Revised Rule Relating To Merger With Foreign Holding Company

Background:

Section 234 of the Companies Act, 2013, along with Rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, outlines the provisions and requirements for compromises, arrangements, and amalgamations. Mergers involving a foreign holding company incorporated outside India and an Indian company must adhere to the provisions specified in Sections 230 to 232 of the 2013 Act.

Amendments:

MCA amended Rule 25A to simplify the procedure for mergers and amalgamations involving foreign holding company incorporated outside India (transferor) and an Indian wholly owned subsidiary (transferee).

Following are the new provisions introduced:

• RBI Approval: Both the foreign holding company and the Indian subsidiary must obtain prior approval from the Reserve Bank of India (RBI).
• Compliance with Section 233: Section 233 of the Companies Act, 2013, governs simplified fast-track mergers. The Indian subsidiary must adhere to the provisions of this section when merging with the foreign holding company.
• Application to the Central Government: The Indian subsidiary is required to submit an application to the Central Government in accordance with Section 233 of the 2013 Act and Rule 25.
• Declaration Requirement: A declaration must be submitted in Form No. CAA 16 under Rule 25A to ensure compliance with the requirements of Rule 25A, the 2013 Act, and other relevant regulatory provisions during the merger application process.

Effective date: The revised amendments shall come into force form the 17^th of September 2024.

Sahil V Ojha, Audit, SW India