The term ‘merger’ is not defined under the Companies Act, 2013 (“CA 2013”) or under the Income Tax Act, 1961 (“ITA”). As a concept, a ‘merger’ is a combination of two or more entities into one; the desired effect being not just the accumulation of assets and liabilities of the distinct entities, but the organization of such entities into one business. The possible objectives of mergers are manifold – economies of scale, acquisition of technologies, access to varied sectors/ markets etc. Generally, in a merger, the merging entities would cease to exist and would merge into a single surviving entity. The ITA does, however, define the analogous term ‘amalgamation’1 as the merger of one or more companies with another company, or the merger of two or more companies to form one company. The ITA goes on to specify certain other conditions that must be satisfied for an ‘amalgamation’ to be eligible for benefits accruing from beneficial tax treatment (discussed in Part VI of this Paper). Sections 230-234 of CA 2013 (the “Merger Provisions”) deal with the schemes of arrangement or compromise between a company, its shareholders and/or its creditors. These provisions are discussed in greater detail in Part II of this Paper. Commercially, mergers and amalgamations may be of several types, depending on the requirements of the merging entities. Although corporate laws may be indifferent to the different commercial forms of merger/amalgamation, the Competition Act, 2002 does pay special attention to the forms.

An ‘acquisition’ is the purchase of shares of the target or acquisition of assets and liabilities of the target. In the latter case, entire business of the target may be acquired on a going concern basis or certain assets and liabilities may be cherry picked and purchased by the acquirer. The transfer when a business is acquired on a going concern basis is referred to as a ‘slump sale’2 under the ITA. Section 2(42C) of the ITA defines slump sale as a “transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such transfers”. The legal and tax considerations of slump sale vis-a-vis an asset sale is discussed in greater detail in Part VI of this Paper.