FAST TRACK MERGERS- SECTION 233

Fast Track Merger is that Form of merger which can be carried out without complying provisions of Section 230 & Section 232 of Companies Act 2013. 

TYPES OF COMPANIES THAT CAN GO FOR FAST TRACK MERGERS

1. Two or more small companies,

2. Holding and its wholly owned subsidiary Company

3. Such class of Companies as may be prescribed

STEPS FOR FAST TRACK MERGER

1. A notice in Form No. CAA.9 of the proposed scheme inviting objections or suggestions, if any,  from the Registrar and  Official Liquidator or persons affected by the scheme  with in 30 days is issued by the transferor Company or Companies and transferee Company. 

2. A declaration of solvency in Form No. CAA.10 along with the prescribed fees is required to be filed by each Company to the Registrar of the place where the registered office of the Company is situated before convening meeting of members and creditors for approval of the scheme. 

3. The objections and suggestions received are considered in the respective general meetings and the scheme is approved by at least ninety percent of total members or class of members and nine-tenth in value of the creditors or class of creditors of respective companies. 

4. Notice of the meeting of members and creditors shall be accompanied by 

a) A statement referred in Section 230(3)

b) A declaration of Solvency in Form No. CAA.10.

c) A copy of the scheme

5. The transferee company shall with in seven days after the conclusion of the meeting of members or class of members or creditors or class of creditors, file a copy of the scheme in Form CAA.11 with the Central Government , in Form GNL-1 to Registrar of Companies with prescribed fees  and by hand delivery or by registered or speed post to Official Liquidator.

6. Where no objections are received from Registrar or Official Liquidator, the Central Government shall issue a confirmation order of such scheme  in Form CAA. 12.

7. If the Registrar or Official Liquidator has any objections, he may communicate the same in writing to Central Government within a period of thirty days and if Central Government is of the opinion that whether on the basis of such objections or otherwise , that the scheme is not in public interest, it may file an application before the tribunal(NCLT) in Form CAA.13 with in sixty days of the receipt of the objections or opinion and requesting that Tribunal may consider the scheme under Section 232 of the ACT.

8. If the Tribunal on receipt of the application from Central government, is of the opinion that scheme should be considered as per the procedure laid down in section 232, the Tribunal ,may direct accordingly or it may confirm the scheme by passing such order as it deems fit. 

9. The confirmation order of the scheme issued by the Central Governments or Tribunal as the case may be,  shall be filed , with in thirty days of the receipt of the order of Confirmation , in Form INC-28 with Registrar of Companies. 

*It is clarified that with respect to schemes of arrangement or compromise falling within the purview of Section 233 of the Act, the concerned Companies ,  may at their discretion , opt to undertake such schemes under Section 230 & 232 of the Act. 

* The registration of scheme shall be deemed to have dissolution effect without winding up.

* The registration of the scheme shall have the following effects, namely:—

(a)transfer of property or liabilities of the transferor company to the transferee company 

(b) the charges, if any, on the property of the transferor company shall be applicable and enforceable as if the charges were on the property of the transferee company;

(c)legal proceedings by or against the transferor company pending before any court of law shall be continued by or against the transferee company; and

(d) where the scheme provides for purchase of shares held by the dissenting shareholders or settlement of debt due to dissenting creditors, such amount, to the extent it is unpaid, shall become the liability of the transferee company.

*A transferee company shall not on merger or amalgamation, hold any shares in its own name or in the name of any trust either on its behalf or on behalf of any of its subsidiary or associate company and all such shares shall be cancelled or extinguished on the merger or amalgamation.

For further clarification, drop email at shailja.tiwari16@gmail.com. 

PROCEDURE FOR FILING APPLICATION BY FINANCIAL CREDITOR UNDER IBC

MEANING OF  FINANCIAL CREDITOR

Financial Creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to. 

HOW  THE FINANCIAL CREDITOR FILE APPLICATION TO NATIONAL COMPANY LAW TRIBUNAL(NCLT)?

The process for filing application by a financial creditor is defined under Section 7 of "The  Insolvency and Bankruptcy Code, 2016"

SECTION 7- Intimation of Corporate Insolvency process by Financial Creditor

(1) A financial creditor either by itself or jointly with other financial creditors may file an application for initiating corporate  insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.

(2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed. 

(3) The financial creditor shall, along with the application furnish— 

(a) record of the default recorded with the information utility or such other record or evidence of default as may be specified; 

(b) the name of the resolution professional proposed to act as an interim resolution professional; and

(c) any other information as may be specified by the Board.

 (4) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section (3). 

(5) Where the Adjudicating Authority is satisfied that— 

(a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or 

(b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceeding is pending against the proposed resolution professional, it may, by order, reject such application: 

Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority. 

(6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5). 

(7) The Adjudicating Authority shall communicate— (a) the order under clause (a) of sub-section (5) to the financial creditor and the corporate debtor; (b) the order under clause (b) of sub-section (5) to the financial creditor, within seven days of admission or rejection of such application, as the case may be.

EXPLANATION

1. The minimum amount of the default should be one lakh rupees or more.

2. A default includes a default in respect of a financial debt owed not only to the applicant financial  creditor but to any  other financial creditor of the corporate debtor.

