An Analytical Study over the Regulatory Framework for Mergers in India with Emphasis On Insolvency And Bankruptcy Code

Abstract

Corporate restructuring and mergers are required to be understood in order to understand the context of economic policies. It is an approach of expanding a corporate via organic growth without forming a new legal corporation. This method of organic growth becomes helpful in revival of the sick corporate. When a firm is unable to pay its debt and has made a default, such a firm is called insolvent. The idea behind revival of sick company that the assets of such company does not leave the market and the interest of the creditors are protected. Merger is one of the measures to revive an insolvent company. The merger has not been defined by the Companies Act, 2013 but the Income Tax Act, 1961 has defined the term amalgamation. The Competition Act, 2002 pays attention to the forms of merger. Here are various legislations such as Companies Act, 2013, Competition Act, 2002 which regulates merger. But with respect to revive the company earlier, there was Sick Industrial Companies (Special Provisions) Act, 1985. But it was found out that the Act was unable to achieve its objective because it was more intended towards declaring the companies sick rather than reviving them. Also, at that time there were multiple legislations for the matter and need was felt to enact a new legislation for the revival and rehabilitation of the sick companies. The Companies Act, 2013 under Chapter XIX consisted of provisions for revival and rehabilitation of sick companies, but these provisions were never notified, instead the provisions of Sick Industrial Companies (Special Provisions) Act, 1985, were still prevailing. Also, these provisions of the Companies Act, 2013 were having no effect over other legislations. With the need of enacting a new legislation Insolvency and Bankruptcy Code, 2016 was enacted which consisted provisions for revival of the companies and is main objective was to revive an insolvent company and if not possible then liquidate the same in a time bound manner. The enactment of the Insolvency and Bankruptcy Code, 2016 al