Difference between Merger, Demerger and Slump Sale
Merger combines two entities into one. Demerger spins off an undertaking. Slump sale transfers an undertaking for lump-sum consideration without itemised valuation.
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Mergers & Corporate Restructuring
Learn how businesses evolve and grow. Mergers, demergers, amalgamations, schemes of arrangement, corporate restructuring, takeovers, and NCLT approvals.
24 questions0 Fresher5 Intermediate19 Senior
Difference between Friendly Takeover and Hostile Takeover
Friendly: with consent of target board; negotiated price, smooth integration. Hostile: bypassing the board via direct offer or proxy fight.
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Drag-along and Tag-along rights in shareholder agreements
Drag-along: majority can force minority to sell on same terms. Tag-along: minority can join majority's sale on same terms. Common in PE-backed companies.
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Conversion of company — private to public and vice versa
Private to public: SR + alteration of MoA + AoA; ROC approval. Public to private: SR + NCLT approval (post-2018 amendment) + compliance with min member requirements.
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Holding-Subsidiary structure — restrictions and disclosures
Cannot have layers > 2 of subsidiaries (with exceptions). Subsidiary cannot hold shares in holding company. Mandatory consolidation; intra-group transactions disclosed.
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Competition Commission (CCI) clearance for combinations
Notify CCI within 30 days of binding agreement if combination crosses asset / turnover thresholds. Standstill obligation until clearance.
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Valuation methods in M&A — DCF, comparable companies, precedent transactions
DCF (intrinsic), Comparable Companies (trading multiples), Precedent Transactions (M&A multiples), Net Asset Value, Capitalised Earnings. Used in combination for credible range.
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Earn-out clauses in share-purchase agreements
Portion of consideration contingent on post-closing performance (revenue, EBITDA, milestones); used to bridge valuation gaps and retain selling management.
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Tax implications of buy-back of shares
Company pays buy-back tax u/s 115QA @ 23.296%. Shareholders' receipts exempt u/s 10(34A). Post Finance Bill 2024 changes shift tax to shareholders for buybacks after 1 Oct 2024.
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Open offer thresholds under SEBI (SAST) Regulations, 2011
Triggered on acquisition of 25% or more voting rights, or any acquisition > 5% in a financial year by an existing holder of 25%-75%. Open offer for minimum 26%.
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Stamp duty implications on Scheme of Arrangement
NCLT order sanctioning scheme is an instrument liable to stamp duty per State Stamp Act; rates vary, with cap in some states. Applies on transferee company's state.
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Reduction of share capital under Section 66 — procedure and considerations
Special resolution → NCLT confirmation; auditor certificate on accounting treatment; reduce paid-up capital, cancel unpaid capital or return excess to shareholders.
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Buy-back vs Capital reduction — comparison
Buy-back: company purchases own shares using free reserves; tax favoured pre-2024. Capital reduction: returns capital, requires NCLT order. Both reduce capital base.
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Demerger — tax-neutral conditions under Section 2(19AA)
Transfer of undertaking on a going-concern basis with shares issued to demerged company's shareholders pro-rata; book values preserved; specific §2(19AA) conditions met.
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Slump Sale — meaning and tax treatment
Transfer of one or more undertakings for lump-sum consideration without itemised values. Taxed under §50B at LTCG / STCG rates depending on undertaking holding period.
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Delisting under SEBI Delisting Regulations, 2021
Voluntary delisting via reverse book-building or fixed-price route; promoter must reach 90% post-delisting. Compulsory delisting by exchange for repeated non-compliance.
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Compromise with creditors outside IBC
Pre-pack restructuring under §230-232 compromise scheme; preserves management; cheaper / faster than NCLT-supervised CIRP for stressed assets.
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Conversion of debt to equity — regulatory framework
Banks convert debt to equity under SDR, S4A or strategic restructuring; FEMA permits FCCB / ECB conversion. Listed entities follow ICDR pricing norms.
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Cross-border merger under FEMA Cross Border Merger Regulations, 2018
Enables Indian-foreign company mergers (inbound and outbound). Inbound: foreign assets get 2-year compliance window. Outbound: resident shareholders via LRS / ODI.
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IP due diligence in M&A — focus areas and red flags
Audit registrations, assignments, licences, employee inventions, litigation and open-source compliance. Red flags: unrecorded assignments, lapsed renewals, infringement notices.
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Buyback regulations — modes, conditions and timelines
Via tender offer or open market. Max 25% of paid-up capital + free reserves; debt-equity ≤ 2:1 post buy-back; cooling period of 1 year between buy-backs.
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Scheme of Arrangement / Compromise under Sections 230-232 of the Companies Act, 2013
Court-supervised compromise / arrangement between company and members/creditors. NCLT sanction needed; approved by 3/4 in value of each class.
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Due diligence in M&A — types and key focus areas
Legal, financial, tax, commercial, HR, IT, environmental and secretarial — each builds a risk profile, identifies deal-breakers and informs warranties.
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FEMA implications in cross-border M&A — inbound and outbound
Inbound: FDI routes apply; valuation as per DCF / SEBI norms. Outbound: ODI framework with 400% net-worth cap and Form FC. Cross-border mergers per RBI 2018 Regulations.
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