Ventura Pranas’ Post

Union Budget 2024-25 Expectation – Direct Tax | 5 Key Budget Expectations for Mergers and Acquisition This update has been contributed by Ronak. Doshi and Jinal Jain Stay tuned for more…… Link to: 1. Budget Expectations for Individuals: https://lnkd.in/dn5KrX_k 2. Budget Expectations for Corporates: https://lnkd.in/dthqUjZ9 3. Budget Expectations on TDS and TCS provisions: https://lnkd.in/dS9gA68B #BansiMehta #Budget #M&A

NEWS ASIA India Mandates RBI Approval for Foreign Holding Company Mergers With Domestic Units India's Ministry of Corporate Affairs has amended the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016, effective from September 17, 2024. The changes allow foreign holding companies to merge with their Indian subsidiaries, fast-tracking such mergers by removing the need for National Company Law Tribunal (NCLT) clearance. Key requirements include prior approval from the Reserve Bank of India (RBI) and compliance with Section 233 of the Companies Act, 2013. Mergers involving companies from countries sharing a land border with India, like China, require additional declarations. The amendment is seen as encouraging "reverse flipping," where start-ups relocate their parent entities back to India, attracted by favorable reforms and market conditions.

The wait is finally over! The Ministry of Corporate Affairs has issued a notification under the Competition Act, 2002, updating the minimum threshold values for M&A activities. Effective from September 10, 2024, the new thresholds are: (i) Minimum Asset Value: ₹450 crore and (ii) Minimum Turnover Value: ₹1,250 crore This long-anticipated update follows the 2023 amendments to the Competition Act and signifies a major shift in India's regulatory framework for mergers. It reflects the evolving competitive landscape and underscores the government's commitment to a fair and transparent market, aligning with the growing scale of high-value deals in today's fast-paced environment. #CompetitionLaw #CorporateLaw #MergersAndAcquisitions #MarketRegulation #India #LegalUpdates #Threshold #MCA

Could cash consideration and issuance of debentures in an intragroup amalgamation scheme lead to transfer pricing adjustment? The Indian ITAT recently answered that question in the affirmative. That decision could be an important judicial precedent for many amalgamation transactions. The ITAT opined that the scheme of amalgamation between two Indian group companies – because of which the ultimate parent company (a foreign company) ended up owning all shares of one of the Indian companies (the amalgamated company) – was an ‘international transaction’ subject to transfer pricing rules. The ITAT also viewed that the mere fact that the National Company Law Tribunal (NCLT) had approved the scheme of amalgamation, per se, did not preclude the transfer pricing officer (TPO) from recommending a transfer pricing adjustment. Further, the ITAT noted, the so-called ‘other transfer pricing method’ for determination of the arm's length price required benchmarking based on uncontrolled transactions and it warranted a high degree of independence in the valuation exercise. The ITAT upheld the tax authorities’ conclusion that though the amalgamated company had issued equity shares - and also it had issued convertible debentures and paid cash - to the sole shareholder of the amalgamating company (a group company tax resident of the Netherlands), only issuance of the equity shares represented the arm's length price. Issuance of debentures and cash payment were in excess of the arm's length price, which justified a transfer pricing adjustment. As result, the ITAT held that only about 0.15% of the consideration was at arm’s length; consideration approximating 99.85% attracted transfer pricing adjustment. The ITAT’s decision seems well reasoned. It is likely to carry significant precedent value, and one would need to consider its implications while formulating structures for intra-group mergers and acquisitions. Prashant Maharishi #transferpricing #mergers #amalgamations

In the world of mergers and acquisitions (M&A), things rarely happen as simply as a handshake and a check. Often, a portion of the purchase price is held back and paid at a later date or contingent upon specific conditions being met. This creates a clash between cash flow and tax obligations. - Taxman says : Pay tax now (on accrued basis as per capital gain law) - Taxpayer says : I have not received full amount and might not even received it!! (logical but facts specific) While tussle is on, this ruling is a step forward that favors taxpayers as ITAT held that only "real income" should be taxed and if taxpayer also receives the amount held back in escrow, he should offer it to tax in the year of receipt. But this is not over as there are other judgment of Madras HC which mention tax should be paid upfront which is not considered by ITAT Mumbai in this case because of the different facts. As always, journey is not over and with rising M&As and this being the standard clause in every M&A deal, we might see more judgment on this topic.

