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The Long and Short of the New Merger and Amalgamation Rules

The Long and Short of the New Merger and Amalgamation Rules

The Ministry of Corporate Affairs (‘MCA’) vide its notification dated 14th Dec, 2016 has issued The Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Rules will come into effect from 15th December, 2016. Consequently, w.e.f. 15th December, 2016 all matters relating to Compromises, Arrangements, and Amalgamations will be dealt as per the provisions of Companies Act, 2013 (‘Act’) and The Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016. On 7th December, 2016, Central Government issued a notification appointing 15th December, 2016 as the date from which the provisions of Section 230 to 233 and 235 to 240 of the Act shall come into force.

A Bird’s Eye View vis-à-vis the provisions of the Act:

The Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016 (‘Rules’) comprises of 29 Rules along with 15 Forms. The Act enables companies to compromise or make arrangements with creditors and members or any class of them 1 by making an application to National Company Law Tribunal (‘Tribunal’).  The Tribunal shall have the power to supervise the implementation of the compromise or arrangement 2 and may make such order from time to time with regard to Compromise and Arrangement sanctioned by it 3. Further, were the sanctioning of a compromise or an arrangement inter-alia involves the scheme for reconstruction of the Company or merger or amalgamation of any two or more companies then on an application to the Tribunal, the Tribunal shall pass orders sanctioning the scheme 4. The Act further provides an expeditious mode of merger or amalgamation of two or small companies or between a holding company and its wholly-owned subsidiary company 5. The Act enables acquisition of shares of dissenting shareholders from a scheme of merger or amalgamation or contract approved by majority 6. In case the acquirer or a person acting in concert with such acquirer becomes a majority shareholder of a company 7, then such acquirer can make an offer to the minority shareholder of the company to buy their shares 8. The Act, empowers the Central Government to provide for merger or amalgamation of two or more companies in public interest 9.

Modus Operandi:






In an era of consolidation were India and the emerging markets are witnessing a lot of M&A transactions across sectors, the new Rules will certainly create lot of uncertainty and therefore will defer Mergers and Amalgamations in India. In addition, appointing the National Company Law Tribunal as the competent authority to sanction the scheme in relation to compromise, restructuring, merger or amalgamation will certainly halt the corporate actions as National Company Law Tribunal has been saddled with a huge work load of cases right from winding up of companies, oppression and mismanagement, insolvency and bankruptcy amongst others. To rub salt to injury the Number of benches of the Tribunal and the appointment of members of the tribunal has been lackadaisical. To further aggravate the situation, the bench of the Appellate Tribunal is situated at New Delhi. Therefore, the efficient and timely functioning of the Tribunals is crucial for forthcoming corporate actions.


  1. Section 230
  2. Section 231 (1) (a)
  3. Section 231 (1) (b)
  4. Section 232
  5. Section 230
  6. Nine tenths of value of shares
  7. 90% or more of the issued share capital
  8. Section 236
  9. Section 237

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