Using financial and nonfinancial characteristics, the post merger performance of fifty greek companies, listed at the athens stock exchange ase that executed at least one merger or acquisition. Consider first the problem of predicting the merging companies sales. Introduction to mergers and acquisitions 5 a horizontal merger horizontal mergers occur when two companies sell similar products to the same markets. For example, when 2 companies merge, one of the companies which is operating in an old factory but has valuable. An amalgamation is distinct from a merger because neither of the. Background the companies act, 1973 was largely based on the british model of company law and made no provision for the combination of business entities by way of a merger.
Mergers and acquisitions carried out by spanish firms in. In commercial parlance, merger essentially means an arrangement. Difference between merger and amalgamation difference. In amalgamation, two or more companies combine to create a new company. For example, the acceptance of a scheme or merger or amalgamation by threefourths of the shareholders, like in section 3912 of the old act, is still a precondition to a merger or amalgamation. Procedure for mergers and amalgamations under the companies. Generally, in a merger, the merging entities would cease to be in existence and would merge into a single surviving entity. The popular meaning of amalgamation is the dissolution of one or more companies and transfer. Amalgamation merger liquidation mergers and acquisitions. A lot of hostile takeover bids were made by companies, which were behaving like raiders, because they sold off different parts of a company after acquiring it. In other words, all assets and liabilities of the transferor company become that of the transfer company. Fixed assets of both the companies are to be revalued at 20% above book value. Therefore, this option is not meant for public company. However, a merger is a consolidation process wherein the resultant company may be a new company or maybe an existing company.
Income tax act defines amalgamation as merger of one or more companies with another company or merger of two or more companies to from one company. A merger can be horizontal, vertical, or conglomerate. Mar 01, 2017 scheme of merger between holding company and its whollyowned subsidiary company. Merger regime under the companies act, 20 introduction merger is a restructuring tool available to indian conglomerates aiming to expand and diversify their businesses for various reasons whether it is to gain competitive advantage, reduce costs or unlock values. Mergers and acquisitions in india a general analysis. With a merger it is easy to maintain the competitive edge because there are many issues and strategies that can e well understood and acquired by combining the resources and talents of two or more companies. Under this category, there is a genuine t m ely of the assets and liabilities of the amalgamating companies t al of the interests of shareholders and of the business of these companies. In this instance, company x and y must deregister and register company z. All the combining companies lose their separate existence and entity. Legal, accounting and taxation aspect of amalgamation.
Requirement to go to nclt for sanctioning of scheme of. Any proposal of amalgamation or merger begins with the process of due diligence, as the proposal for merger without due diligence is like entering a tunnel with darkness growing with each step. Acquisition is when one large company buys and subsumes another company, thus making the latter non existential in terms of title and control. Such other class or classes of companies as may be. The merger or amalgamation may be entered into between two or more small companies or between a holding company and its wholly owned subsidiary company or such other class or classes of companies. The only way companies could enter into a restructure under the old regime was. Transfer or company means the company which is amalgamated into another company. The importance of mergers and acquisitions in todays economy. The income tax act, 1961, stipulates two prerequisites for any amalgamation through which the amalgamated company seeks to avail the benefits of setoff carry forward.
However, the companies act, 20 ca 20 without strictly defining the term explains the concept. The income tax act, 1961, stipulates two prerequisites for any amalgamation through which the amalgamated company seeks to avail the benefits of setoff. Dec 29, 2015 the provisions relating to merger and amalgamation are contained in sections 390 to 396a in chapter v of part vi of the companies act, 1956. This scheme is known as single window clearance scheme.
The 20 act requires that mergers and amalgamations between two or more small companies or between holding companies and its whollyowned subsidiary or between such companies as may be prescribed does not require court approval. The term chosen to describe the merger depends on the economic function, purpose of the business transaction and relationship between the merging companies. A vertical merger is where one company provides raw materials or services to the business or businesses it is acquiring. Amalgamation is the combination of one or more companies into a new entity. Where two or more companies merge with aim of creating a new company. Amalgamation or merger is also a method of reconstruction.
In a merger, the acquiring company assumes the assets and liabilities of the merged company. Ordinary meaning of the word restructure is to organize differently, to organise something such as system or a company in a new and different way. Amalgamations, mergers and demergers will be subject to the existing rules if the draft amalgamation agreement, the draft merger agreement or draft demerger project were approved prior to the date of effectiveness of the amendment and the application for registration of the amalgamation, merger or demerger of the companies in the commercial register was filed within 90 days of the. Impact of postmerger and acquisition activities on the financial. The new company allots its shares to the shareholders of the amalgamating companies. Amalgamation absorption and reconstruction of companies. Difference between amalgamation and merger with infographics. A merger is basically a contractual agreement between organisations to form a single organisation either by incorporating a new structure and all passing assets to that structure, or one organisation passing assets to another. Amalgamations and demerger of companies consolidation. Turnover of acquired company executives is often high, so there is a risk of losing valuable knowledge capital in any merger or acquisition. The companies act, 1956 does not define the term merger or amalgamation. Apr 26, 2011 merger is a fusion between two or more enterprises, whereby the identity of one or more is lost and the result is a single enterprise whereas amalgamation signifies blending of two or more existing undertakings into one undertaking, the blended companies losing their identities and forming themselves into a separate legal identity.
