Govt amends rules related to amalgamations under companies law

government has amended certain rules governing mergers under companies law and amalgamations involving a foreign holding company and its wholly-owned Indian subsidiary will w require prior RBI approval.

Amendments have been me to Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 by corporate affairs ministry.

changes are with respect to "transferor foreign company incorporated outside India being a holding company and transferee Indian company being a wholly-owned subsidiary company incorporated in India" entering into a merger.

In such cases, ministry on Monday said both companies shall obtain prior approval of Reserve Bank of India ( RBI ) and transferee Indian company should also comply with provisions of Section 233 under Companies Act.

Broly, Section 233 pertains to mergers and amalgamations of certain companies.

Sandeep Jhunjhunwala, Partner at Nangia Andersen LLP, said trend of reverse flipping has been rm for many new- startups in recent times and resilience and growth of country's IPO market provide investors with a viable exit strategy for realising returns.

In this backdrop, he said ministry has introduced a new sub-rule whereby both foreign transferor holding company and its wholly-owned Indian subsidiary would have to w obtain a prior RBI approval in cases of merger or amalgamation.

"In parallel, Indian transferee company is also required to file an application with Central Government under existing provisions of Section 233 of Companies Act 2013 and Rule 25 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 for seeking approval on such India inbound mergers," he ded.