The Ministry of Corporate Affairs (MCA) has issued a clarification with regard to the interpretation of the provision of section 232(6) of the Companies Act, 2013.
The MCA said that it had received several queries on whether it is mandatory to indicate a specific calendar date as 'appointed date' in the schemes referred to in the section.
After examining the matter in detail in light of the provisions of the act, applicable rules, prevalent practices and orders passed by various NCLTs, the MCA has clarified in the case of amalgamation or mergers, the companies that are parties to the scheme shall choose and state an 'appointed date'. This 'appointed date' may either be a specific calendar date or may be tied to the occurrence of an event such as, the fulfilment of a precondition that the parties to the scheme may have agreed upon.
The circular also clarified that the chosen 'appointed date' will identified under the scheme will be deemed to be the 'acquisition date' and date of transfer of control for the purpose of accounting standards including, Ind-AS 103 Business Combinations.
The Indian Accounting Standard (Ind AS) 103, Business Combinations, prescribes the recognition and measurement principles for business combinations as a result of acquisitions or mergers.
In the cases where the 'appointed date' is a specific calendar date, then this may precede the date of filing of the application intimating the scheme of amalgamation/merger to the NCLT. However, if the gap between the 'appointed date' and the date of filing of application is significantly beyond a year, then an justification will have to be given explaining that the gap is not against public interest.
If the 'appointed date' is chosen by the parties to be based on the occurrence of a 'trigger event', which is crucial to the proposed scheme, then such an event has to be clearly indicated in the scheme. Furthermore, if this event occurs after the filing of the order of the NCLT with the Registrar under section 232(5) of the Companies Act, 2013, then the parties will have to intimate the Registrar within 30 days of the scheme becoming effective after the occurrence of the event gives the 'appointed date' for that amalgamation or merger.
The clarification aims to resolve the ambiguity arising from the conflicting orders passed by various benches of the NCLT.
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