CAPITAL MARKET & SECURITIES LAW

CROSS BORDER MERGERS AND ACQUISITIONS IN

INDIA

ACKNOWLEDGMENT

I take immense pleasure in thanking Dr. Kondaiah Jonnalagadda our teacher for having
permitted me to carry out this project work. I express my gratitude to him for giving me an
opportunity to explore the world of information concerning my project topic.

Words are inadequate in thanking my seniors and batch mates for their support and
cooperation in carrying out the project work.

Finally, I would like to thank my family members for their blessings and wishes for the
successful completion of the project.

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 TABLE OF CONTENTS

ACKNOWLEDGMENT ......................................................................................................... 1
TABLE OF CONTENTS ......................................................................................................... 2
INDEX OF AUTHORITIES ................................................................................................... 3
INTRODUCTION.................................................................................................................... 4
DEFINITIONS .......................................................................................................................... 4
TYPES OF MERGER ......................................................................................................... 4
REASONS FOR M&A .............................................................................................................. 6
WHAT DOES A COMPANY STAND TO GAIN?......................................................................... 7
DEFINITION OF 'ACQUISITION' ............................................................................................. 7
FUNDING OF MERGERS AND TAKEOVERS............................................................................. 7
POSITION UNDER COMPANIES ACT, 1956 ................................................................................. 8
COMPANIES ACT 1956 ........................................................................................................... 8
SEBI TAKEOVER CODE 2011.............................................................................................. 12
COMPETITION ACT 2002 ..................................................................................................... 12
INCOME TAX ACT 1961 ....................................................................................................... 13
FOREIGN EXCHANGE MANAGEMENT ACT 1999 ................................................................ 13

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CHANGES UNDER THE COMPANIES ACT, 2013 ........................................................................ 14
THE COMPANIES ACT, 2013 ......................................................................................... 15
KEY CHANGES:- ................................................................................................................... 15
CONCLUSION ........................................................................................................................... 16
BIBLIOGRAPHY .................................................................................................................. 18
INTERNET LINKS:- ............................................................................................................... 18

INDEX OF AUTHORITIES

CASE LAWS

1. BOMBAY GAS CO. PVT. LTD. V. UNION OF INDIA ................................................................... 10

2. BUGLE PRESS LIC................................................................................................................ 11
3. CUSTINA RE HOARE ............................................................................................................. 11
4. HINDUSTAN LEVER EMPLOYEES UNION V. HINDUSTAN LEVER LTD ........................................ 11
5. IN RE BANK MUSCAT SAOG ................................................................................................. 12
6. IN RE MOSCHIP SEMICONDUCTOR TECHNOLOGY LTD ........................................................... 11
7. IN RE, SAVOY HOTEL LTD ..................................................................................................... 10
8. IN RE: KIRLOSKAR ELECTRIC CO. LTD., ............................................................................. 10
9. MIHEER H. MAFATTAL V. MAFATLAL INDUSTRIES LTD., ........................................................ 10

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 INTRODUCTION

DEFINITIONS

Cross Border - involving movement or activity across a border between two countries.1

Cross border is often used in conjunction with something specific. For example, cross
border trading means trading between two countries. 2

Merger – A merger may be defined as the combination of two or more independent business
corporations into a single enterprise, usually involving he absorption of one or more firms by
a dominant firm.3

TYPES OF MERGER4

Conglomerate

1
http://www.oxforddictionaries.com/definition/english/cross-border. (last accessed on 3rd September, 2014).
2
http://www.investorwords.com/7796/cross_border.html, (last accessed on 3rd September, 2014).
3
http://www.investopedia.com/terms/m/merger.asp (last accessed on 3rd September, 2014).
4
http://www.mbda.gov/blogger/mergers-and-acquisitions/5-types-company-mergers?page=2 (last accessed on
3rd September, 2014).

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A merger between firms that are involved in totally unrelated business activities. There are
two types of conglomerate mergers: pure and mixed. Pure conglomerate mergers involve
firms with nothing in common, while mixed conglomerate mergers involve firms that are
looking for product extensions or market extensions.

Example

A leading manufacturer of athletic shoes, merges with a soft drink firm. The resulting
company is faced with the same competition in each of its two markets after the merger as the
individual firms were before the merger. One example of a conglomerate merger was the
merger between the Walt Disney Company and the American Broadcasting Company.

