Amalgamation and Merger: A Tax and Company Law Perspective

TABLE OF CONTENTS
CHAPTER 1 – INTRODUCTION;
• Need for Amalgamation / Merger;
• Economics of Amalgamations / Mergers;
• Need for Taxation of Amalgamation / Merger;
• Research Methodology;
• Definitions and meaning;
• Categories of Mergers;
CHAPTER 2 - AMALGAMATION UNDER THE COMPANIES ACT, 1956;
• Scheme of sections 390 to 396 of the Companies Act;
o Class of Creditors / Members;
o Single window clearance;
• Role of Courts in the Scheme of Mergers / Amalgamations;
o Jurisdiction of Court;
o Valuation of Shares;
o Transfer of Workers;
• Procedure adopted by courts in a scheme of Amalgamation / Merger;
CHAPTER 3 - AMALGAMATION UNDER THE INCOME TAX ACT, 1961;
Amalgamation under section 2(1B) of the Income Tax Act;
• Tax Aspects of Amalgamation / Merger;
• Capital Gains on Amalgamation;
~ Transfer of shares by Amalgamating company;
o Relinquishment of the asset; Extinguishment of rights;
o Cost of acquisition of capital assets by the amalgamated company;
• Capital Gains in the hands of Amalgamated Company;
• Treatment of unabsorbed Depreciation and set off and carry forward of loss;
o Whether loss includes depreciation;
• Amortisation of preliminary expenses;
• Amalgamation - Tax Benefits;
o Unabsorbed Depreciation and past losses of Amalgamating company;
o Investment and Development Allowance under section 32A and section 33A(5) of the Income Tax Act;
o Benefits under section 80HH, 80HHA or 80J of the Income Tax Act;
o Additional Income Tax under section 104 of the Income Tax Act;
o Expenditure on Scientific Research;
o Expenditure on acquisition of patent rights or copyrights;
o Expenditure on Know-how;
o Treatment of bad debts;
CHAPTER 4 - STAMP DUTY ON AMALGAMATION;
• Constitutional background regarding levy of Stamp Duty;
• Relevant Provisions of Indian Stamp Act;
o Transfer of assets and liabilities;
o Whether such a transfer is sale?
o Meaning of 'Conveyance';
o 'Conveyance' covers amalgamation or merger;
o Stamp Duty on Amalgamation / Merger;
CHAPTER 5 - CROSS BORDER MERGERS;
• Indian Legal and Regulatory Considerations;
~ Overseas direct investment;
• Direct Investment in a Joint Venture/Wholly Owned Subsidiary;
o General conditions to be fulfilled for making an investment;
o Sources of investment;
• Investment in a foreign company by ADR/GDR share swap;
o Issue of shares to the employees of the foreign company;
• Indian corporate and securities law issues;
o Special resolution under Section 81(l A} of the Companies Act;
o SEBI (Disclosure and Investor Protection) Guidelines, 2000;
o Approval of the shareholders under Section 372-A of the Companies Act;
o Compliance with the provisions of the SEBI Takeover Code;
• Acquiring A Company In The U.S. - Corporate, Securities And Anti-Trust Law Issues;
o Restrictions on Foreign Ownership of U.S. Corporations;
• Relevant statutes;
~ The Securities Act and the Exchange Act;
o Shareholder disclosure requirements;
o Minority Squeeze-out;
o 'Going-private' transactions;
o Exemptions;
o Antitrust Issues;
o Additional considerations;
• Tax Issues In Cross Border Amalgamations I Mergers
~ Indian tax issues;
o Exemption from capital gains tax to a foreign amalgamating company;
for transfer of capital asset, being shares in an Indian company: Section 47(via};
o Capital gains tax liability on the shareholders of the amalgamating company: Section 47(vii};
o - Availability of carry forward and set off of losses by certain companies Section 79;
~ Cross-border tax issues in the US;
o Structuring the transaction;
o Tax-free Reorganizations and Spin-offs;
o Tax-free Reorganizations in cross border situation;
CHAPTER 6 - CONCLUSION