September 2020

 

Interpretation of relevant provisions of Articles 234 and 235 of the Company Law on the merger of Indian companies

Article 234, paragraph 1

 Unless otherwise provided by law, the provisions of this chapter will apply. For mergers between companies, if necessary, changes should be made in accordance with the submitted M&A transaction plan/agreement, and the parties to the merger must comply with the company registration procedures specified in this law, if any. For foreign companies, the company needs to comply with the jurisdiction of the country where the company is registered, and the specific announcement of the government of the country where the company is registered shall prevail.

 

In the case of foreign companies, the central government will negotiate with the Reserve Bank of India and finally determine the specific details of the merger.

 

Companies Law India

Through this regulation, we can see that if a foreign company is involved in an M&A transaction, there are other regulations for foreign companies and the Reserve Bank of India has more detailed requirements for foreign companies. Therefore, foreign companies will have more detailed requirements than domestic companies. There are more rigid requirements when making an acquisition.

 

 

Article 234, paragraph 2

 If other laws provide otherwise, foreign companies' mergers and acquisitions in India must first be approved by the Reserve Bank of India, and the acquisition procedures must be carried out in accordance with the provisions of the company law if the regulations are met. 

Conversely, the same is true for foreign companies being acquired. The time and conditions involved in the M&A transaction plan/agreement also need to be provided. 

In addition, it is necessary to consider the payment method to the target company’s shareholders in the M&A transaction, whether in the form of cash, depository receipts or partial cash deposits The form of entrusted receipts needs to be determined according to the specific circumstances.

 

 

Note: The "foreign company" mentioned here refers to any company or legal entity established in accordance with the laws of the country of registration outside India, and it is necessary to determine whether it has corresponding business in India.

 

 

Articles 230 to 234 are a summary of the merger process

 Whether it is the acquisition of listed companies, non-listed companies, or government enterprises, the basic acquisition process relies on is stipulated in these 5 articles. The provisions of the Foreign Exchange Administration Act and the Indian Securities Regulatory Commission, India 

The rules formulated by the Reserve Bank serve as auxiliary provisions for the acquisition of listed companies. Therefore, these five provisions in the company law are the main lines, and there will be corresponding auxiliary provisions to determine the specific direction of the merger process depending on the specific circumstances.

 

Beginning with Article 235, it deals with the specific details of the acquisition plan. Article 235 gives the transferee the right to purchase shares held by shareholders who disagree with the M&A transaction plan/agreement after the M&A transaction plan/agreement is voted on.

 

Article 235, paragraph 1

 Once the acquisition agreement or equity transfer contract involves the (transferor company) transferring any class of shares to (transferee company), if the acquisition agreement is approved by 9/10 of the transferor’s shareholders, the transferee needs to Complete the purchase of these shares within 4 months.

 Regarding the shares held by the remaining dissenting shareholders, the transferee may issue a tender offer notice to the dissenting shareholders in the manner specified in the M&A transaction plan/agreement within 2 months after the above-mentioned 4-month period.

 

 

Article 235, paragraph 2

 Unless the dissenting shareholder submits an application to the court to change the share purchase conditions within one month after receiving the share purchase notice mentioned in the preceding paragraph and is supported by the court, the transferee will follow the original acquisition transaction plan/agreement Under the terms of the purchase of shares, purchase the shares of dissenting shareholders.

 

 

Article 235, paragraph 3

 The transferee company issued a share purchase notice in accordance with paragraph 1 and the court did not issue an order based on the application submitted by the dissenting shareholder. On the contrary, the transferee company must wait for one month since the notice has been issued or after the dissenting shareholder’s application is submitted.

 The decision was not accepted by the court. The share purchase notice needs to be sent to the transferee company in the form of a copy with conditions for the transfer, and then the representative designated by the transferor company’s shareholders will negotiate with the transferee company. They will agree to implement the corresponding share purchase conditions and complete the transfer in accordance with the provisions of this article, the transferee company shall:

 

a) Filing with the registration authority: the transferee company will become the holder of the above-mentioned shares;

 

b) Within one month of the completion of the filing, notify the dissenting shareholders of the transferor company that their shares have been transferred to the transferee company and will pay the corresponding transfer amount (according to the original share purchase agreement or paragraph 3 Reasonable price later).

 

 

Article 235, paragraph 4

 The transfer money received by the transferor company in accordance with the provisions of this article must be paid to an independent bank account, and the management of any such money and other remuneration funds must be kept in trust by shareholders who have the right to distribute the money, and The distribution of the funds shall be completed within 60 days after the establishment of the trust.

 

a) In the first paragraph of this article, for the statement: Compared with the shares that have been agreed to be transferred, the shares held on the date of the offer are transferred, or are held by the nominee holder, the transferee company or its subsidiary The expression "effectiveness of shares" should be replaced.