Horizontal Merger

A merger occurring between companies in the same industry. Horizontal merger is a business
consolidation that occurs between firms who operate in the same space, often as competitors
offering the same good or service. Horizontal mergers are common in industries with fewer
firms, as competition tends to be higher and the synergies and potential gains in market share
are much greater for merging firms in such an industry.

Example

A merger between Coca-Cola and the Pepsi beverage division, for example, would be
horizontal in nature. The goal of a horizontal merger is to create a new, larger organization
with more market share. Because the merging companies' business operations may be very
similar, there may be opportunities to join certain operations, such as manufacturing, and
reduce costs.

Market Extension Mergers

A market extension merger takes place between two companies that deal in the same products
but in separate markets. The main purpose of the market extension merger is to make sure
that the merging companies can get access to a bigger market and that ensures a bigger client
base.

Example

An example of such a merger is the acquisition of Eagle Bancshares Inc by the RBC
Centura. Eagle Bancshares is headquartered at Atlanta, Georgia and has 283 workers. It
has almost 90,000 accounts and looks after assets worth US $1.1 billion.

Eagle Bancshares also holds the Tucker Federal Bank, which is one of the ten biggest banks
in the metropolitan Atlanta region as far as deposit market share is concerned. One of the
major benefits of this acquisition is that this acquisition enables the RBC to go ahead with its
growth operations in the North American market.

Product Extension Mergers

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A product extension merger takes place between two business organizations that deal in
products that are related to each other and operate in the same market. The product extension
merger allows the merging companies to group together their products and get access to a
bigger set of consumers. This ensures that they earn higher profits.

Example

The acquisition of Mobilink Telecom Inc. by Broadcom is a proper example of product

extension merger. Broadcom deals in the manufacturing Bluetooth personal area network
hardware systems and chips for IEEE 802.11b wireless LAN.

Mobilink Telecom Inc. deals in the manufacturing of product designs meant for handsets that
are equipped with the Global System for Mobile Communications technology. It is also in the
process of being certified to produce wireless networking chips that have high speed and
General Packet Radio Service technology. It is expected that the products of Mobilink
Telecom Inc. would be complementing the wireless products of Broadcom.

Vertical Merger

A merger between two companies producing different goods or services for one specific
finished product. A vertical merger occurs when two or more firms, operating at different
levels within an industry's supply chain, merge operations. Most often the logic behind the
merger is to increase synergies created by merging firms that would be more efficient
operating as one.

Example

A vertical merger joins two companies that may not compete with each other, but exist in the
same supply chain. An automobile company joining with a parts supplier would be an
example of a vertical merger. Such a deal would allow the automobile division to obtain
better pricing on parts and have better control over the manufacturing process. The parts
division, in turn, would be guaranteed a steady stream of business.

Synergy, the idea that the value and performance of two companies combined will be greater
than the sum of the separate individual parts is one of the reasons companies merger

REASONS FOR M&A5

Companies buy other companies for a variety of reasons. Whatever reasons drive a particular
deal, mergers and acquistions (M&A) are considered successful when multiple synergies are
realized and when the business combination increases the net cash flow of the merged
business beyond what each entity could have achieved on its own. Here we'll examine what
makes a successful acquisition and take a look at three companies that have pulled it off.

5
http://www.investopedia.com/articles/financial-theory/08/ma-deal.asp

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WHAT DOES A COMPANY STAND TO GAIN?

A newly combined company can capture significant revenue growth by utilizing the
following new tools in its shareholder value-creation toolkit:

 Extended customer base to increase sales opportunities.

 Superior product, service, technology and/or brand to better serve customers.
 Expanded geographic footprint that provides greater access with which goods and
services can be sold.
 Diversified product and service offerings that present cross-selling opportunities
 Added distribution and marketing channels that provide opportunities to gain market
share.
 More effective sales, research and development (R&D) and new product development
functions.

Acquisition

Definition of 'Acquisition'

It is defined as an act of one enterprise of acquiring, directly or indirectly of shares, voting

rights, assets or control over management, of another enterprise. 6

A corporate action in which a company buys most, if not all, of the target company's
ownership stakes in order to assume control of the target firm. Acquisitions are often made as
part of a company's growth strategy whereby it is more beneficial to take over an existing
firm's operations and niche compared to expanding on its own. Acquisition, in the corporate
context, refers to when one firm buys majority interest in another, but both retain their
identities.

Acquisitions can be either friendly or hostile. Friendly acquisitions occur when the target firm
expresses its agreement to be acquired, whereas hostile acquisitions don't have the same
agreement from the target firm and the acquiring firm needs to actively purchase large stakes
of the target company in order to have a majority stake.

