(The Telegraph Online)
The Union ministry of corporate affairs (MCA) has proposed to widen the scope of merger and amalgamation by including unlisted companies where borrowing from banks and financial institutions is less than ₹50 crore and there is no default.
The ministry has proposed an amendment to section 233 of the Companies Act to include the merger of unlisted companies. The section provides a simplified procedure for mergers and amalgamations of certain classes of companies.
“The above new class will be of those unlisted companies which have reasonable debt exposure and have no default in repayment thereto. It is proposed that section 8 companies (non-profit organisations) would not be covered under this category,” the draft proposal said.
The move follows the budget announcement where Union finance minister Nirmala Sitharaman had said that the requirements and procedures for speedy approval of company mergers will be rationalised and the process simplified.
As part of the draft proposal, two more changes have been included. A subsidiary other than the wholly owned subsidiary of a company may also be allowed to be merged with its holding company under section 233 with the condition that such a subsidiary should not be a listed company.
Second, a merger between fellow subsidiary companies belonging to the same group (i.e. having the same holding company), which is not covered under section 233, will also be included in this section.
The ministry has sought public comments on the proposals by May 5, 2025.
A senior chartered accountant said the proposal to fast-track corporate mergers and streamline the procedures will address the bottlenecks companies face during restructuring and foster a more agile business environment.
Earlier in 2021, section 233 was amended to include the merger of start-ups.
