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New Companies Act, 2013 - Insight Series
23 August 2013
Vol-I : Compromise/Arrangements/Amalgamations/Demergers (Restructuring) Executive Summary
The Companies Bill 2012 awaiting President’s assent to become ’The Companies Act,2013’
Draft Rules to be published for comment.
Separate procedures prescribed for ‘Compromise or Arrangement’ and ;Amalgamation or Demerger’
National Company Law Tribunal (NCLT) to assume jurisdiction of the High Court as sanctioning authority in relation to Restructuring.
Absence of Transitional Provisions – No clarity with respect to Restructuring in process at the time of New Companies Act becoming operational.
New concept of Fast Track Restructuring, without NCLT approval, introduced.
Amalgamation of / Demerger from Foreign Company incorporated in a notified jurisdiction and vice versa allowed subject to approval of Reserve Bank of India (RBI).
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Compromise or Arrangement :
Power of NCLT to dispense with the creditors meeting restricted. Auditor’s certificate to the effect that the accounting treatment specified in the Scheme is in conformity with the prescribed Accounting Standard is required to be submitted to NCLT. Disclosures in and attachment with notice calling meeting substantially increased. Circulation of notice convening the meeting widened and requirement of issue of such notice to all concerned statutory and other authorities included.
Voting allowed at the meeting as well as through postal ballot. Minimum shareholding / debt ownership limit provided for objecting to the Scheme. Sanction of buy-back, variation of rights etc. being part of the Scheme can be sanctioned only if in accordance with the provisions governing such processes.
Treasury stock, holding the shares in the name of transferee company, prohibited. Yearly statement confirming implementation of the Scheme to be in accordance with the Order required to be submitted till completion of the Scheme.
On 8 August 2013 Rajya Sabha passed the Companies Bill, 2012 (the Bill) which was already passed by Lok Sabha on 18 December 2012. Though the President’s assent to the Bill, which will make it an Act, is still pending, the blessing of both houses of Parliament has put an end to prolonged uncertainty regarding the revamp of the Companies Act, 1956 (the existing Act) Upon receipt of the President’s assent, the Bill will become ‘the Companies Act, 2013’ (New Act). However, the New Act will become operational and replace the Companies Act, 1956 from a future date to be notified by the Government. The Government may notify a single date for the entire New Act, or different dates for different parts of the New Act.
The New Act has introduced many new concepts as compared to the existing Act and made material changes to the provisions under the existing Act before adopting the same. In this bulletin, we have dealt with the new concepts [marked as (new) at the appropriate places] introduced and the changes made to existing provisions relating to Compromise, Arrangements, Amalgamations/Mergers and Demergers (collectively referred to as ‘Restructuring’). We have also discussed certain other provisions included in the New Act, but only to the extent that they impact the Restructuring.
The existing Act was self- contained and almost all...
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