RBI Approval Now Mandatory for Mergers of Foreign Holding Companies with Indian Subsidiaries India's Ministry of Corporate Affairs has introduced significant amendments to the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016 effective September 17, 2024. Key updates include: 1) RBI Approval: Both the foreign holding company and the Indian subsidiary must seek prior RBI clearance before proceeding with a merger. 2) Fast-Track Mergers: The process is streamlined by bypassing the National Company Law Tribunal (NCLT), and expediting mergers between foreign startups and their Indian subsidiaries. 3) Section 233 Compliance: Indian companies must adhere to Section 233 of the Companies Act and submit necessary declarations. 4) Land Border Considerations: For companies from nations sharing land borders with India, such as China, additional declarations must be made using Form No. CAA 16. These reforms are expected to benefit Indian-founded startups engaged in “reverse flipping,” relocating their parent entities back to India, driven by favorable capital markets and investor confidence. #IndiaBusiness #CrossBorderMergers #ForeignInvestment

Latest Amendments to Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 Key Amendments: The Ministry of Corporate Affairs (MCA) introduced significant amendments to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, effective from September 17, 2024 by inserting sub rule (5) in Rule 25A. These changes primarily focus on streamlining the process for cross-border mergers and amalgamations involving a foreign holding company and its Indian subsidiary. Core Changes: i) Mandatory RBI Approval: Now, both the transferor foreign company (holding company) and the transferee Indian company (wholly owned subsidiary) must obtain prior approval from the Reserve Bank of India (RBI) before proceeding with a merger or amalgamation. ii) Application to Central Government: The transferee Indian company is required to submit an application to the Central Government under Section 233 of the Companies Act, 2013, along with a declaration in Form CAA-16. Simplified Procedure: The amendment aims to simplify the process for cross-border mergers and amalgamations, making it more efficient and less cumbersome for involved parties. The new regulations aim to promote ‘reverse flipping’ by quickening the approval process. Reverse flipping means a startup registered outside the country moves its headquarters back to India, usually to take advantage of the local regulatory or investment environment. Zerodha co-founder Nithin Kamath highlighted his views on the amendments on X stating “…that the Ministry of Corporate Affairs (MCA) formally opened the doors of 'reverse flipping' or coming home to India yesterday. Three years ago, I shared the problem of Indian companies building for India but incorporating outside the country. Now, things are the other way around. How the tables turn! What we need now are more Indian businesses, located in India, building products and services for the global market.” Impact of the Amendments: These amendments are expected to: * Facilitate cross-border mergers and amalgamations. * Enhance regulatory oversight and compliance. * Promote foreign investment and growth in India's corporate sector. #mergers #amalgamation #scheme #rbi #nclt #nclat

A noteworthy amendment to Rule 25A of the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016 has been introduced by the Ministry of Corporate Affairs on September 9th, 2024, with the addition of subrule (5). The compliance rules have been streamlined by the government to facilitate reverse flipping, which means that the companies that were originally incorporated abroad, shift their bases back to India for regulatory and tax benefits as well as the strong IPO market, which favours investors. Read More: https://lnkd.in/g6e2t4Xt #mca #rule25A #Reverseflipping #mergers #acquisition #india #foxmandal

#mergersandacquisitions In India - In merger , shareholders of Transferor company receive shares of Transferee company as merger consideration , in lieu of their shares in Transferor company. Does this attract taxation ? For tax issues, reach out to Sorting Tax at https://lnkd.in/d_AStpfF . All M&A Tax Videos from Sorting Tax can be accessed at https://lnkd.in/gM4WvDjY #incometaxindia #incometax #MandATax #MergerTaxation #CrossBorderTax #MergersAndAcquisitions #TaxPlanning #DueDiligence #internationaltax #internationaltaxation #acquisition #merger #structuring #icaistudent #icaiexams #ey #deloitte

#TrilegalUpdate The central government has amended the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 to fast-track the merger and amalgamation process of foreign holding companies and their Indian subsidiaries. The amendment is aimed at streamlining the approval process to support the trend of ‘reverse flipping’ transactions. Delano Melo Furtado, Rohit Beerapalli, and Pranika Correa #india #trilegal #legalupdate #mergersandacquisitions #regulatoryupdates #reverseflipping