 

 

b) In the third paragraph of this article, the expression "the representative appointed by the shareholders of the transferor company shall negotiate with the transferee company to agree to implement the corresponding share purchase conditions and complete the transfer in accordance with the provisions of this article".

 

 

As far as Article 235 is concerned, “dissenting shareholders” include shareholders who have not agreed to the purchase conditions in the M&A transaction plan/plan or share purchase contract, and also include refusal to transfer their shares in accordance with the M&A transaction plan/plan or share purchase contract. To the shareholders of the transferee company.

 

 

After the end of Article 234, the procedure for acquiring a company in India is basically over. Articles 235 to 240 are supplementing the details of the merger procedure. 

For example, Article 235 explains how the transferee company can acquire the shares of the transferor in accordance with this article, including how to purchase shares held by dissenting shareholders. 

Everyone can also find that from Article 234 onwards, the court's role has gradually decreased and gradually withdrew from the dominant position, but retreated to the position of neutral, and exercised discretion in accordance with its authority.

 

 

Interpretation of company mergers and acquisitions from the Indian company law

Before 1990, India’s economic system had been implementing the planned economic development model. In the early 1990s, the government began to take some measures to promote economic liberalization, deregulation of the economy, and more inclined to promote market economic development at the legislative level. Up to now, the latest FDI policy All of them have demonstrated their determination to reform. All companies that have resulted in new establishments, reorganizations, and various cooperation models of foreign capital have reduced their economic power from an anti-monopoly perspective and concentrated in the hands of a few Indian family companies. 

As part of the public policy, the government has introduced corresponding measures to encourage foreign companies to enter India. Therefore, mergers and acquisitions have become one of the necessary and important means for foreign companies to enter India.

 

 

1. Indian company mergers and acquisitions legal regulations at a glance

In India, the current government regulations on mergers and acquisitions include:

 

1. India Companies Act 2013

 

2. The Indian Competition Act of 2002

 

3. The Indian Industry Act of 1951

 

4. The Income Tax Act of 1961

 

5. The Indian Securities Exchange Act of 1992 and its equity acquisition control regulations, etc.

 

From the many above-mentioned bills, it can be seen that the Indian legal system strictly regulates mergers and acquisitions in India. 

I will pass the most important bill, the Company Law, and present the characteristics of "Indian-style" mergers and acquisitions in a legal way. Due to space issues, it will be posted multiple times.

 

Article 230 of the Indian Companies Act 

The 2013 Corporate Law is the most important legal regulation of the Indian government on company mergers and acquisitions, which mainly stipulates the specific procedures of mergers and acquisitions. Different from the provisions of Articles 391 to 396 of the Old Company Law of 1956 regarding mergers and acquisitions, the 2013 Company Law expanded the specific procedures, from Article 230 to Article 240, which described the procedures of company mergers and acquisitions and the issues that should be paid attention to in the process of mergers and acquisitions including issues such as the issuance of announcements, relevant licenses involving courts/arbitrations, compromises, and reorganizations.

 

1. The information provided in Article 230 of the 2013 Company Law is the court's approval of the company's merger plan/agreement, the approval of the letter of intent for mergers and acquisitions, or a recognition procedure for the interested parties of the acquired party. The purpose is to bring together all the members who have an interest in the acquired party so that the court can do some proper sorting out.

 

Article 03230, paragraph 1, Article 230, paragraph 1:

 This paragraph mainly stipulates which entities can propose a merger plan in the merger, including the company of both parties, the company’s shareholders, and any of the company’s creditors or the company’s liquidation in the liquidation process Group members, these subjects can propose company merger plans. 

The court will issue an issue of whether to host a meeting of creditors or shareholders of the company based on the application of these entities, and discuss at the meeting.

The purpose of this paragraph is to integrate the company and its different nature and level of equity. It is also a guarantee for the rights and interests of all interested parties of the acquired party, so that the court can confirm the status of both companies when reviewing the acquisition agreement.

 

 

Article 230 Paragraph 2

Paragraph 2 of Article 230: For the acquisition application submitted by the company or other right individual who has the right to make an acquisition application as specified in the preceding paragraph, the following materials will be publicized in court by way of oath:

 

a. All documents related to the company, such as the company's latest financial statements, the latest company account audit report and any ongoing or pending litigation or investigation against the acquired company;

 

b. Whether the company has reduced capital

 

c. 75% of creditors agree to the company’s debt reintegration, including the non-objection declaration form filled out by creditors; protection standards for secured creditors and unsecured creditors; provide an audit report on the flow of funds after agreeing to debt reintegration, and must Approved by the board of directors; the proposal for debt restructuring approved by the board of directors must comply with the existing guidance of RBI and the evaluation report of all the company's assets.

 

 

 

Notice of meeting

The court mentioned in the first paragraph will issue an order and preside over the relevant stakeholder meeting. The announcement of the meeting will be issued to all creditors, company shareholders, bondholders, etc. (also on the company’s website) It needs to be reflected) and the acquired company also needs to post a merger agreement and current company's financial statement at its registered address.

