B.S.V. Prakash Kumar, Member - (1.) The proposed Scheme of Amalgamation between Asian Paints Limited ("Applicant Company" or "Transferee Company") and Asian Paints (International) Limited ("Transferor Company") ("Scheme") provides for the transfer of the entire business of the Transferor Company to, and vesting thereof in, the Transferee Company, as a "going concern", in accordance with the terms of the Scheme and pursuant to the provisions of Sections 230-232 and 234 of the Companies Act, 2013 read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, as amended. The Transferor Company is a foreign company incorporated under the provisions of the Mauritius Companies Act and is a wholly owned subsidiary of the Applicant Company. The proposed Scheme will result in the following benefits: (a) rationalizing multiple foreign subsidiaries in the group to ensure optimized legal entity structure more aligned with the business by reducing the number of legal entities and reorganizing the legal entities in the group structure so as to obtain significant cost savings and/or simplification benefits; (b) significant reduction in the multiplicity of legal and regulatory compliances required at present to be carried out by the Transferor Company and the Applicant Company; (c) elimination of administrative functions and multiple record-keeping, thus resulting in reduced expenditure; and (d) the amalgamation pursuant to the Scheme will create a focused platform for future growth of the Applicant Company. The Scheme does not affect the rights and interests of the members or creditors of the Applicant Company and does not involve any re-organisation of share capital of the Applicant Company. As on date, the assets of the Applicant Company exceed its liabilities and would be sufficient to discharge the said liabilities in future. The assets and liabilities of the Transferor Company will be appropriated under the Scheme by the Applicant Company and the shareholding and other rights of the members of the Applicant Company will remain unaffected as no new shares are being issued and there is no change in the capital structure. Both the Applicant Company and the Transferor Company have a positive Net-worth and the proposed amalgamation will not affect or adversely impact the rights of the creditors of the Applicant Company in view of the strength of the financial position of the Applicant Company and the Transferor Company.
(2.) Pursuant to the notification of Section 234 of the Companies Act, 2013 and Rule 25A of the Companies (Compromises, Arrangement and Amalgamations) Rules, 2016 ("NCLT Scheme Rules"), the Reserve Bank of India ("RBI") has on April 26, 2017 issued draft regulations being viz., Foreign Exchange Management (Cross border Merger) Regulations, 2017 ("Cross Border Draft Regulations"). Regulation 4 of the Cross Border Draft Regulations sets out the conditions that need to be complied with in case of merger of a foreign company with an Indian Company. Regulation 7 of the Cross Border Regulations provides that all transactions arising due to cross border merger are to be reported to the RBI in the same manner in which it is otherwise required to be reported under FEMA or rules or regulations framed thereunder. The Indian company and the foreign company involved in the cross border merger shall be required to furnish reports as may be prescribed by the RBI. Regulation 8 of the Cross Border Regulations states that all transactions undertaken in accordance with the Cross Border Regulations shall be deemed to be approved by the RBI as required under Rule 25A of the NCLT Scheme Rules.
(3.) The Applicant Company filed an application with the RBI on April 25, 2017 seeking approval under Section 234 of the Companies Act, 2013 read with Rule 25A of the NCLT Scheme Rules. The RBI conveyed its "No-objection" from Foreign Exchange Management Act, 1999 ("FEMA") angle to the Applicant Company by its letter dated June 12, 2017, which has been marked and annexed as Exhibit "U" to the Company Scheme Application No. 713 of 2017, subject to the following conditions: (a) Any issue or transfer of security by the resultant company to a person resident outside India shall be in accordance with the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000. (Resultant company means an Indian company or a foreign company which is established or formed or is proposed to be established or formed on sanction of the Scheme of cross border merger, (b) Any borrowing or impending borrowing of the foreign company from overseas sources which becomes the borrowing of the resultant company or any borrowing from overseas sources entering into the books of resultant company arising shall conform to the External Commercial Borrowing norms or Trade Credit norms or other foreign borrowing norms, as laid down under Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 or Foreign Exchange Management (Guarantee) Regulations, 2000, as applicable, (c) the resultant company may acquire and hold any asset outside India which an Indian company is permitted to acquire under the provisions of the FEMA, rules or regulations framed thereunder. Such assets can be transferred in any manner for undertaking a transaction permissible under FEMA or rules or regulations framed thereunder, (d) the valuation of the Indian Company and the foreign Company for the purpose of cross border merger shall be done as per internationally accepted pricing methodology for valuation of shares on arm's length basis which could be duly certified by the Chartered Accountant/public accountant/merchant banker authorise to do so in either jurisdiction. Further, the Applicant Company, while reporting the transaction must (i) confirm the reconciliation of all the remittances under the UIN BYWRB19990180; and (ii) report online the disinvestment in RBI web portal after completion of above compliances. The Applicant Company undertakes to comply with the aforementioned conditions mentioned in the RBI's No-objection letter.;