The Centre may consider eliminating mandatory approval from the company law court in the merger and demerger of local listed firms, two people aware of the discussions in said, over eight years after it allowed the leeway for certain types of companies.
They are also considering whether approval requirements from the NCLT should be included in this process," one of the two people cited above said on the condition of anonymity. To be sure, the government in December, allowed fast-track mergers between a holding company and its wholly owned subsidiaries, two or more small companies, two or more startup companies, or a startup company and a small company.
This allowed mergers to proceed with approvals from Centre and the MCA's regional director unless public interest or interest of creditors is involved. Prior to this, all kinds of mergers required NCLT approval. Government officials are discussing to allow listed firms to skip the NCLT process if the merger or demerger is cleared by financial sector regulators, shareholders, creditors and CCI, the people cited above said on the condition of anonymity.
NCLT benches examine share swap ratios, valuation methods and the treatment of creditors and shareholders. Since mergers involve assets and liabilities, the tribunal essentially analyses the deal's fairness in terms of creditors' dues, payable taxes and the treatment with management. Several large listed companies are currently working on demergers. Tata Motors is working on a proposal to demerge its electric vehicle business, while Adani Group is planning to demerge its airport business.
Currently, every merger involving a public company requires approval by a majority of each class of shareholders and creditors in terms of number and value before the proposal is sent for NCLT approval. Additionally, banking and stock market regulators, a well as stock exchanges must approve the merger proposal.
