Cross-Border Mergers

Merger of an Indian organization with a remote organization was allowed on earlier endorsement reason without precedent for India with the notice of Section 234 of Companies Act, 2013 (Co Act) last April (Read our article here). Presently, India’s national bank, the Reserve Bank of India (RBI) issued draft directions identifying with cross fringe mergers looking for open remarks. After broad open thoughts, the RBI presented the Foreign Exchange Management (Cross Border Merger) Regulations, 2018 (Regulations) on twentieth March, 2018. The Regulations cover both inbound and additionally outbound mergers and widely allude to the administrative structure set out in the Foreign Exchange Management Act, 1999 and controls issued thereunder (FEMA) representing inbound and outbound ventures and in addition inflows and outpouring of cash.


The term ‘inbound merger’ alludes to a cross fringe merger where a remote organization (FC) converges into an Indian organization (IC) and the resultant organization (RC) is an IC, securing the benefits and liabilities of the FC. The articulation ‘outbound merger’ alludes to a cross fringe merger where an IC converges into a FC and the RC is a FC, securing the advantages and liabilities of the IC. A FC is characterized as any organization or body corporate consolidated outside India in the case of having a position of business in India or not; while a RC alludes to an organization, be it Indian or remote, which assumes control over the advantages and liabilities of the company(ies) engaged with the cross outskirt merger.


All cross fringe merger exchanges embraced as per the Regulations should be considered to have earlier endorsement of the RBI as required under the Co Act and the Companies (Compromises, Arrangement and Amalgamations) Rules, 2016 (Amalgamation Rules). In this way, no different earlier endorsement will be required in these cases. A declaration is required from the Managing Director/Whole Time Director and Company Secretary, if accessible, affirming consistence to these Regulations alongside the application made to the jurisdictional National Company Law Tribunal (NCLT) for endorsement of the merger plot.