A merger is a combination of two or more entities into one. The income tax act,1961 defines amalgamation in section 2 ib as a merger of one or more companies with another company, or the merger of two or more companies to form one company, provided 75% in value of the shareholders of amalgamating company must become shareholders of the amalgamated company. As defined under section 285 of the act, a small company is a company other than public company with paid up company not exceeding rs. Companies act, 1956 sec 3994 listing agreement accounting standard 14 sebi takeover code in case of acquisition byof a listed company company court rules fema in case of merger of companies having foreign capital competition act, 2002 income tax act, 1961 indian stamp act. The new company takes over all existing assets and liabilities of the companies amalgamated. Dec 18, 20 the companies act, 1956 does not define the term merger or amalgamation. It provides a composite code for facilitating mergers and amalgamations which obviates the need for making multiple applications under the act.
Summary of legal aspects of mergers, consolidations, and. Mergers and acquisitions report 2014 international. When two companies are merged and are so joined as to form third company or one is absorbed into other or blended with another, the amalgamating company loses its identity. Mergers and acquisitions in india a general analysis corporate law the indian economy has been growing with a rapid pace and has been emerging at the top, be it it, randd, pharmaceutical, infrastructure, energy, consumer retail, telecom, financial services, media, and hospitality etc. Using financial and nonfinancial characteristics, the postmerger performance of fifty greek companies, listed at the athens stock exchange ase that executed at least one merger or acquisition. Fasttrack merger under the 1956 act, all mergers and amalgamations require court approval.
In amalgamation, two or more companies are fused into one by merger or by one taking over the other. Dec 24, 20 merger or amalgamation of a company with foreign company section 234. Amalgamation is a type of consolidation processes used under a merger. In a merger arrangement, two organisations may consolidate to form a new organisation where the assets and liabilities of both organisations are owned under a new organisation. Amalgamation and external reconstruction 8 accounting. The goal of a horizontal merger is to create a new, larger organization with more market share.
Mergers are often misunderstood to be acquisitions. Amalgamation results in the formation of an entirely new company. The terms merger and amalgamation have not been defined in the companies act, 1956 hereinafter referred to as the act though this voluminous piece of legislation contains 69 definitions in section 2. The income tax act,1961 defines amalgamation in section 2 ib as a merger of one or more companies with another company, or the merger of two or more companies to form one company, provided 75% in value of the shareholders of amalgamating company must.
Mergers and acquisitions report 2014 international financial. Summary of legal aspects of mergers, consolidations, and transfers of assets the duty that is most pertinent to the approval of mergers and consolidations, however, is the duty of care. Amalgamation or merger may only be registered manually. However it deals with schemes of merger acquisition which are stipulated under section 391 to 394. Two or more profit companies including holding and subsidiary companies may merge, if upon implementation of the merger, each of the companies satisfies the solvency and liquidity test. The ita does however defines the analogous term amalgamation. Jan 06, 2017 however, the companies act, 20 ca 20 without strictly defining the term explains the concept.
Merger is a fusion between two or more enterprises, whereby the identity of one or more is lost and the result is a single enterprise whereas amalgamation signifies blending of two or more existing undertakings into one undertaking, the blended companies losing their identities and forming themselves into a separate legal identity. This merger usually takes place to minimize the costs and maximize the synergy between the 2 companies. This is a merger and amalgamation other than under scheme of merger and amalgamation. The provision of this chapter shall also apply to the scheme of mergers and amalgamations between companies registered under the companies act, 20 and companies incorporated in the jurisdictions of such countries as may be notified. Both the transferor and the transferee company shall make an application in the form of petition to the tribunal under section 230232 of the companies act, 20 for the puspose of sanctioning the scheme of amalgamation. Existing companies a and b are wound up and a new company c is formed to take over the businesses of a and b. An amalgamation is very similar to a merger and it only applies to incorporated associations operating in the same state. Acquiring company is a single existing company that purchases the majority of equity shares of one or more companies. Section 233 of companies act, 20 provide for the fast paced merger mechanism for the class of companies mentioned above. There may be amalgamation either transfer of two or more undertakings to an existing company or new company. Moreover, although the buying firm may be a considerably different.
In this type of amalgamation, not only is the pooling of assets and liabilities is done but also of the shareholders interests and the businesses of these companies. Chapterisation the entire study is divided into two chapters with an introduction and a conclusion. Apr 15, 2019 amalgamation is the combination of one or more companies into a new entity. Amalgamation and external reconstruction 8 accounting problems. Chapter ii crossborder mergers of limited liability companies. A combination of two companies or two businesses certainly enhances and strengthens the business network by improving market reach. Where two or more companies merge one of two things can happen. Amalgamation means the liquidation of one or more companies and transfer of business of liquidated entities to another entity. Unlike amalgamations, a merger is not based on a legislative process and is largely customisable. Minimum two companies are involved in merger however a minimum of three companies are required for the amalgamation process. An amalgamation is distinct from a merger because neither of the combining companies survives as a legal entity.
Regulatory framework applicable indian laws companies act, 1956 sec 3994listing agreementaccounting standard 14sebi takeover code in case of acquisition byof a listedcompany company court rulesfema in case of merger of companies having foreigncapital competition act, 2002income tax act, 1961indian stamp act. Is formed to take over the business of two existing companies, x ltd. Limitation x the research has been limited to only referring to online sources and books. Company x merges with company y with aim of creating a new company z. The power of the central government to order a merger or amalgamation in the interest of the nation is untouched and is placed in section 237. A horizontal merger is entered into for the purpose of reducing or eliminating one or several competing companies in the market. Merger and amalgamation as for indian economy, by explaining a few arrangements of new companies act, 20. A merger happens when two companies combine due to mutual agreement. Amalgamation occurs when two or more companies are joined. Such kind of merger may be broadly classified into following. Corporate restructuring is vital for survival of a company in the competitive environment.
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