Ministry of Corporate Affairs issues clarification on merger date of firms
New Delhi, Aug 22 (KNN) The Ministry of Corporate Affairs (MCA) has issued a clarification that the companies can now choose a merger’s “appointed date” based on occurrence of an event, which is relevant to the said merger between firms.
MCA said several queries have been received in the Ministry with respect to interpretation of the provision of section 232(6) of the Companies Act, 2013 (Act) on whether it is mandatory to indicate a specific calendar date as 'appointed date' in the schemes referred to in the section.
Further, requests have also been received to confirm whether the, acquisition date' for the purpose of Ind-AS 103 (Business combinations) would be the 'appointed date' referred to in section 232(6).
“Section 232(6) of the Act states that the scheme shall be deemed to be effective from the 'appointed date' and not a date subsequent to the 'appointed date'. This is an enabling provision to allow the companies to decide and agree upon an 'appointed date' from which the scheme shall come into force,” said MCA’s circular.
The circular clarified that the term “appointed date” used in Section 232(6) shall be deemed to be the “acquisition date” for the purpose of conforming to IndAS 103 standard dealing with business combinations.
“A view was being taken in some quarters that the “appointed date” in the scheme needs always be a definite calendar date, which led to difficulties for companies intending to give effect to their merger at a future/event-linked date, based on business considerations, fulfilling legal requirements such as procurement of licence from sectoral regulators, etc,” the MCA said.
Besides this, IndAS 103 (business combinations), which deals with the accounting treatment, uses the expression “acquisition date”, as a date when the acquirer takes control of the acquiree, also required clarification, it added.
The move not only aims to smoothen the process of ascertaining the “appointed date” of merger/amalgamation providing due clarity on accounting treatment but will also help improve ease of doing business. (KNN Bureau)