NCLT Scheme of Arrangement — CAA-2 & CAA-3 (Mergers, Demergers, Compromises)

Section 230 of the Companies Act, 2013: compromise or arrangement with creditors/members; majority in number representing 3/4 in value required; NCLT sanction mandatory. Section 232 of the Companies Act, 2013: merger and amalgamation procedure; NCLT to consider solvency, member interests, public interest; Tribunal order filed with ROC in Form CAA-7 within 30 days (Section 232(5)). Section 233: fast-track merger for small companies and holding-subsidiary mergers — ROC/Official Liquidator approval only (abbreviated process). Companies (Compromises, Arrangements and Amalgamations) Rules, 2016: Form CAA-2 (application to convene meeting), Form CAA-3 (petition for sanction), Form CAA-7 (filing of order with ROC); Rule 25 (Registered Valuer valuation report for share exchange ratio). Accounting Standard 14 (AS 14): accounting for amalgamations in the nature of merger and purchase; Ind AS 103: Business Combinations — applicable to Ind AS reporting entities.

A Scheme of Arrangement is a court-sanctioned mechanism under Sections 230 to 232 of the Companies Act, 2013, by which a company can restructure its affairs — through mergers, demergers, amalgamations, compromises with creditors, or internal reorganisations — with the approval of the National Company Law Tribunal (NCLT). It is the most comprehensive and legally robust restructuring tool available under Indian company law, enabling complex transactions such as the merger of two independent companies, the demerger of a division into a separate entity, or a compromise with creditors to avoid insolvency proceedings.

Section 230 of the Companies Act, 2013 governs compromises and arrangements with creditors and/or members. An application under Section 230 requires the company (or its liquidator, or any creditor or member holding at least 10% of the shareholding or outstanding debt) to make a petition to the NCLT, which then directs that a meeting of creditors and/or members be convened to consider the proposed scheme. The meeting is conducted under the NCLT's supervision, and if the scheme is approved by a majority of persons representing three-fourths in value of the creditors or members present and voting, the scheme is placed before the NCLT for sanctioning. Section 232 deals specifically with mergers and amalgamations, requiring, inter alia, that the Tribunal consider the solvency of each company involved, the interests of members, and the public interest. The Tribunal's order under Section 232(3) must be filed with the Registrar of Companies in Form CAA-7 within 30 days of its receipt.

The procedural forms under the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 are central to this process. Form CAA-2 is the application to the NCLT for convening the meeting of creditors and/or members. Form CAA-3 is the petition for sanctioning the scheme after the meeting has approved it. The scheme document itself must be accompanied by a report from the board of directors explaining the scheme and the financial position of each company, an auditor's report, and a Registered Valuer's valuation report for the share exchange ratio (if shares are being issued) as required under Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

The Chartered Accountant's role in an NCLT Scheme is multifaceted and indispensable. The CA is responsible for: preparing pro-forma financial statements of the merged or demerged entity, certifying the share exchange ratio computed on the basis of net asset value and earnings-based approaches, issuing the solvency opinion, providing the fairness opinion on the scheme terms, and preparing the capital account adjustments under Accounting Standard 14 (AS 14 — Accounting for Amalgamations) or Ind AS 103 (Business Combinations). For Section 233 fast-track mergers — available for mergers of small companies (as defined in Section 2(85)) and holding-subsidiary mergers — the process is abbreviated, requiring approval only from the ROC and Official Liquidator rather than the NCLT, with a shorter timeline. Our service covers the full NCLT Scheme lifecycle from initial feasibility to final ROC filing of the Tribunal's order.