ANNOUNCEMENT 13 Apr 2017
A new amendment to the Companies Act has allowed Indian companies to merge with foreign companies.
NUMBER OF INTERVENTIONS
Ministry of Corporate Affairs Notification G.S.R. 368(E) - 13 April 2017
SKP Business Consulting - Ministry of Corporate Affairs (MCA) notifies the provisions of cross-border mergers and acquisitions
EY Tax Alert - India issues cross-border merger provisions
On 13 April 2017, the Indian Ministry of Corporate Affairs notified the Section 234 of the Companies Act, 2013 and published the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2017, that provides rules for the merger of an Indian company and a foreign company. Importantly, the current amendment allows Indian companies to merge with foreign companies in addition to foreign companies merging with Indian companies as allowed earlier.
The Section also provides for the enabling provisions for such a merger. Any merger of an Indian and a foreign company will require a prior approval from the Reserve Bank of India and the payment of such a merger may be done in cash or depository receipts or both. The transferee company has to ensure that a valuation is conducted by professional valuers in the jurisdiction of the transferee company.
An Indian company can merge with a foreign company only if it falls in a jurisdiction -
i) whose securities market regulator is a signatory to International Organization of Securities Commission’s
Multilateral Memorandum of Understanding or a signatory to bilateral Memorandum of Understanding with India's securities and exchange commission, or
ii) whose central bank is a member of Bank for International Settlements (BIS), and
iii) the jurisdiction has not been identified by the Financial Action Task Force as having strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies or has not mate progress nor committed to an action plan to address these deficiencies.