Indian Companies Allowed to Merge with Companies Abroad

IAS Prelims 2023

The Centre has allowed Indian companies to merger with companies abroad. However, such outbound mergers will be allowed only with the prior approval of the Reserve Bank of India (RBI).

Indian companies will now be able to merge into foreign companies based in Mauritius, the Netherlands, Singapore, UK, US, Abu Dhabi, DIFC (Dubai) and UAE.

The Corporate Affairs Ministry (MCA) has passed the necessary executive orders under the new Companies Act, 2013 to bring this into effect.

While explicitly allowing Indian companies to merge with companies abroad, the Ministry of Corporate Affairs has also reaffirmed the existing legal position of allowing foreign companies to merge with Indian firms here through a scheme of arrangement (inbound mergers).

The erstwhile Companies Act 1956 had no specific provision allowing Indian companies to go for outbound mergers. Only inbound mergers (foreign companies merging into Indian companies) were allowed under this law, which was replaced by the new Companies Act, 2013.