Ministry of Corporate Affairs announces new rules for mergers involving foreign companies
The new rules stipulate important changes for companies involved in mergers and amalgamations, especially when dealing with foreign entities.
The Ministry of Corporate Affairs (MCA) on Tuesday (September 10) issued the Companies (Compromises, Arrangements, and Amalgamations) Amendment Rules, 2024, which will take effect from September 17, 2024.
The new rules stipulate important changes for companies involved in mergers and amalgamations, especially when dealing with foreign entities.
Under the new rules, when a foreign company incorporated outside India merges with a wholly-owned subsidiary (WOS) incorporated in India, prior approval from the Reserve Bank of India (RBI) will be required.
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The stipulation aims to streamline the regulatory framework and strengthen compliance with India’s foreign exchange regulations.
Additionally, the transferee Indian company will need to adhere to the provisions outlined in Section 233 of the Companies Act, which governs mergers and amalgamations. Section 233 outlines the procedure for mergers and amalgamations, including the requirement for application to the Central Government.
The new rules stipulate that the application for such mergers should be made by the transferee Indian company to the Central Government under Section 233 of the Companies Act.
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Furthermore, the provisions of Rule 25 will apply to these applications, ensuring that the process is conducted in a structured and transparent manner.