FUNDING OF MERGERS AND TAKEOVERS

There following are some methods of funding mergers and acquisition:

i. Equity Shares in the transferee company

ii. Preference shares in the transferee company

iii. Debentures in the transferee company

iv. Cash payment

v. External commercial borrowings

6
http://www.investopedia.com/terms/a/acquisition.asp

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vi. ADR/GDR

vii. A combination of all above methods.

POSITION UNDER COMPANIES ACT, 1956

Cross border mergers are increasingly occupying a pivotal role in the growth story of Indian
economy. In 2007, the Indian market figured in the top ten markets on the international plane in
terms of merger and acquisition deals.7In view of their increasing importance, it is essential to
analyse the legal compliances required for carrying out a cross border merger.

COMPANIES ACT 1956

Section 391 to 394 contains major provisions for mergers and acquisitions. The
provisions also deal with the compromise or arrangement with or without merger. Presently
High court enjoys the power of sanctioning amalgamation matters under sec. 394. Any
company, creditor or class of creditors or member or class of the members can file
application seeking sanction of scheme of compromise or arrangement, but due to its very

7
India breaks into top 10 M&A league, Economic Times, April 12, 2007.

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nature the scheme for amalgamation is normally presented by the company. The following
procedure shall be followed.

i. Examine the Memorandum of Articles of the company. The object clause should permit
to regulate, if not so provided in the clause amend accordingly.

ii. Convey board meeting to approve and draft the scheme of amalgamation and for
authorization of filing application to the High court.

iii. File application to High court to issue directions to convey the general meeting.

iv. The High court pass the necessary directions which shall include time and place of the
meeting, chairman of the meeting, procedure to be followed in the meeting and time to
submit the report of the meeting to the court.

v. Send notices to shareholders and creditors, Stock Exchanges and also advertise the
notice of the meeting in the two daily news paper one in English and other in the regional
language.

vi. Hold the general meeting as per court’s direction. The scheme shall be approved by
3/4th majority.

vii. File the report of the meeting to the court and stock exchanges within 7 days.

viii. File resolution with the ROC.

ix. File petition to the court for sanctioning of the scheme.

x. Within 30 days of sanctioning the scheme file courts order with ROC.

It is well established that the nature of jurisdiction of Court under Section 394 is supervisory 8, as
it cannot sanction an arrangement which does not have the necessary approvals of the members
and creditors of the company.4 The jurisdiction does not transform into appellate jurisdiction
throughout the proceedings.5 Further, the court cannot deal with issues which are outside the
scheme as its jurisdiction stands limited to issues within it.9 The broad parameters defining the

8
In Re: Kirloskar Electric Co. Ltd., [2003] 116 Comp Cas 413 (Kar).
9
In Re, Savoy Hotel Ltd., (1981) All ER 646.

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jurisdiction of the sanctioning court have been laid down by the Supreme Court in the landmark
judgment of Miheer H. Mafattal v. Mafatlal Industries Ltd.10

Section 394(4)(b) states that a ‘transferee company’ under the section can only be a
‘company within the meaning of this Act’ while a ‘transferor company’ can be ‘any body
corporate, whether within the meaning of the Act or not’. The expression ‘body corporate’
includes a foreign company under Section 2(7). Thus, under the purview of Section 394, a
foreign company can amalgamate/merge into an Indian company with the sanction of the
court.11

The Report of the Expert Committee on Company Law, 2005 (Irani Committee Report),
argues that under the current framework of law as provided under Section 394, an Indian
company cannot merge into a foreign company. The Report states the position in the
following words:

“A forward looking law on mergers and amalgamations needs to also recognize that an
Indian company ought to be permitted with a foreign company to merger. Both contract
based mergers between an Indian company and a foreign company and court based mergers
between such entities where the foreign company is the transferee, needs to be recognized in
Indian Law.”

The Committee recognizes that this would require some pioneering work between various
jurisdictions in which such mergers and acquisitions are being executed/created.

Also, in the case of Bombay Gas Co. Pvt. Ltd. v. Union of India12, the court has categorically
laid down that: It is quite clear from the special provisions of law contained in section
394(4)(b) of the Act that the transferor company could be a body corporate incorporated
outside India but the transferee company could not be a foreign company.

