○ Total amount to the acquirer after 30 days for share exchanges.
○ Forfeiture amounts will be distributed one-third each to the target company, the Investor
Protection and Education Fund, and pro-rata to accepting shareholders after deducting
associated expenses.

Reg 20: Competing Offers

● Once an acquirer makes a public announcement for an open offer, other individuals can announce
their open offers within 15 working days following the detailed public statement by the first
acquirer.
● The competing open offer must aim to acquire at least the same number of shares as the initial
acquirer, which includes:
○ Shares already held by the competing acquirer and persons acting in concert.
○ Shares intended to be acquired in the initial offer and any related agreements.
● Competing offers made under this regulation are considered not voluntary and will be treated
under the same provisions as the first public announcement.
● All open offers made as per this regulation will be viewed as competing offers.
● No person may make a public announcement for acquiring shares or engage in related transactions:
○ After the 15 working days mentioned above.
○ Until the offer period for the current open offer expires.
● Unless the initial open offer is conditional on a minimum level of acceptances, no competing offer
may be conditional on this.
● No public announcement for acquiring shares is permitted until the offer period ends if:
○ The offer is for shares resulting from disinvestment.
○ The offer is made under relaxation provisions granted by the Board.
● The timeline for all competing offers must be the same. The last date for tendering shares in
acceptance of all competing offers will be the same as the last date set for the most recent competing
offer.
● Upon the announcement of a competing offer, the acquirer of a preceding offer may revise their
terms to be more favorable to shareholders.
● Acquirers can revise their offer prices until one working day before the tendering period begins.
● Except for specific variations allowed in this regulation, all other regulations apply to every
competing offer.

Reg 23: Withdrawal of open offer.

● The necessary statutory approvals required for the open offer or for effecting acquisitions have been
finally refused, provided that such requirements for approval were disclosed in the detailed public
statement and the letter of offer.
● If the acquirer is a natural person and has died.
 ● If any condition in the acquisition agreement that necessitates the open offer is not met due to
reasons beyond the reasonable control of the acquirer, and the agreement is rescinded. This must be
disclosed in the detailed public statement and the letter of offer.
○ Note: An acquirer cannot withdraw an open offer based on a public announcement made
under clause (g) of sub-regulation (2) of regulation 13, even if the preferential issue
acquisition fails.
● Any other circumstances that, in the opinion of the Board, warrant withdrawal.
○ Explanation: The Board must provide a reasoned order permitting withdrawal, which will
be published on its official website.
● If an open offer is withdrawn, the acquirer must take the following actions within two working days
through the manager of the open offer:
○ Announce in the same newspapers where the original public announcement was made,
detailing the grounds and reasons for withdrawal.
○ Simultaneously inform the following entities in writing:
■ The Board.
■ All stock exchanges where the shares of the target company are listed, which must
then disseminate the information to the public.
■ The target company at its registered office.

Chapter V: Disclosures
Reg 29: Disclosure of acquisition and disposal.
● Any acquirer, along with persons acting in concert, who acquires 5% or more of the shares or
voting rights in a target company, must disclose their aggregate shareholding and voting rights
in the specified form.
○ Note: For listed entities on the Innovators Growth Platform, the 5% threshold is
increased to 10%.
● Any person, together with persons acting in concert, holding shares or voting rights that entitle
them to 5% or more must disclose:
○ The number of shares or voting rights held.
○ Any change in shareholding or voting rights, even if the change results in a shareholding
falling below 5%, if:
■ There has been a change since the last disclosure made under sub-regulation (1) or
this sub-regulation.
■ The change exceeds 2% of the total shareholding or voting rights in the target
company.
○ Note: For listed entities on the Innovators Growth Platform, the 5% threshold is
increased to 10%, and the 2% threshold is increased to 5%.
● Disclosures required under sub-regulation (1) and sub-regulation (2) must be made within two
working days of:
○ Receipt of intimation of allotment of shares.
○ Acquisition or disposal of shares or voting rights in the target company.
● The disclosures must be made to:
 ○ Every stock exchange where the shares of the target company are listed.
○ The target company at its registered office.
● Shares taken via encumbrance are treated as an acquisition.
● Shares released from encumbrance are treated as a disposal.
● Disclosures must be made accordingly in the specified form.
● Exemption: This requirement does not apply to:
○ Scheduled commercial banks.
○ Public financial institutions.
○ Housing finance companies or systemically important non-banking financial companies as
pledgees in connection with pledges for securing indebtedness in the ordinary course of
business.

Reg 29: Disclosure of acquisition and disposal.

● A
● The promoter of every target company must disclose details of shares in the company that are
encumbered by:
○ The promoter themselves.
○ Persons acting in concert with the promoter.
■ Disclosure must be made in a specified form.
■ Exemption: This disclosure requirement does not apply if the encumbrance is
undertaken in a depository.
● The promoter must disclose details regarding:
○ The invocation of such encumbrance.
○ The release of such encumbrance.
■ Disclosure must be made in a specified form.
■ This requirement does not apply if the encumbrance is undertaken in a
depository.
● Disclosures required under sub-regulations (1) and (2) must be made within seven working days
from:
○ The creation of encumbrance.
○ The invocation of encumbrance.
○ The release of encumbrance.
● Disclosures must be sent to:
○ Every stock exchange where the shares of the target company are listed.
○ The target company at its registered office.
● The promoter must declare on a yearly basis that they, along with persons acting in concert, have
not made any encumbrance, directly or indirectly, other than those already disclosed during the
financial year.
● The yearly declaration must be made within seven working days from the end of each financial
year to:
○ Every stock exchange where the shares of the target company are listed.
○ The audit committee of the target company
●