Pre. Notification No. G.S.R. 1134(E), dated 14th December, 2016

G.S.R. 1134(E).-In exercise of the powers conferred by sub-sections (1) and (2) of section 469 read with sections 230 to 233 and sections 235 to 240 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules, namely:-

R.1 Short Title and Commencement

(1) These rules may be called the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

(2) They shall come into force with effect from 15th December, 2016.

R.2 Definitions

(1) In these rules, unless the context otherwise requires. -

(a)"Act"means the Companies Act, 2013 (18 of 2013);

(b)"Annexure"means the annexure to these rules;

(c)"Form"means a form set forth in annexure "A" to these rules which shall be used for the matter to which it relates, and includes an electronic version thereof;

(d)"Liquidator"means the Liquidator appointed under the Act or under the Insolvency and Bankruptcy Code, 2016 (31 of 2016);

(2) All other words and expressions used in these rules but not defined herein, and defined in the Act or in the Companies (Specification of Definitions Details) Rules, 2014 or in the National Company Law Tr

R.3 Application for order of a meeting

(1) An application under sub-section (1) of section 230 of the Act may be submitted in Form no. NCLT-1 (appended in the National Company Law Tribunal Rules, 2016) along with:-

(i) a notice of admission in Form No. NCLT-2 (appended in the National Company Law Tribunal Rules, 2016);

(ii) an affidavit in Form No. NCLT-6 (appended in the National Company Law Tribunal Rules, 2016);

(iii) a copy of scheme of compromise or arrangement, which should include disclosures as per sub-section (2) of section 230 of the Act; and

(iv) fee as prescribed in the Schedule of Fees.

(2) Where more than one company is involved in a scheme in relation to which an applica

R.4 Disclosures in application made to the Tribunal for compromise or arrangement

Creditors Responsibility Statement. - For the purposes of sub-clause (i) of clause (c) of sub-section (2) of section 230 of the Act, the creditor's responsibility statement inForm No. CAA. 1shall be included in the scheme of corporate debt restructuring.

Explanation.- For the purpose of this rule, it is clarified that a scheme of corporate debt restructuring as referred to in clause (c) of sub-section (2) of section 230 of the Act shall mean a scheme that restructures or varies the debt obligations of a company towards its creditors.

R.5 Directions at hearing of the application

Upon hearing the application under sub-section (1) of section 230 of the Act, the Tribunal shall, unless it thinks fit for any reason to dismiss the application, give such directions as it may think necessary in respect of the following matters:-

(a) determining the class or classes of creditors or of members whose meeting or meetings have to be held for considering the proposed compromise or arrangement; or dispensing with the meeting or meetings for any class or classes of creditors in terms of sub-section (9) of section 230;

(b) fixing the time and place of the meeting or meetings;

(c) appointing a Chairperson and scrutinizer for the meeting or meetings to be held, as the case may be and

R.6 Notice of meeting

(1) Where a meeting of any class or classes of creditors or members has been directed to be convened, the notice of the meeting pursuant to the order of the Tribunal to be given in the manner provided in subsection (3) of section 230 of the Act shall be inForm No. CAA.2and shall be sent individually to each of the creditors or members.

(2) The notice shall be sent by the Chairperson appointed for the meeting, or, if the Tribunal so directs, by the company (or its liquidator), or any other person as the Tribunal may direct, by registered post or speed post or by courier or by email or by hand delivery or any other mode as directed by the Tribunal to their last known address at least one month before the date fixed for the meeti

R.7 Advertisement of the notice of the meeting

The notice of the meeting under sub-section (3) of Section 230 of the Act shall be advertised inForm No. CAA.2in at least one English newspaper and in at least one vernacular newspaper having wide circulation in the State in which the registered office of the company is situated, or such newspapers as may be directed by the Tribunal and shall also be placed, not less than thirty days before the date fixed for the meeting, on the website of the company (if any) and in case of listed companies also on the website of the SEBI and the recognized stock exchange where the securities of the company are listed:

Provided that where separate meetings of classes of creditors or members are to be held, a joint advertisement for such meeti

R.8 Notice to statutory authorities

(1) For the purposes of sub-section (5) of section 230 of the Act, the notice shall be inForm No. CAA.3, and shall be accompanied with a copy of the scheme of compromise or arrangement, the explanatory statement and the disclosures mentioned under rule 6, and shall be sent to. -

(i) the Central Government, the Registrar of Companies, the Income-tax authorities, in all cases;

(ii) the Reserve Bank of India, the Securities and Exchange Board of India, the Competition Commission of India, and the stock exchanges, as may be applicable ;

(iii) other sectoral regulators or authorities, as required by Tribunal.