Hindustan Lever Employees Union v. Hindustan Lever Ltd.13

Facts- The case involved merger of Tata Oil Mills Company Ltd, an Indian company, with
Hindustan Lever Ltd., a subsidiary of foreign company. Under the scheme, the shareholders of
transferor were to be allotted shares in the transferee company and a preferential allotment at
relatively low price was to be made to the foreign parent in order to maintain its shareholding at
the level of 51%. Moving beyond the settled “prudent business management” test, the court

10
Miheer H. Mafattal v. Mafatlal Industries Ltd., (1997) 1 SCC 579.
11
Bombay Gas Co. Pvt. Ltd. v. Union of India [1997] 89 Comp Cas 195 (Bom); Andhra Bank Housing Finance
Ltd. v. Andhra Bank [2003] 47 SCL 513 (AP).
12
Bombay Gas Co. Pvt. Ltd. v. Union of India, [1997] 89 Comp Cas 195 (Bom).
13
AIR 1995 SC 470.

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added a new ground for review of such a scheme on the ground of public interest by making the
following observations:

“But when the court is concerned with a scheme of merger with a subsidiary of a foreign
company then the test is not only whether the scheme shall result in maximizing profits of the
shareholders or whether the interest of employees was protected but it has to ensure that
merger shall not result in impeding promotion of industry or shall obstruct growth of
national economy. Liberalized economic policy is to achieve this goal.” The merger,
therefore, should not be contrary to this objective. Reliance on English decision for Custina
Re Hoare14 and Bugle Press LIC15 that the power of the court is to be satisfied only whether
the provisions of the Act have been complied with or that the class or classes were fully
represented and the arrangement was such as a man of business would reasonably approve
between two private companies may be correct and may normally be adhered to but when the
merger is with a subsidiary of a foreign company then economic interest of the country may
have to be given precedence. The jurisdiction of the court in this regard is comprehensive.

In the case of In Re Moschip Semiconductor Technology Ltd.16, the court was confronted with
the question of permissibility of a scheme whereby all the assets of a foreign company were
transferred to an Indian company in lieu of the latter allotting share to the shareholders of the
former. On a plain interpretation of Section 394, the court concluded that such cross border
mergers were permissible and subject to sanction of the Court. It laid down that in a cross border
merger the scheme is subject to the laws of both the countries where the companies are
incorporated. In that case, the laws of California under which the foreign company was
incorporated provided that any merger would be effective the moment certified copy of the order
passed by the Court having territorial jurisdiction over the Indian company is filed within six
months from the effective date. The court held that the merger will become effective after
complying with the aforesaid condition under the Californian law. Interestingly, the court only
looked into the issue of whether the scheme was permissible under section 394 and did not apply
the public interest test laid down in the Hindustan Lever judgment.

In another case of In re Bank Muscat SAOG17, the petition was filed by a bank based in Muscat,
Oman, which had obtained a licence from the Reserve Bank of India to operate a branch in
Bangalore. Under a scheme of arrangement, the assets of the branch were to be transferred to a

14
1933 AER Ch. 105
15
1961 Chancery Division 270
16
[2004] 120 Comp Cas 108 (AP).
17
[2004] 120 Comp Cas 340 (Kar).

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transferee company formed and registered under the Companies Act, 1956. Under Section 600(4),
the registration of a foreign company has to be with the Registrar at New Delhi while its place of
business can be located anywhere in India. The central question which arose was whether the
High Court having jurisdiction over the principal place of business of a foreign company in India
has the jurisdiction to entertain such a petition under Section 394. The court answered the
question in affirmative on the ground that under section 600 (4) registered office or place of
business of foreign company is the determinative factor for jurisdiction. Mere registration with
the Registrar at New Delhi is not sufficient to confer jurisdiction but the determinative factor is
the place from which real business is conducted. The actual scheme was approved by the court on
merits.

Other Acts which influence the Cross Border Mergers and Acquisitions are:-

SEBI TAKEOVER CODE 2011

The objective of the Takeover code is to regulate in an organized manner the substantial
acquisition of shares and takeover of a company whose shares are quoted on a stock
exchange i.e. listed company. In a limited sense these regulations also apply to certain
unlisted companies including a body corporate incorporated outside India to an extent
where the acquisition results in the control of a listed company by the acquirer.

COMPETITION ACT 2002

Competition Act 2002 was enacted to ensure free and fair competition in the market by
prohibiting anti-competitive agreements, abuse of dominant position and combinations likely
to have appreciable adverse effects on competition within the relevant market in India.
Competition act also keep watch on the mergers and acquisitions by the Indian companies.
Sec 5 and 6 deals with the mergers of the company. Section 5 of the act deals with
‘Combinations” which defines combinations with reference to assets and turnover

(a) Exclusively in India and

(b) In India and outside India.

