AMALGAMATION OCURS WHEN TWO OR MORE COMPANI ES AREJOINED TO FORM A THIRD ENTITY OR ONE IS ABSORBED INTO AR BLENDED WITH ANOTHER
In common parlance, the terminologies “Amalgamation” or “merger” would mean the two business entities joining together to make totally new business entity or to allow one business entity to survive absorbing the other one. Amalgamation or merger is also a method of reconstruction. In amalgamation, two or more companies are fused into one by merger or by one taking over the other. When two companies are merged and are so joined as to form third company or one is absorbed into other or blended with another, the amalgamating company loses its identity. There may be amalgamation either by transfer of two or more undertakings to a new company or by the transfer of one or more undertakings to an existing company. An amalgamation may be defined as an arrangement where by the assets of the two companies which has as its share holders all or substantially all the share holders of the two companies. But they differ in this regard that amalgamation is a used where two or more companies are there but merger is when one company is blended with another.
However the Companies Act, 1956 does not define the term ‘Merger’ or ‘Amalgamation’. It deals with schemes of merger/ acquisition which are given in s.390-394 ‘A’, 395,396 and 396 ‘A’.
Merger is a tool used by companies for the purpose of expanding their operations often aiming at an increase of their long term profitability. Usually mergers occur in a consensual (occurring by mutual consent) setting. The dictionary meaning of Mergers is “to combine commercial or industrial firms” or “to lose identity by being absorbed in something else”.
Amalgamation – the combination of two or more commercial companies
merger, uniting ,consolidation, integration – the act of combining into an integral whole; “a consolidation of two corporations”; “after their consolidation the two bills were passed unanimously”; “the defendants asked for a consolidation of the actions against them”
Any amalgam of good and bad features; any combination of assets and liabilities, strengths and weaknesses, pros and cons, etc. This British term dates from an 1895 Punch cartoon in which a deferential, diplomatic curate, unwilling to acknowledge before his bishop that he had been served a bad egg, insisted that “Parts of it are excellent!” The expression curate’s egg came into vogue almost immediately, and still enjoys considerable popularity.
All the same it is a curate’s egg of a book. While the whole may be somewhat stale and addled, it would be unfair not to acknowledge the merits of some of its parts. (Oxford Magazine, November 22, 1962)
Melting pot a place where the assimilation of racial groups and ethnic cultures occurs; the amalgamation of qualities or concepts, resulting in an improved or unprecedented end-product. This expression alludes to a large cauldron where dissimilar ingredients are blended to form a distinctive mixture. In the United States, the phrase often refers to the ongoing assimilation of vastly different immigrants into the mainstream of American society. Nonetheless, melting pot often carries its meaning of a medley of heterogeneous elements combined into a single work or idea; this concept is illustrated in the American Guide Series: Connecticut, as cited by Webster’s Third:
The architectural melting pot is seen in the tall Romanesque columns, the Gothic hammer-vault roofing. …
The Supreme Court has, on facts of the case, upheld the decision of Madras High Court that from the scheme of amalgamation becoming effective, proceedings in which the transferor company was a party be continued and enforced by or against the transferee company in the same manner and to the same extent as it could be or might have been continued and enforced by or against the transferor company as if the scheme had not been made. In other words, when a transferor company stands dissolved (with or without winding up) due to amalgamation, its right under the decree for eviction devolves on the transferee company.
Life in the 21st century is one of complex, continuous, and accelerating changes. Challenges resulting from scientific discoveries and global concerns, the demographic slump of lower birth rates in developed countries and the changing workplace are external forces which both create a need and provide an impetus for internal change in individuals and organizations (Foot & Stoffman, 1999; Frye, 1991). Nowhere has change been more evident than in the recent restructuring of organizations in both the private and public sector. In the world of business, mergers and acquisitions (M&A’s) have used financial performance as the most common indicator of success. However, the event itself is a “complex human as well as financial [and political] phenomena” (Cartwright & Cooper, 1994, p. 49).
Amalgamating divisions need to have a clear idea of the process to be followed, a process that must be responsive to the technical, the political, and the cultural aspects of an organization (Tichy, 1983). Insights and understandings of the management of an amalgamation process and the resolution of issues will serve to enhance change theory and be of value to subsequent amalgamation
Amalgamation concerns have not bypassed educational structures. Primarily resulting from fiscal constraints and declining enrollments, school systems throughout Canada are experiencing governance reform through the consolidation of divisions (Green & Pierce, 1997). The willingness of individuals to support the effort is affected by factors such as community involvement, relationships, communication, planning strategies, and timing (Mitchell, 1994). In other words, aspects of restructuring that address the management of a merger process are key to its success.