 

 

If it is a listed company, then the notice of the meeting needs to be sent to the Securities Exchange Center for notification, and the announcement will be made on its company website and designated newspapers.


Vote

    Any subject who has the right to vote in the notice of the meeting mentioned in the preceding paragraph shall determine to participate in the meeting or select an agent to vote within one month after receiving the notice. If there is any objection, it needs to be raised by shareholders who hold at least 10% of the shares or holders of 5% or more of corporate bonds.

  

 

 File submission

The notice of the meeting mentioned in paragraph 3 needs to be submitted to the central government, tax authorities, RBI, competition commission, securities and exchange commission and other administrative departments along with all documents in paragraph 2) in the specified format. 

Based on the submitted materials, it will be reviewed to confirm whether the company is required to make a corresponding statement within 30 days from the date of receipt of the notice by the committee. If it is not requested within 30 days, it will be deemed that no relevant statement is required.

 

Vote on the merger proposal

The meeting mentioned in paragraph 1 in accordance with the court's request and presided over will require 3/4 of all the company's interested parties who have proposed the acquisition agreement to attend the meeting and vote whether to approve the merger plan approved by the court. If the plan is passed by a vote, it will be binding on everyone, and the court will also issue corresponding orders based on the results of the vote.

 

 

 

Court order

At least one of the orders issued by the court mentioned in the preceding paragraph contains the following content:

 

a. Change in the nature of the shares in the acquisition plan and give shareholders an option to accept overdue dividends in cash or to accept equity equivalent to overdue dividends.

 

b. The people attending the meeting will also be written into the order form, emphasizing the protection of their rights. Colleagues and dissenting shareholders will also reflect this and record their dissenting statements.

 

c. If the corresponding purchaser has a related lawsuit or a corresponding investigation is ongoing, it will also be reduced. And other content.

 

From paragraph 8) to paragraph 12), after the court has issued the order, the company needs to file with the ROC within 30 days of receiving the order, and any share repurchase unless it meets the requirements of the 2013 Company Law On the 68th day, otherwise it cannot be supported. The statement of takeover in the merger plan will also be emphasized by the court.

 

Regarding the acquisition of listed companies, the relevant details will be specified by the Securities and Exchange Commission after the order is issued.

 

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In general, the entire section 230 addresses one issue, the scope of the court’s powers and the role it plays in corporate mergers and acquisitions. From the approval of the M&A plan, to the holding of voting meetings ex officio, to the issuance of orders, the protagonist of this main line is the court, and the additional procedures extended under the main line are also complicated, including not only the preparation of the M&A agreement, but also the proposal of an acquisition. 

All documents submitted by the parties to the agreement are submitted by the court. It is important to point out that the scope of the court’s jurisdiction is not limited to the above-mentioned aspects. 

If the acquired company has some pending investigations or lawsuits in a timely manner after the approval of the M&A agreement, the court can reduce it according to the situation. In India where the three powers are separated, the dominance of judicial power is evident.

 

Compared with the mergers and acquisitions of other countries, India is by no means a unique country. Due to its own historical and cultural background, judicial and legislative systems, and national structures, we cannot use inherent legal thinking. Looking at the mergers and acquisitions in India from the same perspective, only by taking into account all aspects can the road of mergers and acquisitions in India go smoothly.

 

Before 1990, India’s economic system had been implementing the planned economic development model. In the early 1990s, the government began to take some measures to promote economic liberalization, deregulation of the economy, and more inclined to promote market economic development at the legislative level. Up to now, the latest FDI policy All of them have demonstrated their determination to reform. 

All companies that have resulted in new establishments, reorganizations, and various cooperation models of foreign capital have reduced their economic power from an anti-monopoly perspective and concentrated in the hands of a few Indian family companies. As part of the public policy, the government has introduced corresponding measures to encourage foreign companies to enter India. Therefore, mergers and acquisitions have become one of the necessary and important means for foreign companies to enter India.

 

 

 

List of Legal Regulations on M&A of Indian Companies

In India, the current government regulations on mergers and acquisitions include:

 

1. India Companies Act 2013

 

2. The Indian Competition Act of 2002

 

3. The Indian Industry Act of 1951

 

4. The Income Tax Act of 1961

 

5. The Indian Securities Exchange Act of 1992 and its equity acquisition control regulations, etc.

 

From the many above-mentioned bills, it can be seen that the Indian legal system strictly regulates mergers and acquisitions in India. I will pass the most important bill, the Company Law, and present the characteristics of "Indian-style" mergers and acquisitions in a legal way. Due to space issues, it will be posted multiple times.

 

Section 231 of the 2013 Companies Act

For the previous analysis of mergers and acquisitions in the corporate law, many people have recognized it. 

First of all, thank you for your attention and recognition of our published articles. This time the legal analysis continues the topic of the last time. 