For example, an Indian company with turnover of Rs. 3000 crores cannot acquire another
Indian company without prior notification and approval of the Competition Commission. On
the other hand, a foreign company with turnover outside India of more than USD 1.5 billion
(or in excess of Rs. 4500 crores) may acquire a company in India with sales just short of Rs.
1500 crores without any notification to (or approval of) the Competition Commission being
required. The act requires the competition authority to approve or reject mergers on the basis
of competition only.

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Section 6 says that no person or enterprise shall enter into a combination which causes or is
likely to cause an appreciable adverse effect on competition within the relevant market in
India and such a combination shall be void.

INCOME TAX ACT 1961

The term amalgamation is defined in sec 2 (1B) of the act. It covers mergers also.

Some important provisions of income tax act regarding mergers and acquisitions are as
follows:

Section 2 (IB): Amalgamation means merger of either one or more companies with another
company or merger of two or more companies to form one company in such a manner that:

i. All the properties and liabilities of the transferor company/companies become the
properties and liabilities of Transferee Company.

ii. Shareholders holding not less than 75% of the value of shares in the transferor company
(other than shares which are held by, or by a nominee for, the transferee company or its
subsidiaries) become shareholders of the transferee company.

Section 47 (vi): Any transfer, in a scheme of amalgamation, of a capital asset by the

amalgamating company to the amalgamated company if the amalgamated company is an
Indian company is not regarded as transfer and not chargeable to tax.

Section 47 (vii): The transfer of shares by the shareholders of the transferor company in lieu
of shares of the transferee company on merger is not regarded as transfer and hence gains
arising from the same are not chargeable to tax in the hands of the shareholders of the
transferee company.

Section 49 (2): In case of merger, cost of acquisition of shares of the transferee company,
which were acquired in pursuant to merger will be the cost incurred for acquiring the shares
of the transferor company.

Section 72A: Government can allow carry forward of losses and unabsorbed depreciation
provided the amalgamated company carry on the business of the amalgamating company for
at least 5 years.

There shall be no Sales tax on mergers and amalgamation.

FOREIGN EXCHANGE MANAGEMENT ACT 1999

FEMA is regulating the cross border mergers and acquisitions. The foreign exchange laws
relating to issuance and allotment of shares to foreign entities are contained in The Foreign
Exchange Management (Transfer or Issue of Security by a person residing outside India)

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Regulation, 2000 issued by RBI vides Notification No. FEMA 20 /2000-RB dated 3rd May,
2000. These regulations contained general provisions for inbound and outbound cross border
mergers and acquisitions in India.. Under these provisions once the scheme of merger or
amalgamation of two or more Indian companies has been approved by a court in India, the
transferee company or new company is allowed to issue share to the shareholders of the
transferor company resident outside India subject to the condition that:

i. The percentage of shareholding of person’s resident outside India in the transferee or new
company does not exceed the sectoral cap.

ii. The transferor company or the transferee or the new company is not engaged in activities,
which are prohibited in terms of FDI policy.

CHANGES UNDER THE COMPANIES ACT,

2013

The year 2013 was a challenging year for many economies at large and India’s story was no
different. India’s GDP growth rate dropped from earlier highs but still continued to stay
ahead of other emerging markets given the resilience of domestic consumption demand.

A high fiscal deficit, depreciating rupee and high inflation levels were some of the key
economic concerns. Against this backdrop, M&A activity continued, though the momentum

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slowed down. Total deal activity stood at US$32bn across 738 deals in 2013. Figure 2 gives
a snapshot of M&A transactions over the last two calendar years.18

The Government of India has recently become more proactive and has introduced some key
positive reforms that will give an impetus to long-term sustainable growth:

1. Passing of key legislations such as the Land Acquisition Bill and the Lokpal Bill (anti-
corruption) to create greater transparency in the regulatory environment.

2. Relaxation of foreign direct investment limits in various sectors such as aviation, telecom
and defence.

3. Part withdrawal of subsidies on petroleum products to manage fiscal deficit.

4. Replacement of the six decade old Companies Act 1956 with Companies Act 2013.

5. Steps to curb unwanted imports such as gold to manage current account deficit.

THE COMPANIES ACT, 2013

The Companies Act, 1956 permits merger of foreign companies with companies registered in
India but not vice-versa. The Bill permits merger of Indian company with foreign companies
as well.

KEY CHANGES:-
The Companies Act, 2013 provides for Amalgamation of/Demerger from a foreign company,
whether having its place of business in India or not, with an Indian company and vice versa.