Research participants identified the following as “critical process” incidents: the inclusion of all stakeholder groups through communication and consultation both before, throughout and after the amalgamation process; leadership; timing; personnel; external support; and mechanisms for the resolution of disputes.
In the area of inclusion, communication needs were described as open, public, honest, and accurate as to both information and the process/legalities of amalgamation, complete, timely, and continuous. Inclusion reflected the need for sharing information, talking, forums for open discussion through public meetings, as well as the presence of stakeholder groups on the company. Research participants generally indicated a high degree of satisfaction in the area of communication and inclusion.
Board members are finding the On-going and up-to-date information with regard to amalgamation issues and the status of the amalgamation, whether or not it was an issue of direct concern to them Furthermore, Board members, subsequent to the decision to join with the members Division, expressed feelings of marginalization during amalgamation discussions. The perception of shareholders is one of being cast adrift with no one at the helm of “their” amalgamation. That this occurred could well be attributed to the perceived lack of leadership by the provincial government.
Secondly, shareholders voiced concern over hearing information for the first time through media releases. Furthermore, Board members, subsequent to the decision to join with the members Division, expressed feelings of marginalization during amalgamation discussions. The perception of shareholders is one of being cast adrift with no one at the helm of “their” amalgamation. That this occurred could well be attributed to the perceived lack of leadership by the provincial government.
Study participants addressed leadership on several levels ( Bolman & Deal, 1997; Gardner, 1990; Sackney & Dibski, 1994). The use of words such as collaborative, trustworthy, honest, open to ideas, caring, fair and not self-serving indicated the participants were, on the whole, satisfied with the degree and quality of leadership provided by both internal and external individuals. Internal leadership was provided by the Boards, Directors, local trustees, and representatives on the company. External leadership in the area of amalgamation procedures and in the resolution of issues such as Board representation, the splitting of the division and teachers’ local agreements was provided by the Minister, Department officials and Regional Directors.
At the same time, numerous participants expressed a need for increased provincial leadership in the area of educational governance restructuring through amalgamations. In their opinion, school divisions are looking for a specific game plan from the government, some explicit guidelines. Indeed, the widespread perception is that the government’s “knowing non-leadership” is viewed, at the very least, as a lack of being pro-active in resolving educational governance problems and, at the very most, as an abdication of their responsibility to provide leadership in the governance and direction of education to their electorate, the people in Saskatchewan. Leadership should be doing the right thing, not doing the thing right (Bennis & Nanus, 1985). As indicated by interview responses, decisions made with political expediency and re-election in mind may not be the responsible or ethical response.
Timing is always an issue within any merger or amalgamation process (Mitchell, 1994; Monk & Haller, 1986 These issues included: time to consider and weigh amalgamation alternatives, particularly for the shareholders community; time to deal with amalgamation issues; time for Directors to deal with both amalgamation and division administration responsibilities; time to collect, organize, and disseminate information; time to adjust to change; time to adjust to new and different ways of doing things; the timing and pacing of the amalgamation process; time to involve people; time to bring schools and individuals on-line; and time to reflect and dream.
Mechanisms used for the resolution of disputes were generally satisfactory and can be attributed, in a great part, to the company, its composition and the effort of those individuals who were charged with the responsibility of liaising between the steering committee and the groups they represented.
Indeed, time and flexibility are crucial to division amalgamation. Whereas time lines are important and the amalgamation process needs to maintain a momentum, common sense and flexibility are additional key elements to school division amalgamations which occur within a collaborative decision-making model.
Admittedly, in mechanism not all decisions were unanimous. Discussions within the respective boards were sometimes (often) heated and feelings of acrimony, rancor, and dissatisfaction were still evident at the time of the research study. This is a reality of mergers or amalgamations, regardless of what type (Buono & Bowditch, 1989).
B.THE PROCESS OF TRANSFER COMPANIES:
The procedure for the amalgamation of two companies has to be viewed from the Transferor and Transferee Company. Steps to be followed by Transferee Company are:
1. Memorandum of Association (M/a):-The Memorandum of Association must provide the power to amalgamate in its objects clause. It M/A is silent, amendment in M/A must take place.
2. Board Meeting:-A Board Meeting shall be convened to consider and pass the following requisite resolutions:
– approve the draft scheme of amalgamation
– to authorize filing of application to the court for directions to convene a general meeting
– to file a petition for confirmation of scheme by the High Court.
Through an application under s.391/ 394 of Companies Act, 1956 can be made by the member or creditor of a company, the court may not be able to sanction the scheme which is not approved by the company by a Board or members resolution.
3. Application to the Court:-An application shall be made to the court for directions to convene a general meeting by way of Judge’s summons supported by an affidavit. The proposed scheme of amalgamation must be attached to such affidavit.