The role of the court in corporate mergers and acquisitions and the powers it enjoys are not only manifested in 230 items.

 The more the main line of mergers and acquisitions develops, the more it feels that the court will never leave the main line of mergers and acquisitions.

 

Section 231 of CA 2013 can be summarized as the power of the court to enforce merger agreements/plans. In Article 230, the court has the authority to approve and approve the merger agreement by convening the corresponding pre-merger meeting, so in the future, the court will require the implementation of the agreement that has passed and bound all interested parties in accordance with its authority. .

 

Section 231 Paragraph 1

The first paragraph of Article 231 of CA2013 stipulates that when the court allows the acquisition agreement/plan passed under the premise of Article 230 and issues the corresponding order, the order is binding on all the company's interested parties. On this basis, the court's follow-up power distribution:

 

a). The court has corresponding supervision powers to supervise the specific implementation of the merger agreement/plan;

 

b). At the same time when the order stipulated in Article 230 is issued or at any time thereafter, if the court considers that some amendments are necessary or more beneficial to the implementation of the merger agreement/plan, the court may give Corresponding guidance or amendments to the implementation details of the merger agreement/plan.

 

Section 231 Interpretation of Paragraph 1

From the first paragraph of Article 231, we can see that the scope of the court’s jurisdiction is not only at the level of approving/recognizing merger agreements/plans, but at the substantive level of implementation, as long as the court considers certain plans or implementation details to be unfavorable.

 The specific implementation of the M&A agreement/plan can be modified by the court at any time in accordance with its authority.

 

Such a regulation also reminds investors who need to merge in India. They cannot ignore the power of the court in mergers and acquisitions. When formulating merger agreements/plans, they must not use the inherent thinking mode. Case by case is required. The treatment, because once there are some small mistakes, then the overall planning may be a fatal mistake. It's still an old saying, preparatory work for investment is a must.

 

 

Article 231 Paragraph 2

Paragraph 2 of Article 231 stipulates that if the merger agreement/plan passed under Article 230 cannot be implemented satisfactorily and does not meet the expectations of the court even if it is amended or not, and the company repays it in accordance with the agreement.

If there is a situation of insolvency, the court can issue an order in accordance with Article 273 of CA 2013 to allow the company to enter the liquidation process.

 

Section 231 Interpretation of Paragraph 2

According to Article 273 of CA2013 involved in this regulation, the liquidation of the company shall be carried out in accordance with the petition of the debtor, shareholders, the company itself, and other rights obligors, and a letter of order shall be issued within 90 days of receiving the petition, requiring. 

The liquidated company will appear in court to make a detailed statement (it can be submitted in writing for special reasons). However, if the court considers that there are other remedial measures, the liquidation order may not be issued. 

From Article 231, paragraph 2 and Article 273, it can be understood that the role of the court is no longer a neutral judge, and its scope of power is extended to interfere with the implementation of the merger plan/plan and unilaterally demand the company as a judicial agency. Enter the liquidation process.

 

Section 231 Paragraph 3

Paragraph 3 of Article 231 stipulates that, as long as possible, the detailed provisions of this article can also be applied before the meeting presided over by the court to approve the merger plan/scheme, and the corresponding order will be issued. 


From the provisions of Article 231 and its clauses, we cannot ignore the power of the court in M&A activities, whether it is to modify the implementation details for the successful implementation of the M&A plan/plan, or to prevent the company from implementing the M&A plan. The plan is in a state of insolvency. 

The court can issue an order to cause the company to enter the liquidation process. We can all see a problem, that is, the strict control of some mergers and acquisitions in economic activities by the judicial authorities is also reflected in the side. Regardless of whether it is from the level of formulating M&A agreements/plans or in the actual implementation of M&A activities.

 India’s M&A activities must not be limited by the inherent legal thinking mode, the premise of controlling and eliminating risks, or a thorough understanding of every detail in the merger. The laws involved do not fight unprepared battles.

 

 

We can summarize Article 232 of the 2013 Company Law as the basic procedure of the court in the early stage of mergers and acquisitions. 

In sections 230 and 231, the court has the right to decide whether to approve and enforce the merger agreement by convening the corresponding pre-merger meeting, and then the court will implement the agreement that has been passed and bound all interested parties in accordance with its authority.


Interpretation of section 232 Paragraph 1 of the 2013 Company Law

Article 232, paragraph 1, the merger application submitted to the court in Article 230, so that the court can approve the merger plan/agreement ex officio. The merger application submitted to the court should reflect the following:

 

a). The acquisition plan/agreement should specify the number of companies that need to be reorganized or are involved in the merger/merger;

 

b). The acquisition plan/agreement needs to specify the assets under the target company's name and need to be transferred to one or more companies of the transferee.

 

The court may approve the merger plan/agreement in accordance with Article 230 and preside over the merger meeting based on the application of the interested party.

