Private limited company registration

Amalgamation merger compromise and arrangement

The companies second amendment act 2002 has made a great change in the scheme of the administering the provisions of the act by transferring most of the powers of the high court to the national company law tribunal. It will be constituted pursuant to section 10FB of the act. Simultaneously the company law board has been dissolved and all the matters which were considered by the erstwhile board will in future be referred to the tribunal.

Amalgamation merger

The powers under sections 390 to 395 will henceforth be exercised by the Tribunal. The rules governing the transaction of business by the tribunal will be notified shortly.

Amalgamation/Merger : Meaning

Amalgamation and merger mean the same thing in practice and both these words are used interchangeably to mean that a company (transferor company) may amalgamate or merge with another transferee company with proper registration guidelines. The amalgamations or merger may also involve more than two companies. In the above instance after amalgamation the transferor company or companies will cease to exist and the transferee company takes over and absorbs the assets, liabilities and business of the transferor company or companies within itself.

Compromise / Arrangement

The term ‘agreement’ is of wide import and includes reorganization of share capital and may also mean modification of the rights.Where a rearrangement includes a reduction of capital, the procedure for reduction of capital has also to be followed. Mostly internal registration of a company may placed in their arrangements. But this may also concern other companies arrangements in one company may precede the amalgamation process with another company or in an arrangement some property and/or rights may be transferred by one company to another valuable consideration.

Vertical Merger

Where two companies, engaged in the same industry as for instance a company manufacturing aluminum rolled products and another producing aluminium foils, may decide to merge into one company which is an example of vertical integration or merger. The same is the case when two or more units manufacturing upstream and downstream products in the petroleum industry decide to amalgamate under section 391 of the act.

Reverse Merger

Where it is proposed to revive a sick industrial company by amalgamating it with a profitable company, it is but natural that the sick company will merge itself with the profitable company and the sick company will cease to exist. In a reverse merger, on the other hand, a successful company merges with a sick company.


It is the process of hiving off certain departments or product operations and putting them under a certain company through a scheme of arrangement under section 391 to 394.

Amalgamation merger compromise and arrangement

Public interest

Section 394 casts an obligation on the court to be satisfied that the scheme for amalgamation or merger is not contrary to public interest. The arrangements of one person company is also be merged in the articles.

Remedy open to all companies

Although section 390 defines “company” for the purpose of section 391 to 393 has been held by the courts in several cases that the expression “company liable to be wound up” includes unregistered and foreign companies and is also restricted to mean companies which have reached such a stage as to be fit for winding up.

Company already being wound-up can be revived under section 391

The provision in section 391 can be availed of even to revive a company which is already in the process of winding-up. The registration must be reviewed by both private limited company and public limited company.

Jurisdiction of High Court

The high court having jurisdiction of the place at which the registration offices of each of the companies are located was considered the appropriate court for hearing a petition under section 391. Where two companies are parties for amalgamation and they are located in two different states of private limited company was to move a petition before the respective high court.

Interest of Employees

In sanctioning an amalgamation, the court ensured that the scheme causes as little hardship as possible to employees and the transferee company assures that the interest of workers would be protected after amalgamation.


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