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SCHOOL OF LAW

OTHER CONTINUOUS ASSESSMENT

Name: DIVYA SHREE


Student ID:2016BCL003
Course & Course Code: COMPANY LAW
Course Coordinator’s Name: PROF.Poorva Dighe Ma’aM
Name of Other Continuous Assessment & No: 1&2

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Student’s Signature ___________DIVYASHREE_______________ Date:
_______________Course Instructor’s Signature:
PRESIDENCY UNIVERSITY SCHOOL OF LAW
SUBJECT : COMPANY LAW 2
PROJECT : AMALGAMATION OF COMPANY

FROM :

NAME DIVYASHREE
DEPARTMENT SCHOOL OF LAW
COLLEGE PRESIDENCY UNIVERSITY
ROLL NO 2016BCL003
Year 2016-2021

TO :

POORVA DIGHE MA’AM

TABLE OF CONTENT
SL.NO TOPIC PG .NO
1 CHAPTER 1
1A INTRODUCTION OF 1
AMALGAMATION
1B AIMS AND OBJECTIVE 1

1C RESEARCH QUESTION 2
2 CHAPTER 2
2A 3-4
AMALGAMATION? IS THERE ANY
DIFFENT FORM WHERE
AMALATION TAKE PLACE

2B 45
TYPES OF AMALGAMATION ARE
THERE AND WHAT ARE THEY

2C 5
WHAT IS NEED FOR
AMALGAMATION
2D LEGAL PROCEDURE FOR 5-6
AMALGAMATION

2E ACCOUNTING OF 6-7
AMALGAMATION
2F 7-9
ADVANTAGES AND
DISADVANTAGES OF
AMALGAMATION?AND PROBLEMS
OF AMALGAMATION

3 9-11
EXAMPLES OF AMALGAMATION
IN RECENT TIMES

4 CHAPTER3 12
CONCLUSION
SUGGESTION
BIBLIOGRAPHY
CHAPTER 1:

INTRODUCTION TO AMALGAMATION

In this particular chapter amalgamation it basically speaks about the what is amalgamation in a
company law ,how it basically works and is it having any different forms while happing of the
amalgamation as well as it also gives some example in order to understand the concept of
amalgamation , it also speak about types of amalgamation and what are they . In later stage it
tell what is need of this chapter ,is there a legal procedure for amalgamation and what is the
accounting for amalgamation as well as it discuss about the advantage and disadvantage of the
amalgamation and many more thing related to the amalgamation , completely /whole it based on
Amalgamation is the combination of one or more companies into a new entity. An amalgamation
is distinct from a merger because neither of the combining companies survives as a legal entity; a
completely new entity is formed to house the combined assets and liabilities of both companies. 

AIMS AND OBJECTIVE OF AMALGAMATION

AIM
The concept of say that Amalgamation is the blending of two or more existing companies into one
company.

For example, if two existing companies say, X Ltd. And Y Ltd. Go into liquidation to form a new
company XY Ltd., it is a case of amalgamation.

OBECTIVE
 build up goodwill
 To reduce the degree of risk through diversification
 Managerial effectiveness.

RESEARCH QUESTION:
1. WHAT IS AMALGAMATION? IS THERE ANY DIFFENT FORM WHERE
AMALATION TAKE PLACE ?

2. HOW MANY THE TYPES OF AMALGAMATION ARE THERE AND WHAT ARE
THEY?

3. WHAT IS NEED FOR AMALGAMATION ?

4. WHAT IS THE LEGAL PROCEDURE FOR AMALGAMATION ?

5. WHAT IS ACCOUNTING OF AMALGAMATION ?

6. WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF


AMALGAMATION?

7. WHAT ARE THE PROBLEMS OF AMALGAMATION?


CHAPTER 2: SUBJECT MATTER AND EXPLAINATION OF AMALGAMATION

WHAT IS AMALGAMATION? IS THERE ANY DIFFENT FORM WHERE


AMALATION TAKE PLACE

 Amalgamation is defined as the combination of one or more companies into a new entity.
It includes:
 Two or more companies join to form a new company
 Absorption or blending of one by the other
 Thereby, amalgamation includes absorption.
 However, one should remember that Amalgamation as its name suggests, is nothing but
two companies becoming one.
 On the other hand, Absorption is the process in which the one powerful company takes
control over the weaker company.
 Generally, Amalgamation is done between two or more companies engaged in the same
line of activity or has some synergy in their operations.
 Again the companies may also combine for diversification of activities or for expansion
of services
 Transfer or Company means the company which is amalgamated into another company;
while Transfer Company means the company into which the transfer or company is
amalgamated.