(2) The notice to the authorities mentioned in sub-rule (1

R.9 Voting

The person who receives the notice may within one month from the date of receipt of the notice vote in the meeting either in person or through proxy or through postal ballot or through electronic means to the adoption of the scheme of compromise and arrangement.

Explanation.- For the purposes of voting by persons who receive the notice as shareholder or creditor under this rule-

(a) "shareholding" shall mean the shareholding of the members of the class who are entitled to vote on the proposal; and

(b) "outstanding debt" shall mean all debt owed by the company to the respective class or classes of creditors that remains outstanding as per the latest audited financial statement, or if such st

R.10 Proxies

(1) Voting by proxy shall be permitted, provided a proxy in the prescribed form duly signed by the person entitled to attend and vote at the meeting is filed with the company at its registered office not later than 48 hours before the meeting.

(2) Where a body corporate which is a member or creditor (including holder of debentures) of a company authorizes any person to act as its representative at the meeting, of the members or creditors of the company, or of any class of them, as the case may be, a copy of the resolution of the Board of Directors or other governing body of such body corporate authorizing such person to act as its representative at the meeting, and certified to be a true copy by a director, the manager, the secretar

R.11 Copy of compromise or arrangement to be furnished by the company

Every creditor or member entitled to attend the meeting shall be furnished by the company, free of charge, within one day on a requisition being made for the same, with a copy of the scheme of the proposed compromise or arrangement together with a copy of the statement required to be furnished under section 230 of Act.

R.12 Affidavit of service

(1) The Chairperson appointed for the meeting of the company or other person directed to issue the advertisement and the notices of the meeting shall file an affidavit before the Tribunal not less than seven days before the date fixed for the meeting or the date of the first of the meetings, as the case may be, stating that the directions regarding the issue of notices and the advertisement have been duly complied with.

(2) In case of default under sub-rule (1), the application along with copy of the last order issued shall be posted before the Tribunal for such orders as it may think fit to make.

R.13 Result of the meeting to be decided by voting

(1) The voting at the meeting or meetings held in pursuance of the directions of the Tribunal under Rule 5 on all resolutions shall take place by poll or by voting through electronic means.

(2) The report of the result of the meeting under sub - rule (1) shall be inForm No. CAA. 4and shall state accurately the number of creditors or class of creditors or the number of members or class of members, as the case may be, who were present and who voted at the meeting either in person or by proxy, and where applicable, who voted through electronic means, their individual values and the way they voted.

R.14 Report of the result of the meeting by Chairperson

The Chairperson of the meeting (or where there are separate meetings, the Chairperson of each meeting) shall, within the time fixed by the Tribunal, or where no time has been fixed, within three days after the conclusion of the meeting, submit a report to the Tribunal on the result of the meeting inForm No. CAA.4-

R.15 Petition for confirming compromise or arrangement

(1) Where the proposed compromise or arrangement is agreed to by the members or creditors or both as the case may be, with or without modification, the company (or its liquidator), shall, within seven days of the filing of the report by the Chairperson, present a petition to the Tribunal inForm No. CAA. 5for sanction of the scheme of compromise or arrangement.

(2) Where a compromise or arrangement is proposed for the purposes of or in connection with scheme for the reconstruction of any company or companies, or for the amalgamation of any two or more companies, the petition shall pray for appropriate orders and directions under section 230 read with section 232 of the Act.

(3) Where the company fails to

R.16 Date and notice of hearing

(1) The Tribunal shall fix a date for the hearing of the petition, and notice of the hearing shall be advertised in the same newspaper in which the notice of the meeting was advertised, or in such other newspaper as the Tribunal may direct, not less than ten days before the date fixed for the hearing.

(2) The notice of the hearing of the petition shall also be served by the Tribunal to the objectors or to their representatives under sub-section (4) of section 230 of the Act and to the Central Government and other authorities who have made representation under rule 8 and have desired to be heard in their representation.

R.17 Order on petition

(1) Where the Tribunal sanctions the compromise or arrangement, the order shall include such directions in regard to any matter or such modifications in the compromise or arrangement as the Tribunal may think fit to make for the proper working of the compromise or arrangement.

(2) The order shall direct that a certified copy of the same shall be filed with the Registrar of Companies within thirty days from the date of the receipt of copy of the order, or such other time as may be fixed by the Tribunal.

(3) The order shall be inForm No. CAA. 6, with such variations as may be necessary.

R.18 Application for directions under section 232 of the Act

(1) Where the compromise or arrangement has been proposed for the purposes of or in connection with a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies, and the matters involved cannot be dealt with or dealt with adequately on the petition for sanction of the compromise or arrangement, an application shall be made to the Tribunal under section 232 of the Act, by a notice of admission supported by an affidavit for directions of the Tribunal as to the proceedings to be taken.

