Fast Track Merger (FTM)

Fast Track Merger provides a more straightforward procedure for the amalgamation of certain classes of companies which includes small companies, holding and subsidiary companies. Hence, under this concept, a merger or amalgamation can be entered into between:

i. Two or more small companies, or

ii. A holding company and its wholly-owned subsidiary (WOS) company, or

iii. Such other class or classes of companies as may be prescribed. (No such other Companies are prescribed yet).

It is unique concept because NCLT approval is not required in this Merger, only Regional Directors, Registrar of Companies and Official Liquidator are the authorities whose approval is required.

Under the FTM process, the Central government has the power to approve such schemes and there is no need to approach the NCLT. The whole process can take 3-5 months’ time for completion. The Central government has delegated the power to approve of the merger to the Regional Director.

In case the Regional Director feels that the scheme is not in public interest or in the interest of the creditors, they can file an application to the NCLT stating that the scheme should be considered as per the procedure of a normal merger.

Steps involved in the Fast Track Merger

1. Check Articles of Association: Firstly, both the transferor and transferee company need to check if      their AOA permits for the merger or not.

2. Prepare a draft scheme

3. Conduct a Board Meeting.

4.  Issue notice of the proposed scheme inviting objections/suggestions, from jurisdictional Registrar       of Companies (ROC) and to the persons affected by the scheme within 30 days.

5. Each company needs to file their respective Declaration of Solvency Statement (Form CAA-10)           with the ROC.

6.  The notice for the meeting must be sent before 21 clear days to the members. It must state the copy of proposed scheme, a statement disclosing details of the merger, copy of the latest audited financial statement, valuation report.

7    7. Obtain written authorization from creditors by conducting a Creditors Meeting.

      8. Obtain consent from the members at a general meeting who holds at least 90% of the total number      of shares of the company.

9   9.  Filing of the draft scheme with Regional Director further provide the scheme to ROC in form              GNL-1 and official liquidator through speed post or registered post.

     10.   Approval of scheme by Regional Director. The order of the Regional Director must be filed in Form INC-28 with the ROC within 30 days.

The Companies Act, 2013 by introducing fast track merger has simplified the procedure for mergers and amalgamation of a particular class of companies as stated above. Hence, fast track merger is a welcome move. Earlier, the Companies Act, 1956 does not offer a simple process for such alliances. Also, all such restructuring have to follow a time-consuming and challenging process as any other mergers or amalgamations. Hence, there was a great need to shorten and fast track the procedure for mergers of such companies where interests of third parties are not involved.