NCLT Bengaluru Sanctions Yahoo India's Amalgamation Scheme, Accepts Undertakings on Tax and FEMA Compliance

Bengaluru, July 30, 2025 – The National Company Law Tribunal (NCLT), Bengaluru Bench, has approved the Scheme of Amalgamation involving two Yahoo group companies with Yahoo India Private Limited. The bench, comprising Judicial Member Shri Sunil Kumar Aggarwal and Technical Member Shri Radhakrishna Sreepada, sanctioned the merger after accepting a series of undertakings from the companies addressing concerns raised by various regulatory bodies, including the Income Tax Department and the Reserve Bank of India.

The order, passed under Sections 230-232 of the Companies Act, 2013, paves the way for the merger of Yahoo Software Development India Private Limited (Transferor Company 1) and 514 Legacy News India Private Limited (Transferor Company 2) into Yahoo India Private Limited (Transferee Company), with an appointed date of April 1, 2024.

Overview of the Amalgamation

The petition detailed a strategic amalgamation aimed at consolidating business operations. The transferor companies, Yahoo Software Development and 514 Legacy News, will dissolve without winding-up and their assets, liabilities, employees, and obligations will be transferred to the transferee entity, Yahoo India.

The rationale behind the scheme, as per the filings, is to streamline corporate structure and enhance operational efficiencies. The NCLT had previously dispensed with the meetings of shareholders and unsecured creditors in its first motion order dated November 6, 2024.

Regulatory Scrutiny and Company Undertakings

The scheme underwent rigorous scrutiny from several statutory authorities, whose observations were central to the proceedings.

Registrar of Companies (ROC) and Regional Director (RD): The ROC and RD raised several queries concerning open charges against the transferee company, differing business objects (news vs. software), payment of fees on increased share capital, and the interests of employees. The petitioner companies provided undertakings to: - Settle all statutory dues, including significant undisputed and disputed tax liabilities of Transferor Company 1 amounting to crores. - Ensure all employees of the transferor companies are absorbed into Yahoo India on terms no less favourable than their current employment. - Pay the differential stamp duty and fees on the combined authorised share capital. - Preserve all books and papers of the amalgamating companies as per Section 239 of the Companies Act, 2013.

Income Tax Department: The IT Department filed a detailed report highlighting substantial outstanding tax demands against Yahoo Software Development India Pvt. Ltd., totaling over ₹40 crores across various assessment years. The department sought an assurance that these liabilities would be enforceable against the new, merged entity. In response, Yahoo India Pvt. Ltd. provided a sworn undertaking to settle all crystallized tax demands post-merger.

"The outstanding demands, if any post rectification and for giving effect to the orders of the Appellate authorities shall be enforced against the Transferee Company." - Income Tax Department Report

Reserve Bank of India (RBI): The RBI report pointed to several pending compliances under the Foreign Exchange Management Act (FEMA). These included outstanding Inward Remittance Messages (IRMs), un-reconciled Shipping Bills (SBs), and pending Bills of Entry (BoEs) for both Yahoo Software Development and Yahoo India. The RBI also noted a past FEMA contravention by Yahoo India related to delayed reporting, for which a compounding application was withdrawn.

The companies responded by detailing the reasons for the delays, attributing them to administrative processes and erroneous purpose codes. They provided undertakings to resolve all outstanding FEMA-related issues with their authorised dealer banks and confirmed their commitment to settle any liability that may arise from past contraventions.

The Tribunal's Final Order

After hearing counsel and perusing the reports, replies, and undertakings, the NCLT concluded that the petitioners had adequately addressed all regulatory concerns.

"The observations of statutory authorities in respect of the Scheme and replies thereto of the petitioner companies have been narrated in sufficient details to cull that the reservations of former are adequately responded with requisite undertakings and explanations as to leave no impediment for the approval of Scheme." - NCLT Bengaluru Bench

The Tribunal sanctioned the Scheme of Amalgamation, making it binding on all shareholders and creditors. Key directions in the final order include: - The appointed date for the amalgamation is confirmed as April 1, 2024. - The transferor companies shall stand dissolved without the process of winding-up. - The transferee company must pay costs of ₹75,000 to the Regional Director and ₹25,000 to the Prime Minister’s National Relief Fund. - The companies are bound by all undertakings given to the ROC, RD, IT Department, and RBI. - The approval does not grant any exemption from stamp duty or other applicable taxes. - The companies are directed to comply with Section 170A of the Income Tax Act, 1961, regarding the furnishing of modified returns post-amalgamation.

The order marks the final regulatory milestone for the consolidation of Yahoo's key software development and corporate entities in India, streamlining its structure for future operations.