 

 

Article 232 Interpretation of Paragraph 2 

Article 232, paragraph 2, if the court approves the plan/agreement and issues a letter of order, then if the company involved in the merger proposes other distribution plans, the information should also be submitted to the court in time:

 

a). The acquisition draft may be formally approved by the board of directors of the companies involved in the merger;

 

b). Submit the draft acquisition plan to the company registration department;

 

c). The directors of the company involved in the merger need to issue a report in the name of the company, and use the form of the report on the impact of the acquisition on shareholders, executives, etc., and state the value that the acquisition can bring;

 

d). As well as the accounting/auditing statements required by the company involved in the merger and the approval of the acquisition plan by convening a shareholder meeting 6 months before the end of the financial year.

 

Section 232 Interpretation of Paragraph 3

Section 232, paragraph 3, after reviewing the materials required by the above two paragraphs, the court considers that it is complete, then it can issue a letter of order to approve the acquisition plan according to its authority, including

 

a). The transferor transfers all or part of the assets under its name to the transferee and confirms that the transfer is completed at a time point agreed by both parties;

 

b). How to redistribute the equity structure within the transferee company after the transfer

 

c). Whether the companies participating in the merger and acquisition are in ongoing litigation or other judicial procedures

 

d). The company's labor relationship status

 

e). If there is a foreign shareholder in the acquiring company, then during the merger process, whether the foreign shareholder meets the specific FDI regulations will be reviewed.

 

f). If the target company is a listed company and the transferee is a non-listed company, it should be noted that the subject nature of the transferee still needs to be maintained at the non-listed level, and if the target company’s shareholders decide to sell their holdings.

 Then the transferee company shall, according to the regulations, consume the shares it holds according to a reasonable estimation formula or valuation.

 

g). If the target company is dissolved, the corresponding expenses incurred need to be paid in its subscribed capital, and then merged with the transferee company.

 

Article 232 Paragraph 4-Interpretation of Paragraph 6

Article 232, paragraph 4, once the order is issued, whether in accordance with the order or in accordance with business ethics, the assets and debts of the target company will also be transferred to the transferee company. If the instruction of the order is too clear, then follow The fees paid by business custom can be rejected.

 

Clauses 5 and 6 of Article 232, companies involved in the acquisition plan/agreement shall submit a copy of the order to the Companies Registry for filing within 30 days after the order is issued. And after the time node needs to be confirmed in the acquisition plan, the acquisition plan will take effect on that date.

 

Article 232 Interpretation of paragraph 7

Article 232, paragraph 7, companies involved in the acquisition plan/agreement have the right to submit a statement report submitted by the accounting/audit to the company registration department every year until the completion of the acquisition. Do it truthfully.

 

Article 232 Article 232 Interpretation of Paragraph 8 Interpretation of Paragraph 8

Article 232, paragraph 8, if during the merger process, the companies of both parties to the merger have violated regulations, the company will be fined 100,000-2.5 million rupees, and the company’s executives or other members will be punished with 1 Annual penalty and pay a fine of 100,000 to 300,000 rupees.


The legislative purpose of Article 232 is that once a merger plan is involved, how the rights and obligations of the companies of both parties are transferred, including existing assets, existing liabilities, obligations, etc., and the form of company mergers. 

The court will regulate them within the scope of the court's control, avoid mistakes that may lead to the abortion of the merger plan.

 

According to Article 232 of CA2013, one of my feelings is that the role of the court has begun to change, from an approver to a supervisor. 

At this time, mergers and acquisitions have actually begun to go on the road, the court will still be beaten whether the merger enterprises are using the correct pace to make sure that they are all within the planned route, and if there is any violation of the court’s command, then Will also face some penalties and fines.

 

Of course, there are two sides to everything. No matter from which point of view, only one thing is certain. It is not only the owners themselves that worry about the mergers and acquisitions in India, but the courts will also worry about the owners. 

Generally speaking, It will move forward with regard to the M&A event. Therefore, for mergers and acquisitions in India, it may be necessary to consider balancing the overall value relationship between justice and business.


Article 233 of the Indian Companies Act 2013 mainly stipulates detailed operations and related procedural requirements at the company level after the court approves the merger agreement/plan. 

At this stage, the most important and need to pay attention to is the background of the target company. The following is a specific interpretation of Article 233.


1. Article 233, paragraph 1

 Article 230 and Article 232 stipulate that the merger plan/agreement can include two or more small companies or companies existing between the holding company and its wholly-owned subsidiaries or other types of companies. The following is the specific procedure:

 

a) Proposal announcement of the M&A plan/agreement is required: The registered office of the relevant company’s registration place or directly affected individuals can raise objections/other suggestions based on the proposed plan of the M&A plan. This announcement needs to be made by the target company or The transferee company issues the M&A plan/agreement within 30 days from the date;

 

b) Once the company receives objections/other proposals, the company needs to convene a general meeting of shareholders to determine whether these objections/other proposals are established. The conditions for the establishment of objections/other proposals are that all types of shareholders who hold 90% of the shares are present. Congress and passed the proposal;

 

c) Companies involved in the merger plan/agreement need to fill in the form and make a statement of current repayment ability at the corresponding authority in the company's registration place;

 

d) The M&A plan/agreement needs to be resolved through a meeting. The company holding the general meeting of shareholders will issue a notice of the meeting 21 days before the start of the meeting, and the meeting will be voted and approved by shareholders holding 9/10 shares, or in writing The form passed.

