Merger of Foreign Companies with Domestic Companies
Merger of foreign companies with Indian companies is possible under the Companies Act itself. However, for that at least the transferee company must be an Indian company so that the Indian Courts can have jurisdiction in the matter to pass necessary orders.
Here there can be two different Courts in two different countries including the jurisdictional High Court in India approving and sanctioning different parts of the same scheme.
As a matter of abundant caution, often such schemes of merger of foreign companies with domestic companies provide that it will come into force only when the last among the approvals or sanctions in this connection are obtained. This is because the approval or sanction of various appropriate and competent authorities including Courts spread in different countries or jurisdictions might be necessary for implementation of the scheme.
Further, to ensure that such scheme is binding on the concerned foreign company, it is often made a co applicant to the petition of the Indian company in the concerned High Court in India for approving the merger under Sections 391-394 of the Companies Act. In this manner the foreign company’s submission to the jurisdiction of the Indian Courts is secured.
Alternatively, there are instances of such amalgamation scheme providing that the foreign transferor company shall submit itself to the jurisdiction of the appropriate Indian Courts.
It has been laid down in the case of Khandelwal Udyog Ltd. reported in 47 Company Cases 503 that Indian Courts have jurisdiction to pass orders in respect of Indian assets of foreign companies.
Under the company legislations in commonwealth countries like UK and India the dissolution without winding up of domestic transferor companies in any scheme of corporate restructuring is possible only at the instance or orders of the domestic jurisdictional Court. However the company law of many jurisdictions or States in the USA provides that the concerned transferor American company of that US State shall stand dissolved automatically without being wound up, without any further act on part of the said transferor company, in a scheme of merger with foreign company, as soon as the order of the foreign Court having territorial jurisdiction over the acquirer foreign company is filed. This is indeed a welcome difference from the UK or Indian company law.
By virtue of similar provisions in Section 1108 (d) of chapter 11 of California Corporation Code there is instance of an American Software Company dissolving without winding up and merging with Indian Software Company only by filing the certified copy of the order of the Indian Court sanctioning the scheme with the concerned US authorities.
Indian branches of foreign companies have been amalgamated with Indian companies by invoking the provisions of Section 391-394 of the Companies Act. This has been facilitated because under Section 591 of the Companies Act, 1956 foreign companies, though incorporated outside India, but having a branch or place of business in India are treated as Indian company for the business carried on by it in India and for no other purpose. Such a foreign company according to Section 591 has to comply with the provisions of Sections 592 to 602 of the said Act. The High Court of the state in India, within whose territory the principal place of business in India of such foreign company is situated, is competent to hear application under Section 391-394 of the said Act for merger of its Indian branch or business with an Indian company.