3. The Financial creditor is required to file an application in Form 1 of Insolvency and Bankruptcy(Application to Adjudicating Authority, rules, 2016).

4. The Financial Creditor along with the application file a Demand Draft of Rs. 25,000/- in favour of " Pay and Accounts Officer, Ministry of Corporate Affairs" payable at Delhi. 

5. The Financial Creditor is required to propose the name of 'Interim Resolution Professional' at the time of filing Application. 

6. Date Of Commencement of Corporate Insolvency Resolution Process- With effect from date of admission of application by NCLT.  

List of documents required to be file by Financial Creditor under Section 7 of IBC- 

1. Application in Form 1 of Insolvency and Bankruptcy(Application to Adjudicating Authority, rules, 2016).

2. Demand Draft of Rs. 25,000/- in favour of " Pay and Accounts Officer, Ministry of Corporate Affairs" payable at Delhi.

5. Written Consent of Insolvency Resolution Process in Form 2 of  Insolvency and Bankruptcy(Application to Adjudicating Authority, rules, 2016).

4. Verifying Affidavit by Financial Creditor in Form No.- NCLT 6.

TIME LIMIT FOR COMPLETION OF CORPORATE INSOLVENCY RESOLUTION PROCESS:-

CIRP must be completed with in 180 days from 'insolvency commencement date'.  One time extension not exceeding 90 days can be granted. Committee of creditors by resolution passed at its meeting by 66% of voting power may instruct the Resolution Professional to seek extension of time. If the Adjudicating Authority is satisfied that CIRP cannot be completed with in 180 days , then it may grant extension upto 90 days. 

DECLARATION BY NCLT:-

NCLT after admission of the application. shall by an order

1. Declare Moratorium

2. Cause a public announcement

3. Appoint an interim resolution professional.

* Moratorium- SECTION 14

The Adjudicating Authority shall by order prohibit the following, namely:— 

1.  the institution/continuation/proceedings of suits against the corporate debtor including execution of any judgment, decree or order in any court of law or any other authority.

2. Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest.

3. Any action under SARFAESI Act 2002; 

4. Recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. 

5. Supply of essential goods or services to the corporate debtor  shall not be terminated or suspended or interrupted during moratorium period. 

The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process:

For further Clarification,. drop email at shailja.tiwari 16@gmail.com

CLARIFICATION ON DIR-3-KYC

Ministry of Corporate Affairs has issued clarification on  Filing of DIR-3-KYC annually by DIN holders. It is evident from filing of DIR-3-KYC for financial year 2019-20 that DIR-3-KYC is not required to be filed every year as DIR-3 KYC available on MCA website is not taking DIN of Directors who has already filed DIR-3 KYC but by the clarification issued by MCA on 13.04.2019 it is clear that DIR-3 KYC is required to be file every year. But before reading the clarification issued by MCA, first understand who is required to file DIR-3-KYC.

WHO IS REQUIRED TO FILE DIR-3-KYC?

For the Financial Year 2018-19-  Any person who has been allotted "Director Identification Number(DIN/DPIN) on or before 31st March 2018 and the status of DIN is "Approved' needs to file DIR-3-KYC to update KYC details in the system on or before 05th October 2018.

For the Financial Year 2019-20 onwards-  Every director who has been allotted DIN or or before the end of Financial Year and whose DIN Status is 'Approved' would be mandatorily required to be filed Form DIR-3-KYC before 30th April of the immediate next financial year. 

CLARIFICATION BY MCA ON 13.04.2019

As per rule 12A of the Companies (Appointment and Qualification of Directors) Rules 2014, “every individual who has been allotted a Director Identification Number (DIN) as on 31st March of a financial year as per these rules shall, submit e-form DIR-3-KYC to the Central Government on or before 30th April of immediate next financial year. 

Provided that every individual who has already been allotted a Director Identification Number (DIN) as at 31st March, 2018, shall submit e-form DIR-3 KYC on or before 5th October,2018.”

However, the DIR-3 KYC e-form presently available on the portal does not cater for the following: 

(i) Filing on annual basis, and 

(ii) Filing in respect of DINs allotted post 31 March 2018. 

It presently caters only to those individuals who were allotted DINs as on 31st March 2018 and whose DINs have been marked as ‘Deactivated due to non-filing of DIR-3 KYC’. 

Stakeholders may please note that DIN holders are required to file the DIR-3 KYC form every year, so that they are aware of and confirm the data & information as available in the MCA21 system. 

With the objective of making the form more user friendly, the form is presently being modified to enable pre-filling of data & information so that annual filings can be done by DIN holders in a simple and user friendly manner. 

The revised form, which will be shortly deployed, can be filed without any fee within a period of 30 days from the date of deployment. 

Accordingly, DIN holders who had filed DIR-3 KYC form earlier and complied with the said provisions may kindly await the deployment of the modified form for fulfilling their compliance requirements. 

Link of MCA clarification-

 http://www.mca.gov.in/Ministry/pdf/DIR3KYCcompleteMessage_13042019.pdf

For Further Clarification drop email at shailja.tiwari16@gmail.com