Section 232 — Merger and amalgamation of companies

(1) Where an application is made to the Tribunal
under section 230 for the sanctioning of a compromise or an arrangement proposed between a company
and any such persons as are mentioned in that section, and it is shown to the Tribunal—
(a) that the compromise or arrangement has been proposed for the purposes of, or in connection
with, a scheme for the reconstruc tion of the company or companies involving merger or the
amalgamation of any two or more companies; and
(b) that under the scheme, the whole or any part of the undertaking, property or liabilities of any
company (hereinafter referred to as the transferor c ompany) is required to be transferred to another
company (hereinafter referred to as the transferee company), or is proposed to be divided among and
transferred to two or more companies,
the Tribunal may on such application, order a meeting of the creditors or class of creditors or the members
or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal
may direct and the provisions of sub-sections (3) to (6) of section 230 shall apply mutatis mutandis.
(2) Where an order has been made by the Tribunal under sub -section (1), merging companies or the
companies in respect of which a division is proposed, shall also be required to circulate the following for
the meeting so ordered by the Tribunal, namely:—
(a) the draf t of the proposed terms of the scheme drawn up and adopted by the directors of the
merging company;
(b) confirmation that a copy of the draft scheme has been filed with the Registrar;
(c) a report adopted by the directors of the merging companies explaining effect of compromise on
each class of shareholders, key managerial personnel, promoters and non-promoter shareholders laying
out in particular the share exchange ratio, specifying any special valuation difficulties;
(d) the report of the expert with regard to valuation, if any;
(e) a supplementary accounting statement if the last annual accounts of any of the merging company
relate to a financial year ending more than six months before the first meeting of the company
summoned for the purposes of approving the scheme.
(3) The Tribunal, after satisfying itself that the procedure specified in sub-sections (1) and (2) has been
complied with, may, by order, sanction the compromise or arrangement or by a subsequent order, make
provision for the following matters, namely:—
(a) the transfer to the transferee company of the whole or any part of the undertaking, property or
liabilities of the transferor company from a date to be determined by the parties unless the Tribunal, for
reasons to be recorded by it in writing, decides otherwise;
(b) the allotment or appropriation by the transferee company of any shares, debentures, policies or
other like instruments in the company which, under the compromise or arrangement, are to be allotted
or appropriated by that company to or for any person:

Provided that a transferee company shall not, as a result of the compromise or arrangement, hold
any shares in its own name or in the name of any trust whether on its behalf or on behalf of any of its
subsidiary or associate companies and any such shares shall be cancelled or extinguished;
(c) the continuation by or against the transferee company of any legal proceedings pending by or
against any transferor company on the date of transfer;
(d) dissolution, without winding-up, of any transferor company;
(e) the provision to be made for any persons who, within such time and in such manner as the
Tribunal directs, dissent from the compromise or arrangement;
(f) where share capital is held by any non-resident shareholder under the foreign direct investment
norms or guidelines specified by the Central Government or in accordance with any law for the time
being in force, the allotment of shares of the transferee company to such shareholder shall be in the
manner specified in the order;
(g) the transfer of the employees of the transferor company to the transferee company;
(h) where the transferor company is a listed company and the transferee company is an unlisted
company,—
(A) the transferee company shall remain an unlisted company until it becomes a listed company;
(B) if shareholders of the transferor company decide to opt out of the transferee company,
provision shall be made for payment of the value of sharesheld by them and other benefits in
accordance with a pre-determined price formula or after a valuation is made, and the arrangements
under this provision may be made by the Tribunal:
Provided that the amount of payment or valuation under this clause for anyshare shall not be less
than what has been specified by the Securities and Exchang e Board under any regulations framed by
it;
(i) where the transferor company is dissolved, the fee, if any, paid by the transferor company on its
authorised capital shall be set-off against any fees payable by the transferee company on its authorised
capital subsequent to the amalgamation; and
(j) such incidental, consequential and supplemental matters as are deemed necessary to secure that
the merger or amalgamation is fully and effectively carried out:
Provided that no compromise or arrangement shall be sanctioned by the Tribunal unless a certificate
by the company’s auditor has been filed with the Tribunal to the effect that the accounting treatment,
if any, proposed in the scheme of compromise or arrangement is in conformity with the accounting
standards prescribed under section 133.
(4) Where an order under this section provides for the transfer of any property or liabilities, then, by
virtue of the order, that property shall be transferred to the transferee company and the liabilities shall be
transferred to and become the liabilities of the transferee company and any property may, if the order so
directs, be freed from any charge which shall by virtue of the compromise or arrangement, cease to have
effect.
(5) Every company in relation to which the order is made shall cause a certified copy of the order to be
filed with the Registrar for registration within thirty days of the receipt of certified copy of the order.
(6) The scheme under this section shall clearly indicate an appointed date from which it s hall be
effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the
appointed date.
(7) Every company in relation to which the order is made shall, until the completion of the scheme, file
a statement in such form and within such time as may be prescribed with the Registrar every year duly
certified by a chartered accountant or a cost accountant or a company secretary in practice indicating
whether the scheme is being complied with in accordance with the orders of the Tribunal or not.

1[(8) If a company fails to comply with sub-section (5), the company and every officer of the company
who is in default shall be liable to a penalty of twenty thousand rupees, and where the failure is a continuing
one, with a fur ther penalty of one thousand rupees for each day after the first during which such failure
continues, subject to a maximum of three lakh rupees.]
Explanation.—For the purposes of this section,—
(i) in a scheme involving a merger, where under the scheme the undertaking, property and
liabilities of one or more companies, including the company in respect of which the compromise
or arrangement is proposed, are to be transferred to another existing company, it is a merger by
absorption, or where the undertaking, property and liabilities of two or more companies, including
the company in respect of which the compromise or arrangement is proposed, are to be transferred
to a new company, whether or not a public company, it is a merger by formation of a new company;
(ii) references to merging companies are in relation to a merger by absorption, to the transferor
and transferee companies, and, in relation to a merger by formation of a new company, to the
transferor companies;
(iii) a scheme involves a division, where u nder the scheme the undertaking, property and
liabilities of the company in respect of which the compromise or arrangement is proposed are to be
divided among and transferred to two or more companies each of which is either an existing
company or a new company; and
(iv) property includes assets, rights and interests of every description and liabilities include