(2) Notice of admission in such cases shall be given in such manner and to such persons as the Tribunal may direct.

R.19 Directions at hearing of application

Upon the hearing of the notice of admission given under rule 18 or upon any adjourned hearing thereof, the Tribunal may make such order or give such directions as it may think fit, as to the proceedings to be taken for the purpose of reconstruction or amalgamation, as the case may be, including, where necessary, an inquiry as to the creditors of the transferor company and the securing of the debts and claims of any of the dissenting creditors in such manner as the Tribunal may think just and appropriate.

R.20 Order under section 232 of the Act

An order made under section 232 read with section 230 of the Act shall be inForm No. CAA. 7with such variation as the circumstances may require

Legal Commentary on Act: COMPANIES (COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS) RULES, 2016, Section R.20

Introduction

Section R.20 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, pertains to procedural provisions related to schemes of compromise, arrangement, or amalgamation under the Companies Act, 2013. It forms part of the framework designed to regulate mergers, acquisitions, and restructuring processes, ensuring transparency and compliance with statutory requirements.

What does Section R.20 Say

While specific text of Section R.20 is not directly provided in the sources, it is associated with Rule 20 of the 2016 Rules, which generally deals with procedural aspects of schemes, including the filing, approval, and compliance requirements for mergers or arrangements. It emphasizes the importance of adhering to prescribed procedures for schemes to be sanctioned by the Tribunal.

Essential Ingredients

• Compliance with procedural formalities prescribed under the Rules.
• Filing of requisite forms and documentation with the Registrar of Companies.
• Submission of necessary certificates, including auditor’s certificates, to validate the scheme.
• Adherence to timelines for objections and approvals.
• Notification and publication requirements to inform stakeholders.

Scope of Section R.20

• Applies to schemes of compromise, arrangement, or amalgamation under the Companies Act, 2013.
• Encompasses procedural steps for approval by the National Company Law Tribunal (NCLT).
• Covers the requirements for filing, notices, and certifications necessary for scheme sanctioning.
• Ensures procedural compliance for mergers, demergers, or arrangements involving companies.

Punishment for Section R.20

• Specific penalties for contravention of Rule 20 are not explicitly detailed in the sources.
• However, Rule 20, being part of the procedural framework, may invoke penalties for non-compliance, including fines or other legal consequences as per Rule 15.1.20 and related provisions.
• The general penalty for contravention of rules under the 2016 Rules involves fines extending up to Rs. 5,000, with a daily fine of Rs. 500 for continuing violations [Source: ""].

Legal Comments

• "Procedural Compliance" - Strict adherence to procedural rules under Rule 20 is essential for scheme approval and legal validity [Source: ""].
• "Filing Requirements" - Filing of necessary forms like CAA-7 and CAA-8 is mandatory for scheme approval [Source: ""].
• "Certification" - A certificate from the company's auditor is required before sanctioning a compromise or arrangement [Source: ""].
• "Timeframes" - Objections or suggestions must be received within 30 days of scheme publication, emphasizing timely compliance [Source: ""].
• "Penalty for Non-compliance" - Contravention of procedural rules may attract fines up to Rs. 5,000, with daily fines for ongoing violations [Source: ""].
• "Scheme Approval Process" - The scheme must be approved by the NCLT following the prescribed procedural steps, including notifications and hearings [Source: ""].
• "Scope of Rules" - The rules aim to streamline mergers and arrangements, ensuring transparency and legal certainty [Source: ""].
• "Amendments and Updates" - Recent amendments aim to expand the scope and streamline approval processes under the Rules [Source: ""].
• "Legal Validity" - Non-compliance with procedural rules, including those in Rule 20, can render schemes liable for challenge or invalidation [Source: ""].
• "Tribunal's Discretion" - The NCLT has the discretion to approve or reject schemes based on compliance with procedural requirements [Source: ""].
• "Public Interest" - The central government’s satisfaction regarding public interest is a prerequisite for certain amalgamations [Source: ""].
• "Notification and Gazette" - Proper notification and gazette publication are integral to procedural compliance [Source: ""].
• "Role of the Registrar" - The Registrar of Companies plays a key role in the filing and verification process under Rule 20 [Source: ""].
• "Impact of Delay" - Delays in filing or procedural lapses can lead to penalties and affect scheme validity [Source: ""].
• "Legal Certainty" - The detailed procedural framework under Rule 20 aims to provide legal certainty and protect stakeholder interests [Source: ""].
• "Transparency" - The rules promote transparency through publication, objections, and certification processes [Source: ""].
• "Enforcement" - Enforcement mechanisms include penalties for violations to ensure compliance with procedural norms [Source: ""].