 Applicability- Between companies registered under this Act and companies

incorporated in notified countries.

 The list of countries is yet to be notified by the MCA.

 Central Government may make rules in connection with such Amalgamation.

 Approving Authority

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International Mergers &Acquisitions Review 2014.

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1. National Company Law Tribunal
2. Prior approval of the Reserve Bank of India also required
3. Other approvals as may be prescribed.

 Approval of High Court not required.

 Merger scheme may also provide for consideration in form of cash or Indian depository
receipts (IDR) or partly in cash or partly in IDR.

 Cross-border merger can facilitate overseas listing of

Indian companies.

 Exchange control and tax laws to be aligned to effect

such mergers

CONCLUSION

The legal and financial reforms by the government of India since the early 1990's have
resulted in substantial growth of the Indian economy. With the liberalized policies the
practice of mergers and acquisitions has attained considerable significance in the

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contemporary corporate scenario in India which is broadly used for reorganizing the business
entities. According to a recent study, mergers and acquisition activity in the country more
than doubled in the first month of 2010 as deals worth nearly USD three billion (about Rs.
13,950 crore) were announced amid improved signs of liquidity. Indian companies have
shown their globle presence by acquiring some big companies outside IndiaThe most
important benefit that the developing and transition economies derive from outward
investments is increased competitiveness. This strengthens the arms of local companies and
of the MNCs to survive in a competitive milieu. Therefore, the more the domestic industries
invest abroad, the more the benefits to the home economy.

In this period of challenged macro economic situation, Merger and Acquisition (‘M&A’) is
viewed as an important tool in improving the financial health of corporate sector. One of the
key features of this Bill is promoting and regulating M&A activity in the country. The Bill
intends to bring in reformatory and contemporary provisions, so as to make M& A
environment more congenial.19

For instance the existing provisions under the Companies Act, 1956 envisaged and provided
for a restrictive scenario allowing only foreign companies to merge with Indian companies by
following the procedures laid down in sections 391 to 394 of the Act and not the other way
around. However, the Companies Act, 2013 has widened the scope by allowing an Indian
company to merge with a foreign company and thus can be a transferor company. For those
uninitiated with Indian Law, the term foreign company has been defined as a company or
body corporate incorporated outside India whether having a place of business in India or not.

To conclude, the New Act is modern and progressive in nature. It aims to align the law with
current commercial realities. It has been drafted, keeping in mind the need of the hour, the
necessity to boost the Indian economy, bring transparency in corporate restructuring.
However, other allied laws and regulations such as Foreign exchange Management
Act (‘FEMA’), Income tax Act, 1961 (‘IT Act’) and the proposed rules to be notified by the
Central Government should fall in line with the provisions of the Companies Act, 2013 else,
it would make the implementation inefficient and yield inconsistency which in the current
economic environment would be an unwelcome experimentation.

19
http://indianlawyer250.com/features/article/180/the-proposed-new-corporate-law-framework-impact-cross-
border-business/

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The 1956 Act permits cross-border mergers only where the transferor is a foreign company. In
contrast, the 2013 Act permits in-principle mergers between an Indian and a foreign company
located in a jurisdiction notified by the central government in periodic consultation with RBI.
Such a merger would be subject to RBI approval and Scheme may provide payment in cash or
depository receipts or both. The payment in cash or depository receipts would facilitate exit to the
shareholders of the merging entity who do not want to be a part of the merged entity. These
changes reflect the legislature’s intent to facilitate cross-border business. The Income Tax Act
presently grants tax exemptions15 on mergers if the transferee is an Indian company and does not
recognize a situation where the transferee will be a foreign company, as contemplated under the
2013 Act. The introduction of cross-border mergers under the 2013 Act may, therefore, require
corresponding changes in other laws, including foreign exchange and tax.

Only time will tell how the harmony between all these laws and their requirement is ensured.
However, since the new law has simplified the process it is expected to aid the market trends
touting India as a favoured destination of investment and outbound investment by Indian
investors.

BIBLIOGRAPHY

INTERNET LINKS:-

 http://indianlawyer250.com/features/article/180/the-proposed-new-corporate-law-
framework-impact-cross-border-business/

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  International Mergers &Acquisitions Review 2014.
 India breaks into top 10 M&A league, Economic Times, April 12, 2007
 http://www.investopedia.com/articles/financial-theory/08/ma-deal.asp
 http://www.investopedia.com/terms/a/acquisition.asp

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