MERGERS AND ACQUISITIONS
Mergers and acquisitions are two modes, through which different organisations or companies, can come together to perform their businesses.
Mergers involve two or more businesses combining together to perform the activities necessary for a specific purpose or so, whereas acquisitions imply one organisation taking over the other. The main objective of mergers or acquisitions is wealth maximisation by the companies, as well as to enhance their working operations.
Since mergers and acquisitions involve companies sharing their resources, data, information etc., and enter into them with the purpose of fulfilling some promises, therefore they are always entered into by the way of contracts.
There are various legislations which regulate these are:
As all companies in India are governed by the Companies Act and its provisions, therefore mergers/primary or secondary acquisitions of these should also be in line with these terms, and should be performed accordingly.
2. Income Tax Act, 1961-
All the tax treatment activities concerned with mergers and acquisitions, are governed by the Income Tax Act of 1961. This also involves keeping into view the other taxation laws and provisions, especially those which are to be applied in international transactions.
3. SEBI (Substantial Acquisition of Shares and Takeovers)-
The Securities and Exchange Board of India, provides the different provisions concerning the regulation and control of different exchange transactions between companies. The SEBI (Substantial Acquisition of Shares and Takeovers), governs the M&A transactions which organisations enter into, and also regulate the acquisitions of substantial stake in such acquired companies.
4. Competitions Act, 2002-
This Act, along with the Competitions Commission in India, regulates the different combinations of companies together, and analyse their effect on the market competition. Moreover, they also take up necessary measures in order to control such adverse effects on the market.
Mergers and acquisitions can be considered as an important market and business strategy within the economic market. This is because they provide companies a great way to develop a strong footing within the market, especially in cases where the company is on the verge of winding up or being declared as insolvent.
These statuary legislations allow a regulated market for the firms to smoothly combine and merger with each other, and accordingly carry out their business activities in the best way possible.
