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MCA Guidelines on Approval of Corporate Restructures


The Ministry of Corporate Affairs ("MCA") has issued guidelines for the procedure to be followed by the field officers, more specifically, the Regional Directors / Registrar of Companies ("RDs/RoCs) in sending comments to the High Courts. Taxand India looks at the guidelines.

Corporate restructurings in the nature of amalgamations, demergers and other arrangements require an approval of the scheme by the High Court. The High Court, inter alia, takes into consideration the representations of the various agencies of the Government in according its approval to the proposed scheme. Given the different practices followed by the various field agencies in sending their comments, the MCA has issued this circular providing certain guidelines to streamline the procedure along with timelines for the same.

The procedure as envisaged in the guidelines involves the RD acting as the nodal agency in presenting the findings of the MCA before the High Court. The RD would interact inter alia with the RoC and the law ministry in examining the issues referred to in the guidelines.

The guidelines prescribe timelines which envisage the entire procedure to be completed within a period of 20-25 days of receipt of the notice by the RD from the High Court.

Under the guidelines, the ROC before sending his report to the RD is required to fulfil a number of criteria.

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Taxand's Take

The circular is an attempt by the MCA to regulate the procedure of approvals for corporate restructurings in the wake of increasing number of petitions filed by Corporates and the varied practices followed by the field officers. The streamlining of the procedure and the definite timelines involved are welcome and would provide much needed clarity on the timelines for companies involved in the scheme.

Interestingly, the specific list of issues which are required to be examined by the RD are indicative of the recent trend where the tax and regulatory authorities have been increasingly questioning several aspects of the scheme of arrangements and it is expected that the level of such scrutiny will increase given the specific instructions issued to the RD.

Your Taxand contacts for further queries are:
Kalpesh Maroo
T. +91 124 339 5010

Manoj Kumar
T. +91 124 339 5010

Vinay Kalarical
T. +91 124 339 5010

Taxand's Take Author