First merger filing under Companies Act, 2013 being heard at NCLT, Delhi

The first merger filing under the new provisions of the Companies Act of 2013 (Act) along with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (Rules) is currently progressing at the Principal Bench of National Companies Law Tribunal (NCLT), New Delhi..The joint application has been filed under Sections 230, 231 and 232 of the Act in relation to the Scheme of Amalgamation proposed between JVA Trading Pvt. Ltd. (Transferor) and C&S Electric Company Pvt. Ltd. (Transferee), both of whom are engaged in electric and electronic goods. The Transferor is engaged in trading and the Transferee is engaged in manufacturing, thus complementing one another’s business..Senior Advocate Arun Kathapalia along with Advocates Krishnendu Datta and Prachi Johri appeared before the NCLT..The relevant Sections of the Act dealing with mergers i.e. Sections 230-233 and Sections 235-240 [pdf] were notified on December 7 last year, and the Rules [pdf] were notified a week later on December 14..The amalgamation will be in the form of a merger wherein the Transferee will issue shares of the merged company to all the members appearing in the register of members of the Transferor, prior to merger..While the Transferor prayed for a dispensation of the meeting of the equity shareholders, the NCLT declined to grant dispensation since the Act and the Rules ‘do not clothe this Tribunal with the power of dispensation in relation to the meeting of shareholders/ members’. Rule 5 of the Rules read along with Section 230(9) of the Act empower the NCLT to only dispense with the meetings of creditors and not members..Further, directions have been issued by the NCLT with respect to convening of meetings of: members, secured creditors, unsecured creditors of both Transferor and Transferee companies..(Read the order here)