Conditions to be complied with by the resultant company

Resultant company would be allowed to issue any security/foreign security to a person resident outside India provided it complies with FDI Regulations1 including:-

• Pricing Guidelines
• Entry routes
• Sectoral caps
• Attendant conditions
• Reporting requirements

• A person resident in India may acquire or hold securities of the resultant company in accordance with ODI Regulations
• A resident individual may acquire securities outside India provided that the fair market value of such securities is within the limits prescribed under the Liberalized Remittance Scheme laid down in the Act or rules or regulations framed thereunder.

It should also comply with conditions laid down in ODI Regulations for transfer/acquisition of shares in following cases:

• Where the foreign company is a JV/ WOS of the Indian company
• Where such merger of the JV/WOS results into acquisition of the Step down subsidiary of the JV/ WOS of the Indian party by the resultant company

Compliance by office of the foreign/Indian company

An office outside India of the foreign company, post-merger shall be deemed to be the branch/office outside India of the resultant company and may undertake any transaction as permitted to a branch/office under the aforesaid Regulations in accordance with relevant3 regulations.

An office in India of the Indian company, pursuant to sanction of the Scheme of cross border merger, may be deemed to be a branch office in India of the resultant company and may undertake any transaction in accordance with relevant regulations

Guarantees or outstanding borrowings of the foreign/Indian company

The guarantees or outstanding borrowings of the foreign company from overseas sources which become the borrowing of the resultant company or any borrowing from overseas sources entering into the books of resultant company shall conform, within a period of two years, to the External Commercial Borrowing norms or Trade Credit norms or other foreign borrowing norms, as laid down under ECB Regulations4 as applicable.

Another condition is that no remittance for repayment of such liability is made from India within such period of two years.

However, conditions with respect to end use shall not apply.

• The guarantees or outstanding borrowings of the Indian company which become the liabilities of the resultant company shall be repaid as per the Scheme sanctioned by the NCLT in terms of the Companies (Compromises, Arrangement or Amalgamation) Rules, 2016.
• Also, the resultant company shall not acquire any liability payable towards a lender in India in Rupees which is not in conformity with the Act or rules or regulations framed thereunder.
• Further, a no-objection certificate to this effect should be obtained from the lenders in India of the Indian company.

Acquisition or holding of an asset outside India and in India

The resultant company may acquire and hold any asset outside India which an Indian company is permitted to acquire under the provisions of the Act, rules or regulations framed thereunder. Such assets can be transferred in any manner for undertaking a transaction permissible under the Act or rules or regulations framed thereunder.

Where the asset or security outside India is not permitted to be acquired or held by the resultant company under the Act, rules or regulations, the resultant company shall sell such asset or security within a period of two years from the date of sanction of the Scheme by NCLT and the sale proceeds shall be repatriated to India immediately through banking channels.

Where any liability outside India is not permitted to be held by the resultant company, the same may be extinguished from the sale proceeds of such overseas assets within the period of two years.

The resultant company may acquire and hold any asset in India which a foreign company is permitted to acquire under the provisions of the Act, rules or regulations framed thereunder. Such assets can be transferred in any manner for undertaking a transaction permissible under the Act or rules or regulations framed thereunder.

Where the asset or security in India cannot be acquired or held by the resultant company under the Act, rules or regulations, the resultant company shall sell such asset or security within a period of two years from the date of sanction of the Scheme by NCLT and the sale proceeds shall be repatriated outside India immediately through banking channels. Repayment of Indian liabilities from sale proceeds of such assets or securities within the period of two years shall be permissible.

Opening of a Bank Account Outside India/in India

The resultant company may open a bank account in foreign currency in the overseas jurisdiction for the purpose of putting through transactions incidental to the cross border merger for a maximum period of two years from the date of sanction of the Scheme by NCLT.

The resultant company may open a Special Non-Resident Rupee Account (SNRR Account) in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016 for the purpose of putting through transactions under these Regulations. The account shall run for a maximum period of two years from the date of sanction of the Scheme by NCLT.