Company Rules on Schemes of Arrangement
Facilitating mergers, acquisitions and other forms of corporate restructuring and reorganization
These rules provide for a tribunal-supervised process by which a company can enter into a scheme of arrangement, amalgamation or a compromise with its creditors or members under section 230 of the Companies Act, 2013.
A scheme of arrangement or a compromise may be proposed between a company and its members or creditors and even involve two or more companies. Such schemes may include merger of two or more companies, demergers, reorganization of share capital and even debt restructuring, among other types of arrangements.
Once a scheme is proposed, the company or any shareholder or creditor or even the liquidator (if the company is being wound up) has to make an application to the National Company Law Tribunal for holding a meeting of the creditors or the shareholders, as the case may be for obtaining the necessary approvals.
The scheme or compromise is binding on the company and all its members or creditors (as the case may be) if it is approved by the requisite majority of the stakeholders and also sanctioned by the tribunal.
These rules provide a detailed mechanism for running the process. They also prescribe the methodology for determining the purchase price of shares in acquisitions involving buy-out of minority shareholders under section 236 of the Act.