 

It is necessary to pay attention to whether there are corresponding objections raised in paragraph 1, and if so, the method of handling and the procedures to be followed should be clarified.

 

 

2. Article 233, paragraph 2

 If the M&A plan/agreement is passed under the circumstances of the preceding paragraph, the transferee company shall submit a copy of the M&A plan/agreement to the central government, the company registration agency in the place where the transferor’s company is registered, and the official liquidation agency. (Used for local filing for later supervision)

 

 

3. Article 233, paragraphs 3 and 4. Clause 3 stipulates: 

After the administrative department mentioned in the preceding paragraph receives a copy of the M&A plan/agreement, if the company registration agency and the official liquidation agency in the place where the transferor’s company is registered do not have any objections/other suggestions to the plan/agreement 

The relevant filing of mergers and acquisitions, and the central government will also file the plan/agreement based on this situation and issue a certification document.


 

Clause 4 stipulates

 If there are objections/other suggestions, the relevant administrative department will communicate with the central government in writing within 30 days from the date of the objection. If there is no corresponding communication within the prescribed time limit, it is presumed that there are no objections/other suggestions to the merger plan/agreement.

 

 

4. Article 233, paragraph 5

 If the central government, after receiving the objections/other suggestions mentioned in paragraph 3, believes that the M&A plan/agreement reflects the interests of the M&A party greater than the public interest, then within 60 days after receiving the M&A plan/agreement you can submit a statement to the court, stating your objections in detail, and the court will consider whether the objections/other recommendations put forward by the central government are valid based on Article 232.

 

 

5. Article 233, paragraph 6

 After the central government’s objection/other proposal is submitted to the court, the court will give written reasons for the objection/other proposal submitted by the government based on Article 232, stating whether it supports the objection/other proposal, or directly through the merger plan/agreement.

 

If the central government does not submit any objections to the merger plan/agreement, or raises objections/other suggestions but does not submit the application to the court for review, the court will consider that the central government has not raised any objections/other suggestions to the merger plan/agreement .

 

 

6. Article 233, paragraph 7

 The court considers that the objection is established according to paragraph 6, then it will issue an order to request the registration department where the transferee company is located to conduct a specific review of the objection/other recommendations, and then make a confirmation letter confirming whether the objection actually exists, and will confirm The book is sent as a copy to the company registration department where the target company is located.

 

 

7. Article 233, paragraphs 8 and 9

 If the objections/other suggestions in paragraphs 3 and 7 are not established and the merger plan/agreement has been filed in the company registration department, the target company is deemed to be dissolved and does not need to go through bankruptcy liquidation procedures.

 

It is clearly stated in paragraph 9 that the adopted M&A plan/agreement has the following effects and effects:

 

a) All the assets and liabilities of the target company are transferred to the transferee company and become its assets and liabilities;

 

b) If costs are incurred during the transfer of assets, they will also be paid by the transferee company;

 

c) The litigation/arbitration of the target company will also become the litigation/arbitration of the transferee company;

 

d) If the merger plan/agreement proposes to purchase shares held by dissenting shareholders or settle debts held by different creditors, it shall become the debts of the assignee.

 

 

8. Article 233, paragraph 10

 During the M&A process, the transferee company is not allowed to hold the corresponding shares in its name, nor can it hold trust assets in its name or in the name of its subsidiary. If such shares exist or the trust assets need to be cancelled, they can enter M&A procedures.

 

 

9. Section 233, paragraph 11

 The transferee company shall submit an application and attach a merger plan/agreement to the company registration department of the place of registration for filing, explain its revised registered capital after the merger, and pay the fees required to revise the registered capital. 

If this part of the cost is paid in advance by the registered capital of the target company during the M&A process, the transferee company needs to deduct it from its revised registered capital after the completion of the merger.

 

As mentioned at the beginning, in Article 233, the most important aspect is the target company. Because when the target company merges into the transferee company, all assets, existing or pending responsibilities will then enter the transferee company’s "stomach". 

The so-called illness is imported from the mouth. One or two hidden dangers "virus", and it may affect the entire transaction and even the final settlement.

 

What I want to emphasize is that at this stage, it is important to understand the background of the entire target company, assess the existing risks, and whether there are hidden dangers that affect the transaction. 

