Rule of Merger & Demerger
Rules of Merger & Demerger _________________________________________
1. These rules are called Rules of Merger & Demerger amongst the Firms registered with The Institute of Chartered Accountants of India.
2. Concept of Merger & Demerger:
i) The Partnership Act has not prescribed merger & demerger of partnerships. In the corporate world, merger and demerger have become universal practices for securing survival, growth, expansion and globalization of enterprise and achieving multitude of objectives. Merger is the fusion of two or more existing companies. On the other hand, demerger signifies a movement in the company just opposite to merger. `Demerger’ is also used to describe spinning off of an “undertaking” of a Corporate entity. The concept of `Merger’, `Demerger’ & `Acquisition’ are arising out of the `Arrangement’ under Sections 391-394 of the Companies Act, 1956. Merger and Demerger are natural corollary of globalization.
ii) To incorporate the spirit of Corporate World and to imbibe the consolidation creed, the Council used the term ‘merger’ and ‘amalgamation’ of CA firms. The Council in its 198th Meeting held from 25th to 27th February, 1999 and in 223rd Meeting held from 2nd to 5th February, 2002 considered the Seniority and Mergers of the firm and implications of the decisions.
iii) In order to have an orderly and sustainable growth of the CA firms, it is desirable that the coming together of the firms begins with networking and then matures to mergers. Networking will enable the firms to develop working relationships with each other. However, it is not to suggest that there cannot be mergers without networking.
iv) The mergers should be effected to develop core competencies and to render professional services of a larger range spread over bigger geographical area. A merged big entity will always be superior to a network arrangement.
3. Merger
i) To effectuate merger, a merger agreement in
1. These rules are called Rules of Merger & Demerger amongst the Firms registered with The Institute of Chartered Accountants of India.
2. Concept of Merger & Demerger:
i) The Partnership Act has not prescribed merger & demerger of partnerships. In the corporate world, merger and demerger have become universal practices for securing survival, growth, expansion and globalization of enterprise and achieving multitude of objectives. Merger is the fusion of two or more existing companies. On the other hand, demerger signifies a movement in the company just opposite to merger. `Demerger’ is also used to describe spinning off of an “undertaking” of a Corporate entity. The concept of `Merger’, `Demerger’ & `Acquisition’ are arising out of the `Arrangement’ under Sections 391-394 of the Companies Act, 1956. Merger and Demerger are natural corollary of globalization.
ii) To incorporate the spirit of Corporate World and to imbibe the consolidation creed, the Council used the term ‘merger’ and ‘amalgamation’ of CA firms. The Council in its 198th Meeting held from 25th to 27th February, 1999 and in 223rd Meeting held from 2nd to 5th February, 2002 considered the Seniority and Mergers of the firm and implications of the decisions.
iii) In order to have an orderly and sustainable growth of the CA firms, it is desirable that the coming together of the firms begins with networking and then matures to mergers. Networking will enable the firms to develop working relationships with each other. However, it is not to suggest that there cannot be mergers without networking.
iv) The mergers should be effected to develop core competencies and to render professional services of a larger range spread over bigger geographical area. A merged big entity will always be superior to a network arrangement.
3. Merger
i) To effectuate merger, a merger agreement in