The Ministry of Corporate Affairs (the MCA) vide its notification dated 21 August 2019, has provided a clarification with respect to interpretation of section 232(6) of the Companies Act (Act). Section 232(6) of the Act states that the scheme under section 232 of the Act shall clearly indicate an appointed date from which it shall be effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the appointed date. The circular has been brought in furtherance of several queries which have been received by MCA. The two important clarification sought are:
Whether it is mandatory to indicate a specific calendar date as ‘appointed date’ in the scheme? and
Whether the 'acquisition date' for the purpose of Ind-AS 103 (Business combinations) would be the 'appointed date' referred to in section 232(6)?
Prior to issuance of the aforementioned clarification for the first query, the MCA has referred to decision of Supreme Court in the case of Marshall Sons & Co. India Ltd. v. lTO [223 lTR 809] where the court held that the date on which the amalgamation shall take place can be a date prior the filing of the sanctioning of the scheme by the Court, the date of filing of certified copies of the orders of the Court before the Registrar of Companies (the ROC) (i.e. Appointed Date). However, the scheme would be effective from the Appointed Date only after the order of the Court is filed with the RoC. The MCA also referred to the judgement held in Equitas Housing Finance Limited and Equitas Micro Finance Limited in C.P.Nos.l 19 to 121 of 2016 where the court was the of opinion that appointed date need not necessarily be a calendar date but can be a date tied to the occurrence of a relevant event.
Section 232(6) provides the companies a choice to decide and state a date from which the scheme shall be enforceable. The two options available while deciding the date are:
(i) a specific calendar date, or
(ii) date tied to the occurrence of an event such as of license by a competent authority or fulfilment of any preconditions agreed upon by the parties or meeting any other requirement as agreed upon between the parties, etc., which are relevant to the scheme.
In case the parties to the scheme of merger/amalgamation choose the 'appointed date' to be a calendar date, such date can be a date preceding the date of filing the scheme with National Company Law Tribunal. If the 'appointed date' is significantly dated beyond a year from the date of filing the scheme, a reason for the same has to be specifically captured in the scheme and such reason shall not be against public interest. Where the 'appointed date' is date tied to the occurrence of a relevant event to the scheme, such an event shall be specifically indicated in the scheme on the occurrence of which the scheme would be effective. However, in a situation where 'appointed date' is a date subsequent to the date of filing the order with the ROC under section 232(5) of the Act, the company has an obligation to file an intimation of the same with ROC within 30 days of such scheme coming into force and being effective.
With regard to the second query, the MCA states that the 'acquisition date' shall be same as 'appointed date' mentioned under the scheme and shall also be deemed to be the date of transfer of control for the purpose of conforming to accounting standards (including Ind-AS 103 Business Combinations).