This may seem to be an optional process, but it is risky. Pre-judgment and control are the prerequisites for deciding whether the delivery can be successful. In fact, looking at Guo Guangchang's large-scale work, you can understand that Fosun's acquisition in India has been relatively smooth for a reason.

 

 

Cross-border Investment / Mergers and Acquisitions Rules and Regulations Procedures Law

When companies of a country invest overseas, in addition to considering the relevant domestic approvals and their own food and salary supply, they also need to pay attention to the differences in the political system, economic policy, and culture of the target country. In addition, it is more important to understand and abide by the relevant laws and regulations of the target country, so as to ensure legal investment behavior and effectively avoid legal risks in overseas investment. The legal problems encountered by Chinese companies in overseas investment cannot be said to be like tigers, but they can be overcome as long as they are handled carefully.

 

1. Weather vane-foreign investment policy of target country

The country where foreign investment activities are located must have its own unique system. Therefore, before starting investment, you must go to the countryside to study and understand the relevant laws and regulations of the target country and the policy and legal environment related to foreign investment in order to conduct investment feasibility analysis and transaction structure. The determination and subsequent operational planning lay the foundation. 

By Foreign Investors Indian Mergers and Acquisition Law Legal Policies
Indian Mergers and Acquisition Policies


For example, in addition to understanding Indian laws and regulations, companies investing in India should also understand the FDI policies, which industries are allowed to invest, where are forbidden areas, recognize the automatically permitted part of the investment, and also understand that the government and RBI can Only by grasping the "wind vane" of the boundary of the hand, can the enterprise move forward and retreat freely.

 

👉 Foreign investment incentives in the target country

Most countries support and welcome foreign investment to varying degrees. Some countries have even introduced a series of preferential policies to attract foreign investment, such as low-priced land, opening of special economic zones, tax reduction and exemption policies, etc. Understand and make full use of these preferential policies. Only when Chinese companies increase revenue and reduce expenditure and strengthen themselves in overseas investment Rely on.

 

👉 Foreign investment restrictions

Before investing, it is necessary not only to see the preferential policies provided by the target country, but also to have an overall understanding of the legal environment of the target country. Many countries also have different degrees of restrictions on foreign investment, such as industrial restrictions, foreign ownership, or foreign exchange. Therefore, there must be laws and regulations for understanding this area, as well as corresponding government regulatory agencies.

 

Most of the forms of foreign investment restrictions are embodied in the form of additional conditions (proportion of foreign equity) or requirements for review or permits. It is worth noting that some countries completely prohibit foreign investment in certain sensitive industries. For example, Indian law prohibits foreign investment in the lottery industry, gambling industry, tobacco industry, etc. Of course, there are also industries that restrict investment. To control the proportion of foreign ownership. 

Although foreign direct investment in certain areas is restricted or prohibited, the laws of the country are always changing, especially foreign investment policies may be constantly adjusted due to the influence of domestic and international political and economic situations. Therefore, Chinese companies must keep abreast of the latest situation of the "weathervane" in order to respond actively and effectively.

 

2. Understanding the "double-edged sword"-the impact of antitrust laws on cross-border investment

The legal supervision of mergers and acquisitions in various countries in the world is largely related to anti-monopoly. Developed countries often have relatively mature anti-monopoly laws. 

Since mergers and acquisitions of enterprises may cause certain negative effects on market competition, all countries are starting to maintain market competition. From the perspective of certain regulations on mergers and acquisitions.

 

India promulgated the Competition Law in 2002, the scope of regulation includes anti-competitive agreements, abuse of market dominance, and business mergers. Taking this country as an example, in overseas M&A transactions, the antitrust legal requirements for investment in India need to be considered from the following aspects:

 

👉 Will the acquisition result in violation of anti-competitive agreements?

Enterprise mergers and acquisitions will inevitably lead to the elimination of competitors in the market, and may therefore lead to or strengthen a monopolistic market structure. The purpose of this control is not to limit the absolute scale of the enterprise, but to ensure that effective competition can still be carried out in the market after the transaction, thereby protecting the interests of consumers.

 

👉 Does the acquisition abuse its dominant market position?

Occupying a dominant market position is not illegal in itself, but abuse of such status so that the company’s operations can be protected from external competition or negatively affected its competitors or consumers can be regarded as abuse of dominant market position. 

Although the influence of Chinese companies under the scale of the global economy is still relatively limited, there are still relatively few transactions that may really have a significant negative impact on the competition in the target country's market. 

However, with the continuous expansion of Chinese enterprises' own strength, the scale and market position of the required acquisition targets will increase day by day, and overseas mergers and acquisitions of Chinese enterprises will also face anti-monopoly regulations.

 

3. Localized operation-labor law issues in overseas investment

Chinese companies' overseas investment involves a wide range of legal issues, including not only the laws directly related to investment mergers and acquisitions, but also the laws and regulations involved in the continuous operation of the local after investment. Just like labor law, social insurance, foreign exchange control and other aspects of legal norms and regulations are also very different.