 Existing companies A and B are  Amalgamation


wound up and a new company C is
formed to take over the businesses
of A and B
 Existing company A takes over the  Absorption
business of another existing
company B which is wound up

 A New Company X is formed to  External reconstruction


take over the business of an existing
company Y which is wound up.

HOW MANY THE TYPES OF AMALGAMATION ARE THERE AND WHAT ARE
THEY

1. Amalgamation in the nature of merger:

 In this type of amalgamation, not only is the pooling of assets and liabilities is done but
also of the shareholders’ interests and the businesses of these companies.
 In other words, all assets and liabilities of the transferor company become that of the
transfer company. In this case, the business of the transfer or company is intended to be
carried on after the amalgamation. There are no adjustments intended to be made to the
book values.
 The other conditions that need to be fulfilled include that the shareholders of the vendor
company holding at least 90% face value of equity shares become the shareholders’ of
the vendee company.

2.Amalgamation in the nature of purchase:

 This method is considered when the conditions for the amalgamation in the nature of
merger are not satisfied.
 Through this method, one company is acquired by another, and thereby the shareholders’
of the company which is acquired normally do not continue to have proportionate share
in the equity of the combined company or the business of the company which is acquired
is generally not intended to be continued.
 If the purchase consideration exceeds the net assets value then the excess amount is
recorded as the goodwill, while if it is less than the net assets value it is recorded as the
capital reserves.
WHAT IS NEED FOR AMALGAMATION ?

there are various motives behind the amalgamation.

Briefly,

1. It helps in availment of various tax benefits. Many a times amalgamation takes place as a
measure of tax planning.
2. By uniting through way of amalgamation, companies take advantage of large economies
of scale.
3. It also helps in elimination of competition amongst similar group of industries.
Sometimes, it also helps in creation of monopoly in the market.
4. It is always viewed as an icon of growth, it generally increases the value of the
companies.
5. It carries future prospects of financial and capital- growth & development.
6. It provides ‘synergy benefits’, quite a popular word related with amalgamations. In
simple terms, it means the benefits derived due to the combination.
7. To acquire cash resources
8. Economies of large scale operations Increase shareholders value &To reduce the degree
of risk by diversification
9. Managerial effectiveness
10. To achieve growth and gain financially

WHAT IS THE LEGAL PROCEDURE FOR AMALGAMATION ?

1. The terms of amalgamation are finalized by the board of directors of the amalgamating
companies.
2. A scheme of amalgamation is prepared and submitted for approval to the respective High
Court.
3. Approval of the shareholders’ of the constituent companies is obtained followed by
approval of SEBI.
4. A new company is formed and shares are issued to the shareholders’ of the transferor
company.
5. The transferor company is then liquidated and all the assets and liabilities are taken over
by the transferee company.

WHAT IS ACCOUNTING OF AMALGAMATION

A. Pooling of Interests Method:

Through this accounting method, the assets, liabilities and reserves of the transfer or company
are recorded by the transferee company at their existing carrying amounts.

B. Purchase Method:

In this method, the transfer company accounts for the amalgamation either by incorporating the
assets and liabilities at their existing carrying amounts or by allocating the consideration to
individual assets and liabilities of the transfer or company on the basis of their fair values at the
date of amalgamation.

Computation of purchase consideration: 

For computing purchase consideration, generally two methods are used:

1. Purchase Consideration using net asset method: Total of assets taken over and this should
be at fair values minus liabilities that are taken over at the agreed amounts.

Particulars Rs.

Agreed value of assets taken over XXX


Less: Agreed value of liabilities taken over XXX

Purchase Consideration XXX

2. Agreed value means the amount at which the transfer or company has agreed to sell and
the transferee company has agreed to take over a particular asset or liability.
3. Purchase consideration using payments method: 

Total of consideration paid to both equity and preference shareholders in various forms.

WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF AMALGAMATION?

