The provisions of Section 233 of the Companies Act, 2013 read with Rule 25 of The Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 came into force w.e.f. 15th December 2016. It provides the concept of simplified merger. This simplified procedure is called “Fast Track Merger”. The significance of the fast track merger process is that it does not require court intervention i.e., the mandatory approval of the National Company Law Tribunal (NCLT).

MCA has notified Companies (Compromise, Arrangements and Amalgamation) Rules, 2016 (Rules) on December 14, 2016. The said Rules were further amended in 2021.

Section 233 of the Act postulates for a fast-track method to facilitate an amalgamation, compromise, or arrangement between a wholly owned subsidiary (“WOS”) and its holding company. Small companies (including one-person companies) that meet the threshold of Section 2(85) of the Act and start-ups can also avail this amalgamation route.

Benefits of Fast Track Merger

• No Mandatory approval of NCLT required.
• Less Administrative Burden.
• Series of Hearing may be avoided.
• Registration of scheme shall deemed to have effect of dissolution of transferor companies without the process of winding up.
• Comparatively less cost and time Saving.
• Less time consuming process
• No Need of Issuing Public Advertisement.

 
Companies Covered under the Fast Track Merger Route
A scheme of merger or amalgamation under section 233 of the Act may be entered into between any of the following class of companies, namely,

• Two or more start-up companies; or
• One or more start-up company with one or more Small Company;
• Merger between two or more Small Companies;
• Merger between a Holding Company and its Wholly-owned Subsidiary Company.

 
Explanation.- For the purposes of this sub-rule, “start-up company” means a private company incorporated under the Companies Act, 2013 or Companies Act, 1956 and recognised as such in accordance with notification number G.S.R. 127 (E), dated the 19th February, 2019 issued by the Department for Promotion of Industry and Internal Trade.]

Provided that nothing in this clause shall apply to -(a) a Holding company or a subsidiary company (b) A Company registered under Section 8. (c) a company or body corporate governed by any special Act.

Procedure for Fast Track Merger :-
STEP-1 Convene Board Meeting
Board meeting is to be convened both by the transferor and transferee company to decide and approve the following:

• To approve the Scheme of Merger and authorise a Director/Company Secretary to make an application to the Regional Director.
• To fix, time, date and place of meeting of the shareholders.
• To appoint valuer for taking certificate for Fair value of share under section 247 of the Act.
• To approve latest financial statement, auditor’s report and supplementary financial statements in case the last financial statement is more than 6 months before the date of Board Meeting.
• Certificate from Statutory Auditor that the accounting treatment for the proposed Scheme is as per the Accounting Standards.
• To approve the Declaration of Solvency by the Directors.
• Noting of list of creditors and value of total liabilities towards creditors. Also, to fix time, day and place of meeting of the creditors.

 
STEP-2 Issuance of Notice:
A notice of the proposed scheme is issued to invite suggestions or objections to the jurisdictional Registrar of Companies (“ROC”), the Official Liquidator (“OL“), income tax department and to the persons who are affected by the proposed scheme of the merger (for example any sectoral regulators for any companies), in Form CAA-9.

STEP-3 Declaration of Solvency by the Companies:
Each of the companies is required to file a declaration of solvency in Form CAA-10 with the jurisdictional ROC. The Form CAA-10 shall be filed with the ROC in e-Form GNL-1 and shall be accompanied by an auditor’s report on the statement of assets and liabilities. The companies are required to ensure that such declaration of solvency of the companies is not negative and there should be a positive surplus.

STEP-4 Notice of Meeting for convening a general meeting:
The companies shall issue a notice for convening a general meeting of all its members and creditors. The notice being issued shall be accompanied by a copy of the scheme of merger, an explanatory statement providing details about the merger, a copy of the latest audited financials, declaration of solvency in Form CAA-10 and other relevant information if any.

STEP-5 Approval of the shareholders and the creditors:
The objections and the suggestions to the scheme shall be considered in the meeting convened by the members or class of members of the companies and the scheme is said to be approved when the members holding at least 90% of the total number of shares of the company have consented and agreed to the scheme of merger. A meeting of the creditors or the class of creditors shall be convened and the scheme is said to be approved by the creditors or class of creditors when it has been approved by a majority holding 9/10th value of the creditors.

STEP-6 Post Approval:
For the purposes of sub-section (2) of section 233 of the Act, the transferee company shall, within seven days after the conclusion of the meeting of members or class of members or creditors, file a copy of the scheme as agreed to by the members and creditors, along with a report of the result of each of the meetings in Form no. CAA.11 with the central government, along with the fees as provided under the companies (Registration offices and fees) rules, 2014.

Copy of the scheme shall also be filed , along with Form No. CAA.11with-

• The registrar of companies in form no. GNL-1 along with fees provided under the companies (Registration offices and fees ) rules, 2014 ; and
• The official liquidator through hand delivery or by registered post or speed post and in the event of any objections or suggestions, the ROC or the OL shall intimate the same to the RD, within 30 days.

 
STEP-7 Order:
If the ROC or the OL has not raised any objections, the scheme shall be registered and The confirmation order of the scheme issued by the central government or tribunal under sub section (7) of section 233 of the Act, shall be filed, within thirty days of the receipt of the order of confirmation, in Form INC-28 along with the fees as provided under companies (registration offices and fees) rules 2014 with the Registrar of companies respectively.

Post Registration of Scheme:
The registration of the scheme shall be followed by the dissolution of the transferor company without the procedure of winding up; transfer of all the property or the liabilities of the transferor company to the transferee company; charges on the property of the transferor company shall be enforceable as charges on the property of the transferee company; any or all the legal proceedings initiated by the transferor company shall be carried on by the transferee company and all the other additional liability of the transferor company shall become the liability of the transferee company.

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