 

In the main target countries for Chinese companies' overseas investments, these legal systems protect the legitimate rights and interests of employees and maintain the standards of social welfare, but on the other hand, they also bring a greater economic burden to the company. 

When Chinese companies conduct overseas investment and mergers, they need to adapt to local conditions and follow the local customs, which usually involves local employees’ labor contracts, compensation, retention, or layoffs. It is important to understand the requirements of local laws and regulations, rather than simply bringing some domestic concepts and practices abroad.

 

👉 Employee employment

After completing the overseas investment, the employment of employees in the company's operations must meet the legal requirements of the target country. To this end, Chinese companies that invest in need to understand the labor laws of the target country in detail. For example, what are the restrictions on the employment of local employees in Indian laws, what benefits and insurances need to be provided to employees, and what employment methods are legal and efficient, etc. 

 Only after dealing with the relationship with employees can we "make money with peace"

 

👉 Layoffs and dismissals

After the completion of the acquisition, if the target of the acquisition is a "distressed household", the acquirer often needs to make arrangements in line with the commercial strategy of the acquired party. How to integrate the "difficult household" into itself and reduce the debt burden of the acquirer as soon as possible Create profits, so sometimes layoffs become an inevitable part.

 The procedures and costs required for layoffs must be fully planned in advance. For example, study in advance the requirements of local laws on layoffs and dismissal of employees, analyze the government's possible attitude to layoffs, and avoid the purchaser's commitment to unreasonable restrictions and foreseeable labor disputes in the future.

 

👉 Chinese companies' response measures when facing labor problems in the target country

Before the acquisition, the acquirer should try its best to rely on the role that Chinese lawyers can play in the acquisition project. For example, in the due diligence stage of the lawyers in the early stage of the acquisition, the labor issues involving the acquiree should be amplified and timely feedback:

 

1. Investigations related to labor issues should be carried out in detail. At the same time, it is also necessary to have a macro understanding of the labor legal environment of the country where the acquired party is located, and understand the requirements of labor contracts, layoffs, social welfare, insurance and other aspects;

 

2. The other two aspects should be microscopically grasp the specific labor situation of the acquired party, such as employees, total number and structure, labor contract, collective contract, social welfare, employee equity incentive plan, etc.

 

Laws of Investment in India by alien investor entities
Indian Investment Law

For every labor law issue that may be involved in the transaction, the purchaser must formulate a response plan. Even after the completion of the acquisition, Chinese shareholders should urge the acquiree to continue to comply with local labor laws.

 

4. Bundled gold rope-foreign exchange management system

The purpose of a company's overseas investment is to obtain a return on investment, so the investor can remit profits or other funds back to the country is a key step in investment behavior. If there are foreign exchange control measures in the target country, the impact of these measures on the flow of foreign exchange funds needs to be considered.

 

If the country where the M&A target is located is a foreign exchange control country, it must fully understand its foreign exchange laws and regulations. For example, India, in addition to the “Reserve Bank of India Act of 1934” and “Foreign Exchange Management Act of 1999”, there are a large number of specific areas involved in foreign exchange management. 

Management rules, such as "Foreign Exchange Management (Establishment of Branches, Offices or Other Business Places in India) Rules 2000", "Foreign Exchange Management (Transfer and Issuance of Foreign Securities) Rules 2000" and so on. 


In the foreign exchange management system, how to make full use of soft regulations to avoid corresponding risks. For example, in which countries the funds transferred from companies can avoid being charged corresponding taxes, and the control rules are less restrictive than other countries. Reference alternative.

 

5. Recruitment of talents-the recruitment of executives and core personnel

In many mergers and acquisitions, the key to successful acquisition is to retain senior management and core technical personnel of the acquired party. Therefore, how to ensure that key personnel can continue to be retained to serve the acquirer after the completion of the acquisition requires planning during the transaction negotiation stage. 

The acquirer can require the seller to urge the company to sign a lock-up agreement with these personnel, and make the signing of the lock-up agreement one of the prerequisites for delivery, so that the seller's interests are bound to the acquirer. 

In addition, Chinese companies should also consider granting key personnel retention incentives or design and implement executive equity incentive plans in accordance with the usual practices of the local market, so that the interests of core personnel are consistent with those of the company, so as to ensure the retention of core personnel and the stability of the acquired party. Transition operations.

 

From the beginning to the landing, cross-border investment and mergers and acquisitions are full of commercial risks, but in the final analysis, the so-called commercial risks are particularly obvious at the legal risk level. "It affects the whole body" is especially reflected in cross-border investment and mergers.

 However, this sentence is not about emphasizing what cannot be done, but about which risks can be treated flexibly to achieve avoidance. Cross-border investment needs to give full play to the "monopoly spirit"-this depends on whether we truly understand the "rules of the game" in the target region. Since we are not the rulers of the game, we must understand the rules of the game to achieve the top.

 

Lawruling

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