Changing paradigms in the M&A landscape

Mergers and acquisitions (M&A) are the prime driving force for the growth of any economy. The ease with which M&A can be effected goes a long way in determining the growth of an economy. The Companies Act, 2013, strives to foster such growth by codifying certain concepts which were followed in practice but not contained in law earlier and by bringing about greater transparency and accountability in the age old procedures of M&A, thereby visibly making India’s corporate law friendlier and more acceptable in the global arena.

Key aspects of M&A introduced in the act and the objectives sought to be achieved are analysed below.

Notice for approval to be sent to concerned regulators: The act requires that the notices of meeting for approval of a scheme of merger be sent to the central government and also to various regulatory authorities (Income Tax Department, Reserve Bank of India, Securities and Exchange Board of India, etc.) including sectoral regulators likely to be affected by the scheme. The notice should be accompanied by a valuation report and disclosure statements, explaining the effects of the scheme on key managerial personnel and promoter and non-promoter members.

This procedure was already followed earlier under directions of the court but making it mandatory at the first stage will go a long way in reducing the time required for an M&A transaction as the concerned regulators will have ample time to send their representations, if any, and will also have all the information readily available for them to come to a conclusion.

Pankaj Agarwal is a partner, Kunal Rajpal is a principal associate-designate, and Kunal Sharma and Amit Kumar are associates at Amarchand & Mangaldas & Suresh A Shroff & Co (Ahmedabad office). The views expressed in this article are those of the authors and do not reflect the position of the firm.