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MCA clarifies ‘appointed date’ and ‘acquisition date’ in a scheme of arrangement

MCA clarifies ‘appointed date’ and ‘acquisition date’

Currently, a scheme of arrangement filed under Section 230 and 232 of the Companies Act, 2013 (2013 Act) is required to be approved by the National Company Law Tribunal (NCLT).

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Background

Currently, a scheme of arrangement filed under Section 230 and 232 of the Companies Act, 2013 (2013 Act) is required to be approved by the National Company Law Tribunal (NCLT). The scheme should indicate an appointed date from which it would be deemed to be effective (as per Section 232(6) of the 2013 Act). However, the term ‘appointed date’ has not been defined under the 2013 Act.

On the other hand, as per the requirements of Ind AS 103, Business Combinations, an acquirer needs to identify an ‘acquisition date’ which is the date on which it obtains control of an acquiree.

The Ministry of Corporate Affairs (MCA) received various queries on determination of ‘appointed date’ and ‘acquisition date’ such as whether it is mandatory to indicate a specific calendar date as ‘appointed date’ in a scheme of arrangement. Also, whether acquisition date for the purpose of Ind AS 103 would be the appointed date as referred in Section 232(6) of the 2013 Act.

New development

On 21 August 2019, the MCA issued a circular (no.09/2019) and clarified that the provision of Section 232(6) of the 2013 Act is an enabling provision which allows the companies in the scheme to decide and agree upon an appointed date from which the scheme should come into force. An appointed date could be a specific calendar date or it could be tied to the occurrence of an event.

This issue of First Notes provides an overview of the clarification provided by the MCA.

To access the text of the MCA clarification, please click here.
 

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