M&A Advisory / Corporate Restructuring

Sections 230–232 of the Companies Act 2013 govern mergers, demergers, and capital restructuring. Process: (1) Board approval + valuation report + share swap ratio from a Registered Valuer; (2) NCLT admission; (3) 75% in value of shareholders and creditors approve at court-convened meetings; (4) NCLT sanctions the scheme; (5) INC-28 filed with ROC. Timeline: 6–18 months.

Section 2(1B) requires: (a) all properties and liabilities of the amalgamating company transfer to the amalgamated company; (b) shareholders of the amalgamating company receive ≥75% of shares in the amalgamated company. Tax neutrality under Section 47(vi) applies. Losses and unabsorbed depreciation carry forward under Section 72A — subject to genuine business purpose and 5-year business continuity.

Section 2(19AA) requires: all assets and liabilities of the undertaking transfer to the resulting company; shareholders receive shares proportional to their existing holding; all related liabilities transfer. Tax neutrality under Section 47(vib). Cost and holding period of shares in the resulting company carry over from the demerged company under Section 49(2C) — no fresh acquisition for capital gains.

Financial DD: historical financials, quality of earnings, working capital normalisation, off-balance-sheet liabilities. Tax DD: open ITR/GST/TDS/customs demands, MAT credit availability, transfer pricing risk, Section 72A eligibility for losses. The CA firm typically leads both financial and tax DD, working alongside legal (contracts, litigation) and regulatory (FEMA, sectoral FDI cap) advisors.

Section 233 allows merger without NCLT involvement for: (a) two or more small companies; (b) a holding company and its wholly-owned subsidiary; or (c) two startup companies. Process goes through the Regional Director of MCA — 90% shareholder and creditor approval, no Registered Valuer report mandated. Typically completed in 3–4 months vs. 6–18 months under Section 232.