Merger and Acquisition in India

Mergers & Acquisitions Strategy for Indian Subsidiaries: Tax and Legal View Introduction Mergers and Acquisitions (M&A) are strategic tools for growth and restructuring. For Indian subsidiaries, a well-planned M&A strategy offers tax efficiency and legal clarity. Whether merging with a parent entity or being acquired by a foreign investor, aligning with Indian laws and business goals is essential. Summary M&A enables Indian subsidiaries to scale, restructure, or exit with legal and tax advantages. Selecting the appropriate structure (merger, share transfer, slump sale) affects tax and compliance. Legal approvals from MCA, NCLT, SEBI, and RBI may be necessary. FDI regulations apply when foreign investment or ownership is involved. Conducting due diligence is crucial to uncover hidden liabilities. EbizFiling assists with documentation, compliance, and regulatory approvals. Why is M&A Strategy Important for Indian Subsidiaries? A robust M&A strategy is vital for the success of business transitions, especially for Indian subsidiaries of foreign companies. Here's why: Regulatory Compliance: Ensures adherence to laws under the Companies Act, FEMA, SEBI, and Income Tax regulations. Tax Advantages: Proper planning allows access to tax exemptions under Sections 47 and 72A of the Income Tax Act. Business Continuity: A structured process ensures uninterrupted operations, employee management, and vendor contracts. Strategic Alignment: Supports business objectives, whether entering new markets or consolidating assets. Risk Mitigation: Identifies potential risks early, avoiding penalties, litigation, and delays. Types of M&A Structures in India Indian subsidiaries can opt for various M&A routes based on their objectives: Amalgamation: Two or more companies merge into a new or existing entity. Demerger: A unit is separated from a company and transferred to another. Slump Sale: Transfer of a business as a going concern without individual asset valuation. Share Purchase: Acquisition of shares from existing shareholders. Asset Purchase: Transfer of specific assets and liabilities to the buyer. We help businesses to open Indian subsidiary and ensure compliance by assisting with filing FC-GPR form for foreign investments, simplifying your expansion into India. What Are the Legal Requirements for M&A Transactions? Each M&A deal must comply with Indian legal frameworks. Key requirements include: Board Approval: Necessary from both merging/acquiring entities. Shareholder Consent: Approval via general meeting or special resolution is required. Regulatory Filings: Submission of forms like MGT-7, AOC-4, and INC-28 with the Ministry of Corporate Affairs. NCLT Clearance: Required for schemes of merger or amalgamation under the Companies Act, 2013. CCI Approval: Mandatory if asset or turnover thresholds under the Competition Act are exceeded. FDI Compliance: Adherence to FEMA and RBI norms is essential for foreign ownership or investment. Stamp Duty: Applicable on share and asset transfers as per state laws. You can validate from www.mca.gov.in, www.rbi.org.in, www.incometax.gov.in Step-by-Step Process for Executing M&A for Indian Subsidiaries To ensure a smooth and compliant M&A process, follow this stepwise guide: Feasibility AnalysisAssess objectives like market expansion, asset exit, or restructuring to determine the suitable M&A structure. Due DiligenceExamine legal, financial, and tax records to identify liabilities, non-compliance, or hidden obligations. Select the Deal RouteChoose between merger, share purchase, or slump sale based on tax and legal implications. Obtain Regulatory ApprovalsApply to NCLT, MCA, SEBI (if listed), and RBI as applicable, and prepare necessary filings. Secure Stakeholder ApprovalsObtain approvals from shareholders, creditors, and boards; public notices may also be required. Execute and Close the DealFinalize agreements, transfer assets or shares, and complete all filings, ensuring proper operational handover. Post-Merger ComplianceUpdate PAN, GST, employment records, bank accounts, and inform vendors and customers. Tax Implications in M&A for Indian Subsidiaries Tax treatment varies based on the M&A transaction structure: Type of Transaction Tax Benefit Relevant Sections Amalgamation Eligible for exemption Sections 47 & 72A of Income Tax Act Slump Sale Taxed as business transfer Section 50B of Income Tax Act Share Transfer Capital gains applicable Sections 2(42A), 48 Asset Purchase Capital gains & GST may apply Section 45, GST Act How EbizFiling Can Help EbizFiling provides comprehensive support throughout your M&A journey: Deal Structuring: Helps choose the best-fit M&A model based on your tax and legal goals. Complete Documentation: Drafts and files all required forms, resolutions, and agreements. Regulatory Compliance: Manages MCA, RBI, and FDI-related filings and approvals. Due Diligence: Reviews financials and legal records to uncover hidden risks. Post-Merger Support: Updates PAN, GST, employment, and banking records post-deal. With EbizFiling, your M&A transaction is managed professionally, ensuring compliance and efficiency. Conclusion Executing an M&A transaction for an Indian subsidiary involves navigating legal, tax, and compliance complexities. Selecting the appropriate route and adhering to a structured process minimizes risks and maximizes benefits. Expert guidance from platforms like EbizFiling ensures alignment with Indian laws and business objectives. Suggested Read : Holding and Subsidiary Company in India Indian Subsidiary Foreign Shareholder How to start a Subsidiary Company in India? RBI Rules for Foreign Subsidiary Companies Foreign Subsidiary Company Compliance in India FAQs It refers to the merger or acquisition of an Indian subsidiary by another company.Only for mergers and amalgamations under a legally approved scheme.Yes, subject to compliance with FDI and FEMA regulations.Yes, it varies based on asset type and state laws.Yes, under specific conditions outlined in Sections 47 and 72A.No, shareholder approval is typically required.A review of financial, legal, and operational records to identify risks.Yes, we manage end-to-end compliance for foreign transactions.Typically between 3-9 months, depending on structure and approvals.Board resolutions, merger agreements, valuation reports, creditor NOCs, and ROC filings.

Merger and Acquisition in India

Mergers & Acquisitions Strategy for Indian Subsidiaries

A Complete guide on Mergers and Acquisitions in India (M&A India)