Note: Due to limited direct textual information on Section R.20 itself, the commentary primarily draws upon the procedural and penalty provisions associated with Rule 20 and related rules from the 2016 framework.

R.21 Statement of compliance in mergers and amalgamations

For the purpose of sub-section (7) of section 232 of the Act, every company in relation to which an order is made under sub-section (3) of section 232 of the Act shall until the scheme is fully implemented, file with the Registrar of Companies, the statement inForm No. CAA. 8along with such fee as specified in the Companies (Registration Offices and Fees) Rules, 2014 within two hundred and ten days from the end of each financial year.

R.22 Report on working of compromise or arrangement

At any time after issuing an order sanctioning the compromise or arrangement, the Tribunal may, either on its own motion or on the application of any interested person, make an order directing the company or where the company is being wound-up, its liquidator, to submit to the Tribunal within such time as the Tribunal may fix, a report on the working of the said compromise or arrangement and on consideration of the report, the Tribunal may pass such orders or give such directions as it may think fit.

R.23 Liberty to apply

(1) The company, or any creditor or member thereof, or in case of a company which is being wound-up, its liquidator, may, at any time after the passing of the order sanctioning the compromise or arrangement, apply to the Tribunal for the determination of any question relating to the working of the compromise or arrangement.

(2) The application shall in the first instance be posted before the Tribunal for directions as to the notices and the advertisement, if any, to be issued, as the Tribunal may direct.

(3) The Tribunal may, on such application, pass such orders and give such directions as it may think fit in regard to the matter, and may make such modifications in the compromise or arrangement as it may consi

R.24 Liberty of the Tribunal

(1) At any time during the proceedings, if the Tribunal hearing a petition or application under these Rules is of the opinion that the petition or application or evidence or information or statement is required to be filed in the form of affidavit, the same may be ordered by the Tribunal in the manner as the Tribunal may think fit.

(2) The Tribunal may pass any direction(s) or order or dispense with any procedure prescribed by these rules in pursuance of the object of the provisions for implementation of the scheme of arrangement or compromise or restructuring or otherwise practicable except on those matters specifically provided in the Act.

R.25 Merger or Amalgamation of certain companies

(1) The notice of the proposed scheme, under clause (a) of subsection

(1) of section 233 of the Act, to invite objections or suggestions from the Registrar and Official Liquidator or persons affected by the scheme shall be inForm No. CAA. 9-

(2) For the purposes of clause (c) of sub-section (1) of section 233 of the Act the declaration of solvency shall be filed by each of the companies involved in the scheme of merger or amalgamation inForm No. CAA. 10along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014, before convening the meeting of members and creditors for approval of the scheme.

(3) For the purposes of clause (b) and (d) of sub-se

R.26 Notice to dissenting shareholders for acquiring the shares

For the purposes of sub-section (1) of section 235 of the Act, the transferee company shall send a notice to the dissenting shareholder(s) of the transferor company, inForm No. CAA. 14at the last intimated address of such shareholder, for acquiring the shares of such dissenting shareholders.

R.27 Determination of price for purchase of minority shareholding

For the purposes of sub-section (2) of section 236 of the Act, the registered valuer shall determine the price (hereinafter called as offer price) to be paid by the acquirer, person or group of persons referred to in sub-section (1) of section 236 of the Act for purchase of equity shares of the minority shareholders of the company, in accordance with the following rules:-

(1) In the case of a listed company,-

(i) the offer price shall be determined in the manner as may be specified by the Securities and Exchange Board of India under the relevant regulations framed by it, as may be applicable; and

(ii) the registered valuer shall also provide a valuation report on the basis of

R.28 Circular containing scheme of amalgamation or merger

(1) For the purposes of clause (a) of sub-section (1) of section 238 of the Act, every circular containing the offer of scheme or contract involving transfer of shares or any class of shares and recommendation to the members of the transferor company by its directors to accept such offer, shall be accompanied by such information as set out inForm No. CAA. 15-

(2) The circular shall be presented to the Registrar for registration.

R.29 Appeal under sub-section (2) of section 238 of the Act

Any aggrieved party may file an appeal against the order of the Registrar of Companies refusing to register any circular under sub-section (2) of section 238 of the Act and the said appeal shall be in theForm No. NCLT. 9(appended in the National Company Law Tribunal Rules, 2016) supported with an affidavit in theForm No. NCLT. 6(appended in the National Company Law Tribunal Rules, 2016).