Overview

• How arrangement and reconstruction process starts

• When is Tribunal’s permission required
• What role Central Government play
• How arrangement and reconstruction resolution is passed
• Share swap agreement
• Formation of amalgamated companies

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 Definition

• S 390(b) The Expression “arrangement” includes a

reorganisation of the share capital of the company by the
consolidation of shares of different classes, or by the division
of shares into shares of different classes or, by both those
methods;

• S 2(1b) "Amalgamation", in relation to companies, means

the merger of one or more companies with another company
or the merger of two or more companies to form one
company (the company or companies which so merge being
referred to as the amalgamating company or companies and
the company with which they merge or which is formed as a
result of the merger, as the amalgamated company) in such a
manner that -
(i) all the property of the amalgamating company
or companies immediately before the
amalgamation becomes the property of the
amalgamated company by virtue of the
amalgamation;

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(ii) All the liabilities of the amalgamating
company or companies immediately before the
amalgamation become the liabilities of the
amalgamated company by virtue of the
amalgamation;
(iii) Shareholders holding not less than nine-
tenths in value of the shares in the amalgamating
company or companies (other than shares
already held therein immediately before the
amalgamation by, or by a nominee for, the
amalgamated company or its subsidiary) become
shareholders of the amalgamated company by
virtue of the amalgamation, otherwise than as a
result of the acquisition of the property of one
company by another company pursuant to the
purchase of such property by the other company
or as a result of the distribution of such property
to the other company after the winding up of the
first mentioned company;

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 STEP 1
Who can initiate the process of arrangement S 391(1)
• Company through its board of Directors
• Creditors
• Members
• Liquidator

STEP 2
What would the proposal contain S 391 (2) proviso
• The latest auditor’s report on the accounts of the
company
• Information relating to the pendency of any
investigation proceedings in relation to the company
• All material facts relating to the company

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 STEP 3
Proposal to be filed before Tribunal

STEP 4
If Tribunal is satisfied that the proposal is valid and per se not
malafide, then it send the proposal for preliminary permission of
Central Government

STEP 5
If the Central Government agrees then the Tribunal calls for a
meeting u/s 391(1)

STEP 6
Order of Tribunal has to be filed before the Registrar

STEP 7

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 Information to be given out along with notice of meeting S 393
• Notification of the place and time at which meeting
would be held
• A statement setting forth the terms of the compromise
or arrangement and explaining its effect, and in
particular, stating any material interests of the office
bearers
• Any likely change in the rights of shareholder or
debenture holders

STEP 8
Meeting S 391(2)
• Three-fourths in value of the creditors, or class of creditors,
or members, or class of members should agree to the
proposal

STEP 9
The resolution accepted in the meeting would have to be placed
before tribunal for its sanction. If tribunal agrees then it becomes
binding on the company

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