Steps To Be Followed By Transferor Company:-
The procedure as given above shall be followed by the transferor company.
The only exception is that – there is no need for the transferor company to pass a special resolution for offering shares to the persons other than the existing shareholders and to file Form No. 23 of the Companies General Rules and Forms with the Registrar of Companies.
C.THE SUMMONS IS ACOMPANIED BY:
A certified copy of the M&A of both companies
A certified true copy of the latest audited B/S and P&L A/c of transferee company
The application to convene meeting under s.391(1) is required to be made to the respective jurisdictional HC by the company concerned depending on the location of its registered office. Similarly an application for the scheme of arrangement will have to be made to the concerned HC where the company’s registered office is situated.
Person entitled to apply:- (i) U/s.391 & 394, members of the company have right to apply to court (ii) A successor to a share of a deceased member has in the normal course, locus standi to maintain an application u/s.391, 395.(iii) An application can also be made by the transferee of shares. (iv)The creditor also have right to apply to court. (v) The liquidator is also empowered to make an application to the court.
4. Copy to Regional Director:-A copy of application made to concerned H.C. shall also be sent to the R.D. of the region. Although, such notice is supposed to be sent by the H.C., usually the company sends it without waiting for the H.C. to send it.
5. Order Of High Court:-On hearing of the summons, the H.C. shall pass the necessary orders which shall include: (a) Time and place of the meeting, (b) Chairman of the meeting, (c) Fixing the quorum, (d) Procedure to be followed in the meeting for voting by the proxy, (e) Advertisement of notice of the meeting, (f) Time limit for the chairman to submit the report to the court regarding the result of the meeting.
6. Notice of the Meeting:-The notice of the meeting shall be sent to the creditors and/or all the shareholders individually (including preference shareholders) by the chairman so appointed by registered post enclosing: (a) A statement setting forth the following:
-Terms of amalgamation and its effects
– Any material interests of the director, MDs or Manager, in any capacity
– Effect of the arrangement on those interests.
(b) A copy of the proposed scheme of amalgamation
(c) A form of proxy, (d) Attendance slip, (e) Notice of the resolution for authorizing issue of shares to persons other than existing shareholders
Computation: The notice that is required to be given u/s.393 of the Act for the meeting of the members/creditors shall be by 21 clear days notice.
7. Advertisement of Notice of Meeting:-The notice of the meeting shall be advertised in English and Hindi Newspapers as the court may direct by giving not less than 21 clear days notice before the date fixed for the meeting. However in some instances, the 21 days period can be condoned if reasons are found justifiable.
8. Notice To Stock Exchange: – In case of the listed company, 3 copies of the notice of the general meeting along with enclosures shall be sent to the Stock Exchange where the company is listed.
9. Filing of Affidavit for the Compliance: – An affidavit not les than 7 days before the meeting shall be filed by the Chairman of the meeting with the Court showing that the directions regarding the issue of notices and advertisement have been duly complied with.
Where the court observes that any of the following circumstances exist in the case of the merger it may not order a meeting when shareholders are few in number; or where the membership is restricted to a single family, HUF or close relatives; or where shareholding pattern of transferor and transferee companies is identical.
10. General Meeting :-The General Meeting shall be held to pass the following resolutions: (a) Approving the scheme of amalgamation by ¾th majority e.g. if a meeting is attended by say 100 members holding 100 shares, the scheme shall be deemed to have been approved only when it is supported by at least 51 members holding together 750 shares amounts themselves; (b) Special Resolution authorizing allotment of shares to persons other than existing shareholders or an ordinary resolution be passed subject to getting Central Government’s approval for the allotment as per the provisions of Section 81(1A) of the Companies Act, 1956, (c) The resolution to empower directors to dispose of the shares not taken up by the dissenting shareholders at their discretion., (d) An ordinary/special resolution shall be passed to increase the Authorized share capital, if the proposed issue of shares exceeds the present authorized capital. The decision of the meeting shall be ascertained only by taking a poll on resolutions.
11. Reporting of Result of the Meeting:-The Chairman of the meeting shall report the result of the meeting to the court within the time fixed by the
12. Formalities With ROC:- The following documents shall be filed with ROC along-with the requisite filing fees:
(i)Form No. 23 of Companies General Rules & Forms + copy of Special Resolution, (ii)Resolution approving the scheme of amalgamation, (iii) Special resolution passed for the issue of shares to persons other than existing share hold
Reporting Of Result Of The Meeting:-The Chairman of the meeting shall report the result of the meeting to the court within the time fixed by the judge or within 7 days, as the case may be. A copy of proceedings of the meeting shall also be sent to the concerned Stock Exchange.
