SME Times News Bureau | 21 Aug, 2019
The Ministry of Corporate
Affairs issued a circular on Wednesday clarifying the import of section 232(6)
of the Companies Act, 2013, which deals with the requirement of indicating an
“appointed date” in the scheme of mergers and amalgamations, which would also
be the effective date of the merger/amalgamation coming into force.
A view was being taken in some
quarters that the “appointed date” in the scheme need always be a definite
calendar date, which led to difficulties for companies intending to give effect
to their merger at a future/event-linked date, based on business
considerations, fulfilling legal requirements such as procurement of license
from sectoral regulators, etc.
Besides this, IndAS 103
(Business Combinations), which deals with the accounting treatment, uses the
expression “acquisition date”, as a date when the acquirer takes control of the
acquiree, also required clarification.
The circular clarifies that
the companies may choose the “appointed date” of the merger/amalgamation based
on occurrence of an event, which is relevant to the merger between companies.
This would allow the companies
concerned to function independently till such event is actually materialised.
The circular further clarifies that the term “appointed date” used in section
232(6) shall be deemed to be the “acquisition date” for the purpose of
conforming to IndAS 103 standard dealing with business combinations.
This clarification would lead
to harmonisation of practices in ascertaining the “appointed date” of
merger/amalgamation and provide due clarity on the accounting treatment,
thereby allowing stakeholders to align the “appointed date” of
merger/amalgamation in accordance with their business considerations or legal
requirements.
This would also contribute
significantly in the ease of Doing Business, said an official release.