MEANING OF MERGER AND ACQUISITION
The term “merger” has not been defined under the Companies Act 2013 or even the Income Tax Act. The dictionary meaning of the word Merger is combining two or more entities into one single entity. In mergers, the merging entity losses are ceased to exist and combine into one single business entity. A merger is usually done for the acquisition of technology, getting access to different markets or sectors, etc.
The Companies Act of 2013 has not defined mergers and acquisitions; however, it states about schemes or compromises between companies. Sections 230-234 of the Companies Act of 2013 mention the same.
There are various kinds of mergers as per the Competition Act of 2002:
Merger and Acquisitions are often used interchangeably; however, the two are different. Acquisition or takeovers is when one company purchases the other company. The acquisition may be hostile or friendly. Unlike in a merger, no new entity is created, rather, a company is acquired and it ceased to exist. The Assets of this acquired company then belongs to the company which acquired it. However, slowly the line of difference between the two is being eroded.
The Merger and Acquisitions or M&A is governed under the following laws in India:
HOW DOES ESCROW AGREEMENT WORK IN M&A?
The Escrow agreement plays an essential role in Merger and Acquisition. The main purpose of bringing in an Escrow agreement in this area is to ensure that each party performs its obligations and duties. The escrow agreement is usually an agreement to involve that each party performs its obligations and duties. The escrow agreement is usually an agreement to involve a third party in a transaction to ensure that each party fulfils their obligations. An escrow agreement is mainly used to minimize the risk in transactions.
Escrow agreement in M&A works mainly works by holding a percentage value of the deal. This allows the Buyer to claim against the seller if the seller is not able to fulfil the conditions laid down in the agreement to complete the transaction. In other words, Escrow acts as a mediator in these transactions. The mechanism used in M&A for escrow is called the Holdback escrow. This can be used for both assets as well as stock sales.
An escrow account is beneficial to both the seller and the buyer. It is beneficial for the seller in a manner that the buyer will not be able to claw back the amount; this ensures that at closing the seller will receive a minimum amount in his hands. Further, the buyer would also be ensured that the seller will perform his part of the contract as if he does not then he will neither get the amount which has been deposited as holdback in the escrow account with the escrow agent and the buyer may also sue the seller of breach of contract.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.