13. Petition:-For approval of the scheme of amalgamation, a petition shall be made to the H.C. within 7 days of the filing of report by the chairman.
If the Regd. Offices of the companies are in same state – then both the companies may move jointly to the High Court. If the Regd. Offices of the companies are in different states – then each company shall move the petition in respective High Court for directions.
14. Sanction of the Scheme: – The Court shall sanction the scheme on being satisfied that:
(i) The whole scheme is annexed to the notice for convening meeting. (This provision is mandatory in nature)
(ii) The scheme should have been approved by the company by means of ¾th majority of the members present.
(iii)The scheme should be genuine and bona fide and should not be against the interests of the creditors, the company and the public interest.
After satisfying itself, the court shall pass orders in the requisite form. The requirement of law is permission or approval of court to the scheme. The application made by the company is to seek court’s approval to the company scheme of amalgamation and not merely ordering a meeting. The court may order a meeting of members too. The court must consider all aspects of the matter so as to arrive at a finding that the scheme is fair, just and reasonable and does not contravene public policy or any statutory provision.
While interpreting s.394 r/w s.391, we find that the Tribunal’s power of ordering
Amalgamation/reconstruction is limited by two provisos of s.394: Firstly, Tribunal has to await the receipt of report from the Registrar of Companies about the manner in which affairs of the Company are conducted. Secondly, when the transferor company is proposed to be dissolved without winding up, the Tribunal shall await.
15. Stamp Duty
A scheme sanctioned by the court is an instrument liable to stamp duty.
16. Filing with ROC
The following documents shall be filed with ROC within 30 days of order:
” A certified true copy of Court’s Order
” Form No. 21 of Companies General Rules & Forms
17. Copy of Order to be annexed
A copy of court’s order shall be annexed to every copy of the Memorandum of Association issued after the certified copy of the order has been filed with as aforesaid.
18. Allotment of shares
A Board Resolution shall be passed for the allotment of shares to the shareholders in exchange of shares held in the transferor-company and to fix the record date for this purpose.
RELATIONSHIP BETWEEN MERGER AND AMALGAMATION
The amalgamation of schools divisions can be compared to a horizontal merger (Pfeffer & Salancik, 1978) and, as with any merger, one needs to address concerns with regard to both strategic and organizational fit (Buono & Bowditch, 1989). A horizontal merger is generally viewed as either a collaborative effort and/or an organizational rescue (Pritchett, 1985) which results in a changed organizational structure.
During the merger process, the management of planned second-order change focuses on the technical, political, and cultural aspects of organizations (Tichy, 1983). Technical issues include the resolution of differences in employee benefits, policy, mill rates, and the division of assets as well as organizational design, costs of amalgamation, and technical resources. Political problems include the need for mechanisms to resolve disputes, conflicts arising from government policy and regulations, budget allocations, the distribution of power and influence, and accession decisions. Cultural aspects include individual and group transition management (Bridges, 1992) and the integration of cultures at both division and school levels (Marks & Mirvis, 1992).
In addition, throughout the amalgamation, a process of transition is taking place among those involved in and affected by the change. Individuals are moving, in various stages and at their own pace, through the phases of organizational transition, namely— endings, regrouping and beginnings (Bridges, 1986).
Collaboration and consultation are paramount to success when one is grappling with technical, political and cultural issues as well as with issues of human resource management. Additional important elements to merger management involve leadership, individual and group participation, a team approach to problem-solving, and both internal and external support. Throughout the management of a merger process and key to its success is the need for open, continuous and complete communication. At the end of the process is a renewed organization which is visionary, learning, and technically, politically, and culturally aligned.
It is the researcher’s opinion that the conceptual framework which guided this study can stand on its own merit. However, having said that, the researcher proposes that the cultural aspect of planned strategic change and the iterative phases of transition be given a greater degree of prominence in the conceptualization of planned second-order change through the amalgamation of divisions. Organizations are human constructs and, as such, should reflect the culture(s) of those who are part of the organization. Change and the ensuing transitions individuals experience as a result of change are constants in the evolution of organizations. Attention to the “human side of amalgamations” will result in new and renewed organizations which are visionary, learning, and aligned—culturally, technically, and politically.
Some tentative conclusions can be inferred from the study but cannot be generalized beyond the amalgamation of the respective school divisions. However, the “thick” data provided by the study may make transferability judgments possible on the part of other school divisions engaged in an amalgamation process. The readers of this study are, therefore, the people who will determine if the findings in this particular amalgamation can be applied to another setting.
In amalgamation, two or more companies are fused into one by merger or by one taking over the other. Form third company or one is absorbed into other or blended with often leaving Staples as the only superstore in the area.
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