Advantages of Amalgamation

 Competition between the companies gets eliminated


 R&D facilities are increased
 Operating cost can be reduced
 Stability in the prices of the goods is maintained

Disadvantages of Amalgamation

 Amalgamation may lead to elimination of healthy competition


 Reduction of employees may take place
 There could be additional debt to pay
 Business combination could lead to monopoly in the market, which is not always positive
 The goodwill and identity of the old company is lost
WHAT ARE THE PROBLEMS OF AMALGAMATION

1. Though change is the law of nature. We all would agree with this point that changes are

difficult and not easily welcomed by us, same goes for mergers.

2. There are cultural differences especially in case of cross border merger. People don’t

work in harmony, there are signs of discontentment.

3. It is not possible every time that one gets a win-win situation out of amalgamations. One

has to be ever ready for facing trial and tribulations.

4. The attitude of the management is not always friendly, the hostile kind of attitude of the

management is a sign of danger for any amalgamation.

EXAMPLES OF AMALGAMATION IN RECENT TIMES

Heinz and Kraft Foods

 Most interesting merger to study for many of us, is Heinz and Kraft food wondering
why? Because we love food, don’t we? Apart from this, following are some noteworthy
points w.r.t this merger-
 This merger was important for the reason that it involved combination of two giants in
the food industry.
 The merger helped in augmentation of annual sales and establishing the major market
share in the world and more specifically in United States.
 The synergy benefits were expected out of merger in form of International Growth and
the economies of scale.
 Cost savings were expected as a results of combined operations. Different strategies were
adopted to cut the costs.
 The cost of merger was approximately $42 billion. The merger was a horizontal merger.
Toyota Mergers

 The Toyota mergers are peculiar kind of mergers, the unique kind of feature observed in
their mergers is that they believe in expansion through internal means.
 Mergers took place between two subsidiaries of the same parent company.
 The motive behind these kind of mergers is improvement of internal processes, utilizing
strengths of each other and strengthening the communication.

E-Bay and Paypal

 The reason behind this E-Bay and Paypal merger was dependency on each other.
 The Paypal was dependent on E-bay for majority of its income.
 The payment businesses are dependent on the volume of transactions & the Paypal was
dependent on E-bay for this volume.
 This merger could not continue for a long and again E-bay and Paypal parted their ways
approximately after 12 years of its unity.
 The cost of merger was approximately $1.5 billion.

Dow Chemical & Dupont

 This merger took place because the investors wanted to have a better diversified portfolio
for their investments.
 The dupont was into the seeds industry and the Dow was into chemicals industry.
 A merger of these rare industries was strategically planned to achieve the best position in
the field of agriculture.
 The cost of merger was approximately $130 billions. The mereger is a kind of vertical
merger.

Citicorp and Travelers Group

 This merger was meant to create one of the biggest merger in the sector of financial
services of banking, insurance and investment operations.
 This was done to bring various clients together who make use of the financial services
and who are keen to invest in the markets. This move would increase their client base on
individual levels.
 Through this measure, the investments products were made available to all kinds of
customers.
 The cost of merger was approximately $140 billion.

Recently announced Amalgamation

One of the recent amalgamations announced on the corporate front is of PVR Ltd. Multiplex
operator PVR Ltd has approved an amalgamation scheme between Bijli Holdings Pvt Ltd and
itself to simplify PVR’s shareholding structure. As per the management, the purpose of the
amalgamation is to simplify the shareholding structure of PVR and reduction of shareholding
tiers. It also envisages demonstrating Bijli Holdings’ direct engagement with PVR. After the
amalgamation, individual promoters will directly hold shares in PVR and there will be no change
in the total promoters’ shareholding of PVR.
CHAPTER 3

Conclusion

Amalgamation is one of the tools that can help companies avoid competition among them and
add to the market offerings. It is for the mutual advantage of the acquirer and acquired
companies. It serves as an apt method of corporate restructuring to bring about a change for the
better and make business environment competitive.

SUGGESTION

1. Thoroughly evaluate your liquidity and financial capability.

2. Put together the perfect team.

3. Make sure information can be shared securely and efficiently

RESOURCE /BIBLIOGRAPHY

https://www.edupristine.com/blog/amalgamation-explained-detail
http://www.mca.gov.in/Ministry/notification/pdf/AS_14.pdf
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2319788/
https://www.investopedia.com/terms/a/amalgamation.asp

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