MCA issues clarification on firms’ merger date

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Published: August 22, 2019 6:18:38 AM

The circular clarified that the term “appointed date” used in Section 232(6) shall be deemed to be the “acquisition date” for the purpose of conforming to IndAS 103 standard dealing with business combinations.

Ministry of Corporate Affairs, MCA, economy news, merger, merger dates, company, acquisition Besides this, IndAS 103, which deals with the accounting treatment, uses the expression “acquisition date”, as a date when the acquirer takes control of the acquiree, also required clarification, it added.

The Ministry of Corporate Affairs (MCA) on Wednesday issued a circular clarifying that companies can now choose a merger’s “appointed date” based on occurrence of an event, which is relevant to the said merger between firms. This would allow companies which are merging to function independently till such an event (merger or amalgamation) actually materialises, the MCA said.

The circular clarified that the term “appointed date” used in Section 232(6) shall be deemed to be the “acquisition date” for the purpose of conforming to IndAS 103 standard dealing with business combinations.

“A view was being taken in some quarters that the “appointed date” in the scheme needs always be a definite calendar date, which led to difficulties for companies intending to give effect to their merger at a future/event-linked date, based on business considerations, fulfilling legal requirements such as procurement of licence from sectoral regulators, etc,” the MCA explained.

Besides this, IndAS 103 (business combinations), which deals with the accounting treatment, uses the expression “acquisition date”, as a date when the acquirer takes control of the acquiree, also required clarification, it added.

The clarification would lead to harmonisation of practices in ascertaining the “appointed date” of merger/amalgamation and provide due clarity on the accounting treatment, thereby allowing stakeholders to align the “appointed date” of merger/amalgamation in accordance with their business considerations or legal requirements. “This would also contribute significantly in the ease of doing business,” the MCA said.

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