Merger and Amalgamation Process in Bangladesh: A Comprehensive Guide
The process of merger and amalgamation in Bangladesh is a complex but well-regulated legal procedure that involves two or more companies coming together to form a single, stronger entity. This article explores the merger and amalgamation process in Bangladesh, shedding light on the steps, legal requirements, and key considerations involved in this intricate corporate endeavor.
The Initial Steps
The journey toward a successful merger or amalgamation begins with a few critical steps that set the stage for the entire process.
1. Board Resolution for Alteration
The first step involves both companies’ Board of Directors passing a special resolution to alter the provisions of their Memorandum of Association. This alteration is necessary to accommodate the merger and acquisition, allowing the companies to combine their assets, operations, and objectives.
2. Filing a Petition
After the Board Resolutions are in place, the next crucial step is filing a formal petition before the court. This petition is intended to confirm the proposed alteration to the Memorandum of Association, which is necessary for the merger to proceed. The court will scrutinize the proposed changes to ensure they comply with the law and align with the companies’ interests.
The Scheme of Amalgamation
The scheme of amalgamation is a cornerstone of the merger process. It is a comprehensive plan that outlines the terms and conditions of the merger, including the allocation of assets, liabilities, and shares. Here’s a closer look at the scheme of amalgamation:
3. Approval by the Board of Directors
The respective Board of Directors for both merging companies is required to approve the scheme of amalgamation. This approval signifies that the directors are in agreement with the terms and conditions outlined in the scheme. It is a pivotal step in the merger process.
4. Fixing a Merger Date
Once the scheme of amalgamation is approved, the parties involved must establish a specific date for the merger to take place. This date serves as the point of transition when the two companies become a single, unified entity.
Auditing the Companies’ Accounts
A critical component of the merger process is the audit of the companies’ accounts. This is a non-statutory audit conducted to assess the financial health and records of both companies. It is a vital step in ensuring the accuracy of financial information, which plays a pivotal role in the merger.
Seeking Court Permission
The merger process in Bangladesh involves seeking approval from the court through a joint petition. Here’s what this step entails:
5. Joint Petition Under Section 228
The parties involved, typically the merging companies, must file a joint petition under Section 228 of the Companies Act 1994. This petition seeks the court’s permission for an amalgamation order. The court evaluates the petition and accompanying documents to ascertain the legality and feasibility of the merger arrangement.
6. Amalgamation Order
If the court is satisfied with the merger proposal, it issues an amalgamation order. This order serves multiple purposes, including approving the merger arrangement and dissolving the diminishing company without the need for winding up. It’s a crucial legal document that facilitates the smooth transition from separate entities to a unified corporation.
Transfer of Property and Liabilities
Once the court grants an amalgamation order, certain key actions come into play:
7. Property Transfer
By virtue of the amalgamation order, the properties of the diminishing company are transferred to and vested in the surviving entity. This includes physical assets, intellectual property, and other holdings.
8. Liabilities Transfer
Similarly, the liabilities of the diminishing company are transferred to and become the responsibilities of the surviving entity. This ensures that all obligations and commitments are seamlessly transitioned to the new, unified company.
Here’s a table summarizing the key points of the merger and amalgamation process in Bangladesh:
|1||Board Resolution for Alteration||Board resolutions passed to modify the Memorandum of Association||Essential for aligning company objectives|
|2||Filing a Petition||A formal petition filed before the court to confirm alteration||Ensures legal compliance and court scrutiny|
|3||Scheme of Amalgamation||Comprehensive plan outlining merger terms and conditions||Blueprint for merger execution|
|4||Approval by the Board of Directors||Board approval of the amalgamation scheme||Signals director agreement with merger terms|
|5||Fixing a Merger Date||Selection of a specific date for merger transition||Marks the point of transition to a unified entity|
|6||Auditing the Companies’ Accounts||Non-statutory audit of financial records||Ensures financial accuracy and reliability|
|7||Seeking Court Permission||Filing a joint petition under Section 228||Court evaluates and approves the merger arrangement|
|8||Amalgamation Order||Court-issued order approving the merger||Facilitates a smooth transition and dissolves the diminishing company|
|9||Property Transfer||Transfer of properties to the surviving entity||Includes physical and intellectual assets|
|10||Liabilities Transfer||Transfer of liabilities to the surviving entity||Ensures seamless transition of obligations|
This table provides a structured overview of the 10 key steps involved in the merger and amalgamation process, from the initial Board Resolutions to the transfer of properties and liabilities, highlighting their significance in the process.
The merger and amalgamation process in Bangladesh is a meticulously regulated legal procedure designed to facilitate the consolidation of companies. It involves a series of steps, from altering the Memorandum of Association to seeking court permission and executing the amalgamation order. This complex yet well-structured process enables companies to merge and create more substantial, resilient entities.
As companies embark on this journey, they must consider the legal requirements, engage in meticulous planning, and ensure transparency and compliance at every stage. With the support of experienced legal professionals and a deep understanding of the process, businesses can navigate the intricacies of mergers and amalgamations in Bangladesh successfully.