Cross Border Merger
The enforcement of the relevant provisions pertaining to Cross Border Mergers
contained in the Companies Act, 2013 by the Ministry of Corporate Affairs with
corresponding provisions in Companies (Compromises, Arrangements and
Amalgamation) Rules, 2016, including insertion of the Rule 25A and introduction of draft
Foreign Exchange Management (Cross Border Merger) Regulations, 2017 has ushered in
infinite opportunities of partnerships in the form of mergers, consolidations,
acquisitions etc. As per the notified provisions, prior approval of the Reserve Bank of
India is requisite to go ahead with such mergers. And the draft Regulations issued by the
RBI provide that cross-border merger shall be deemed to be approved by the RBI if it is
accordance with the draft Regulations.
Section 234 of the Companies Act, 2013 provides for scheme of mergers and
amalgamations between Companies registered under the said Act and Foreign
Companies. However, in case of outbound mergers only Companies which are
incorporated in the Jurisdictions of such Countries which are notified by the Central
Government are eligible. Apart from complying with the provisions stipulated under
Section 230 to 232 of the Companies Act, 2013 read with the rules made thereunder the
following additional compliances in case of outbound mergers are enumerated in Rule
25A of Companies (Compromises, Arrangements and Amalgamation) Rules, 2016:-
Prior approval of RBI is mandatory in case of cross border mergers.
In terms of the said rule Valuation in case of cross border merger, the following
must additionally be ensured:
The foreign company is required to ensure that valuation is conducted by valuers
who are members of a recognized professional body in the jurisdiction of such
The valuation is conducted in accordance with internationally accepted principles
on accounting and valuation.
A declaration in relation to the above-mentioned points are submitted along with
the application to the RBI seeking approval for such merger or amalgamation
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