SPEEDING UP FAST-TRACK MERGERS

The govt has proposed a wider scope for fast-track M&As, but a lot more action is awaited

- RUCHIKA CHITRAVANSHI New Delhi, 8 April

Last week, the Ministry of Corporate Affairs brought a much awaited proposal on widening the scope of fast-track mergers under the Company Law.

Steps such as allowing mergers of any subsidiary, as long as it is not listed, with its wholly owned subsidiary or mergers between fellow unlisted subsidiary companies belonging to the same group were in line with industry demand. However, a lot remains in the industry wishlist when it comes to the fast-track mechanism and simplifying mergers.

Lowering thresholds for shareholder approval, allowing listed entities to merge in fast-track mechanism and easing the process for micro, small and medium enterprises (MSMEs) are some of the expert suggestions for policymakers in this area. Also, capacity enhancement at the National Company Law Tribunal (NCLT) benches, which are currently inundated with Insolvency and Bankruptcy Code (IBC) cases, must go hand in hand with merger and acquisition (M&A) reforms, legal experts have said. Besides the NCLT, multiple regulators need to approve mergers under the Companies Act, 2013, and the Competition Act, 2002, from the Competition Commission of India (CCI) to the Securities & Exchange Board of India (Sebi), Reserve Bank of India (RBI) to sectoral regulators, entities looking to merge go from one authority to another, leading to excessive delays.

“The introduction of a single-window clearance mech-anism for mergers and acquisitions, along with predefined time-lines for approvals, can greatly enhance efficiency,” said Sonam Chandwani, managing partner, KS Legal and Associates.

Finance Minister Nirmala Sitharaman in her latest Budget speech had said that the government would rationalise the requirements and procedures for speedy approval of company mergers. The Budget had promised to widen the scope for fast-track mergers while simplifying the process.