Corporate Restructuring

Atul Mittal, NIRC-ICSI

Agenda

• A Snapshot

• Legal Aspects

• Critical Issues

• Amalgamation under BIFR

• Stamp Duty

• Procedure to be followed u/s 391 -394

Corporate Restructuring – A Snapshot

Business Restructuring

Business Restructuring

Capital Reorganization

Capital Reorganization

AcquisitionAcquisition

Family Arrangement

Family Arrangement

• Buy back of shares• Capital reduction• Buy back through

Scheme of Arrangement

• Preferential issue of shares

• Variation of Shareholders rights

• Acquisition of ICo by FCo

• Acquisition of an ICo by another ICo

• Stock acquisition• Business acquisition -

Asset purchase vsslump purchase

• Cash deal vs share swap or a combination of both

• Joint ventures• Scheme of

arrangement• Merger /

demerger / hive off

• Share swaps

• Mergers and Amalgamation

• Demerger• Slump sale• Slump Sale through

court process• Asset sale

A snapshot……

Legal Aspects

Legal Aspects under various Statutes

Critical Issues

M&A..

Critical Issues

• Separate Application / Joint Application

• Whether Memorandum of Association (MOA) should empower for Compromise or Arrangement

• Unison/Identity of Objects of Transferor and Transferee Company

• Appointed Date and Effective Date

• Reduction of Share Capital

• Change of Name

• Authorized Capital

• Prior approval of the Stock Exchanges

• Listing and Delisting

Critical Issues

• Valuation Mandatory or Not

• Can only Equity Shares be issued

• Buyback of Shares

• NBFC Regulations

• SEBI Takeover Code

• Modification of Scheme post sanction of Hon'ble Court

Amalgamation under BIFR

Amalgamation under BIFR

• Amalgamation is a method of rehabilitation of the business and undertaking of Sick Company.

• Section 18 of SICA provides the matters that can be incorporated by operating agency in Scheme.

• The Scheme must be approved by the shareholders of the other company in general meeting.

• The Scheme is sanctioned by the BIFR and come into effect on the date specified by the BIFR.

• The BIFR sanction is the conclusive evidence that all the requirements of the scheme have been compiled with and the copy of the sanctioned scheme certified by BIFR officer is admissible as evidence in all legal proceedings.

NO Stamp Duty is

Payable

Stamp Duty Issues

Stamp Duty

Whether an order under Section 394 of the Act is an instrument and therefore liable to be stamped.

Yes held by Calcutta High Court in Gemini Silk Limited Vs. Gemini Silk Overseas and Bombay High Court in Li Taka Pharmaceuticals ltd.

Incidence of stamp duty in India is the prerogative of respective State, different positions can be taken by respective State legislatures.

In absence on any conclusive judgment on the subject from Supreme Court the decision of Bombay and Calcutta High Court cannot be regarded as law of the land.

States where specific Entry exists

Andhra Pradesh

Chhattisgarh

Gujarat

Karnataka

Madhya Pradesh

Maharashtra

Rajasthan

Definition of Conveyance - "Conveyance" includes -

- a conveyance on sale;

- very decree or final order of any civil court or revenue authority;

- every order made by the High Court/Tribunal under Section 394 of the Companies Act, 1956 in respect of the amalgamation or reconstruction of companies; and every order made by the Reserve Bank of India under section 44 A of the Banking Regulation Act, 1949 in respect of amalgamation or reconstruction of Banking Companies;

- any other instrument,

by which property, whether movable or immovable, or any estate or interest in any property is transferred to, or vested in any other person, inter vivos and which is not specifically provided for by Schedule-1.

Proposed change in Indian Stamp Act

Proposed change shall clear the position and make court orders chargeable to stamp duty…!!

Procedure to be Followed

u/s 391-394

Approval of the Scheme by Board of Directors of the Companies

Considering proposal for Merger and Amalgamation

Preparation of Scheme of Amalgamation

Filing of Scheme with the Stock Exchanges for their approval, if listed shares

Filing of Application in High Court

Convening of Shareholders and Creditors Meetings – decision reported to Court

Procedure to be followed

Notice to Regional Director and Official Liquidator and submission of their NOC with High Court

Final Hearing by High Court

Obtaining High Court Order and filing with Registrar of Companies

Post Merger compliances

Procedure to be followed

Annexing the copy of High Court order with Articles of Association

Q & A …PleaseATUL MITTALAssociate DirectorPricewaterhouseCoopersatul.mittal@in.pwc.com0124 - 3306637