There have been lot of mergers/amalgamations over the years where the transferor and transferee companies are registered in different states and have assets in different states.
Any Amalgamation is carried out by drafting a scheme detailing the transfer of business in whole for a consideration in equity or cash. Currently the schemes are to be presented to the NCLT of each state where the transferor and transferee companies have its registered office. Respective NCLT passes the order sanctioning the scheme. The ORDER, thus passed, is liable to levying of stamp duty.
This is where the trouble is right now, payment of stamp duty is fine but the questions of which state should the stamp duty be paid, how much rebate can one get in case of paying stamp duty in both states, paying stamp duty in the respective state as per the value of assets which are transferred is to be considered or the worst to pay stamp duty in all the relevant states without rebate at full amount applicable. So, the question is the order of which NCLT is primary instrument by which assets and liabilities are transferred hence liable to full stamp duty
There are numerous cases in the past where the companies have gone to their state high courts seeking clarity on the same but there is need for some clarity and guideline as to what is the best way to levy stamp duty and by whom in case of companies in different states.
In our previous article, we had commented on the following case (which is referred here again for the purpose of analysis) , wherein the decision of judiciary led to increase in the transaction cost of amalgamation.
Amalgamation of Reliance Industries, Mumbai and Reliance Petroleum, Gujarat
In the matter of the amalgamation, Bombay High Court held that
1. Amalgamation scheme is not document chargeable to duty. Order passed by the Court sanctioning such a Scheme under Section 394 of the Companies Act,1956 which effects transfer is a document chargeable to Stamp Duty.
2. The Amalgamation Order of High Court is the instrument. It is not incidental.
This story is from the May 2019 edition of M & A Critique.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the May 2019 edition of M & A Critique.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
Dalmia Group continues its journey of segregation of businesses by way of demerger
Recently Dalmia Group announced yet another restructuring of one of its group companies Dalmia Bharat Refractories Limited.
Rane Group to consolidate its listed operational entities
After keeping different operational listed entities for years, Rane Group, one of the key players in Auto Ancillary space has decided to consolidate its listed operational companies under Rane (Madras) Limited.
Zuari Group's attempts to create the biggest private producer of Fertilisers
“Transfer of Identified shares from ZACL to ZMPPL is a precondition for approval of the merger transaction”
Shankara Building Products separates its trading & marketplace business for independent growth
Recently, Shankara Building Products Limited announced the demerger of its trading/building material marketplace business from its manufacturing business.
CASE LAW: Reduction of Share Capital by way of cancellation of Shares amounts to "Transfer" and Losses available for set-off
Recently, the Mumbai bench of the Income Tax Appellate Tribunal in the case of Tata Sons Limited held that the reduction of share capital of the company by way of cancellation of shares is an extinguishment of rights in shares and be treated as \"transfer\".
Allcargo Logistics creating a more simplified structure
“The transaction will separate the international supply chain business into a separate entity”
TVS Group's Restructuring A Benchmark for Family Arrangements
\"Part I of the scheme, although complex with multiple transactions, executed to achieve separation of ownership between various family branches\"
Aster to sell its GCC Business
Recently, Aster DM healthcare Limited (\"Aster\"]) announced much awaited news for its stakeholders. The Board of Directors of Aster announced separation of its India & GCC (Gulf Corporation Council) business by selling GCC business held by it.
Merger driven by Venture Capital
The Board of Directors of JHS Svendgaard Laboratories Limited. announced merger of the company with private company Vedic Cosmeceuticals Private Limited. As acclaimed by the management, the product portfolio of Vedic Cosmeceuticals Private Limited is complimentary to that of JHS Svendgaard Laboratories Limited's products.
NO TDS on Sale of Property by Liquidator under the IBC, 2016?
Case Law: Company Appeal (AT) (Insolvency) No. 624 of 2020