The new Companies Bill proposes seminal changes in the manner in which Companies are governed and regulated

in India & brings easy and efficient way of doing business in India, better governance, improves levels of transparency while enhancing accountability, inculcating self compliance and making Corporate socially responsible. The new Companies Bill will make acquisitions, mergers and restructuring easier for companies, empower private equity investors to enforce various agreements and check misuse by promoters by increasing transparency, say experts. The bill, passed by the Upper House of Parliament last week, is waiting for the President's stamp of approval. It will replace the 50-year-old Companies Act of 1956 with its 470 clauses.

Experts say the bill could potentially trigger a spate of domestic and cross-border mergers and acquisitions and make Indian firms more attractive to PE investors. The new law also allows an Indian company to merge with a foreign company, making cross-border mergers and acquisitions easier. Earlier, only foreign companies were allowed to merge with Indian companies. The new law will also make it easier for promoters to restructure, merge or acquire companies because only those shareholders who own more than 10% stake or have more than 5% of the total debt will have the power to oppose any scheme of arrangement.

Merger of a listed company into unlisted company The 2013 Act requires that in case of merger between a listed transferor company and an unlisted transferee company, transferee company would continue to be unlisted until it becomes listed. Further, the 2013 Act also proposes that transfereecompany would have to provide an exit opportunity. Merger or amalgamation of company with foreign company The 2013 Act states that merger between Indian companies and companies in notified foreign jurisdiction shall also be governed by the same provisions of the 2013 Act. Prior approval of Reserve Bank of India would be required and the consideration for the merger can be in the form of cash and or of depository receipts or both. Fast-track merger This will reduce the time consumed in court proceedings and will result in faster disposal of the matter. It will help remove the bureaucratic barriers involved in court proceedings and in turn simplify the process. Presently, it seems that in such fast-track mergers, there is also no requirement for sending notices to RBI or income-tax or providing a valuation report or providing auditor certificate for complying with the accounting standard. The 2013 Act does not specify transitional provisions relating to restructuring in progress and presently there is a lack of clarity in this regard.

Approval of scheme through postal ballot The 2013 Act additionally allows the approval of the scheme by postal ballot. This will involve wider participation of the shareholders of the company in voting and will protect shareholders interest.

Valuation certificate The 2013 Act now mandatorily requires the scheme to contain the valuation certificate. The valuation report also needs to be annexed to the notice for meetings for approval of the scheme. This will enable the shareholders to understand the business rationale of the transaction and take an informed decision.

Attractive to PE investors The bill could potentially trigger a spate of domestic and cross-border mergers and acquisitions, strategic alliances and make Indian firms more attractive to PE investors. We are briefly discussing the changes impacting Mergers & Acquisitions.

The bill also disallows issue of treasury stocks in the name of a transferee company. This means, when there is a gap between the book value and fair market value of a company, the difference will have to be written off over a period of time and cannot be locked as treasury shares. Until now, this difference was treated as goodwill value on the books. The new law also disallows reverse merger of a listed company with that of an unlisted one. According to Clause 232(3)(h), in case of a merger between a listed company with an unlisted one, the transferee company shall remain unlisted after the merger. This will ensure there is no possibility of 'backdoor listing' through

reverse mergers. Clause 232 also elaborates an exit option for a shareholder of the listed transferor company, which should be given at a price not less than what may be specified by market regulator SEBI for the purpose.

The bill could potentially trigger a spate of domestic and cross-border mergers and acquisitions, strategic alliances and make Indian firms more attractive to PE investors. We are briefly discussing the changes impacting Mergers & Acquisitions.

-Global integration and cross-border mergers are now permitted by new Bill thereby allowing merger of an Indian company with a foreign company. Earlier, only foreign companies were allowed to merge with Indian companies. Exits will be easier, because the new law allows the consideration on a merger to be settled in the form of cash or depository receipts.

-Allows fast & quick merger between two or more small companies, holding company and its wholly owned subsidiary or such other class(es) of companies as may be prescribed by the central government, without the approval of the high court or National Company Law Tribunal (NCLT). -The Companies Bill specifically provides for provisions relating to a merger of a listed company with an unlisted company and gives power to the National Company law Tribunal to order exit of the dissenting shareholders (made easy) of the transferor listed company in case they opt out of the unlisted transferee company with payment of the value of shares held by them and other benefits in accordance with a pre-determined price formula or after a valuation has been made.

-For good governance and investor protection, the new Bill advocates price determination by a registered valuer for any preferential allotment of equity. Such a measure is in sync with the principals set out under the exchange laws and the tax framework. This should prevent the dilution of existing investors' interests at an unfair price.

-Prohibits the retaining of any treasury stock, arising on consolidation, pursuant to a merger and requires all such shares to be cancelled or extinguished, thereby restricting trust structure used by listed entities to retain control or future monitization.

-Pooling of assets under a single company in any jurisdiction is achievable now by access to large capital without need to go public as number of member restriction under Private limited company increased to 200 from 50.