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This article is written by Surya Rose Thomas who is pursuing a Diploma in M&A, Institutional Finance and Investment Laws (including PE and VC transactions) from LawSikho.


Facebook, the most popular social networking company acquired Instagram on May 15, 2020, for 400,000,000 USD. In 2014 for $19 billion it acquired Whatsapp, the messenger application. Myntra, the e-commerce company was acquired by Flipkart for $ 280 million in 2014. What are these million-dollar transactions all about? Wondering how this is done? This article showcases what are Merger and Acquisition transactions and what are the various documents and stages involved in this. 

Mergers and acquisitions

When two companies combine to form a single entity, it is called mergers. For example, when company A and company B combine and form Company AB it is a merger. Lately formed new entity ‘Vodafone Idea Limited’ is a good example of a merger in which Vodafone India merged with Idea Cellular. This merger is a result of high competition and price war in the telecom industry due to the emergence of Reliance Jio as a much sought-after telecom brand. Acquisition is different from mergers as in it a company acquires or purchases another company. When company A buys company B and makes it a part of company A, it is acquisition. Here one company overtakes another. Just like how countries were so interested in conquering other countries for territory expansion, power and wealth, today companies are keen on acquiring other companies that have a good customer base and market position. Very recently, in 2020, Zomato acquired Uber Eats. 

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Are merging and acquiring good signs for a company? For the one who is acquiring this definitely is a good sign which shows their capability and position in the market. However, a company is acquired by another when it is not able to manage its business and due to heavy debt which it cannot resolve. Hence, this is not a good sign for the one which gets acquired by another. But sometimes acquisition may also happen to expand the business of both the companies.

Mergers and acquisitions are used widely in various fields to increase the customer base, to diversify the business, to consolidate wealth, to enter into a market via a well-established entity, and to gain more strength and position. Another important reason is to avoid competition or to eliminate competitors. Acquisition by Zomato is a good example to establish this point. By acquiring Uber Eats which was a competitor of Zomato, made the market more favourable for Zomato as it is left with only one main competitor that is Swiggy. 

Now let us move on to the document part of Merger and Acquisition which indeed is a long and court-driven process. 


The documentation part of merger and acquisition is of paramount importance. It can be considered as the soul of merger and acquisition. We will see some important documents in the process of merger and acquisition.

Letter of intent 

This non-binding document is the beginning of a merger and acquisition transaction. The relevance of this document is sometimes not perceived by the seller. The seller has to consider this document with the same diligence which he makes for other documents in the transaction. Though the document is non-binding, some clauses like confidentiality, exclusivity, governing law and arbitration, termination, fees, and expenses of the letter of intent are binding.

The board of directors must authorize the execution of the letter of intent.

Acquisition agreement

After this is the acquisition documents. Parties in the transaction will enter into an acquisition agreement which is a binding document. The acquisition agreement contains terms of the deal entered between parties. The main clauses in an acquisition agreement are description, interpretation, covenants, representations and warranties, conditions, termination, indemnification, etc. The Acquisition agreement must be carefully drafted to avoid future disputes or ambiguities.  

Articles of incorporation

Amendments to the articles of incorporation of the surviving company are essential. This includes the issuance of any new class of shares if any according to the acquisition agreement, change in the name of the company if any, any change in the purpose clause, expansion details by the company if any, etc.

Further documents and different stages

The process of merger and acquisition in India is not a simple process that can be concluded between the parties involved. It needs the approval from National Company Law Tribunal. The process involves various stages which are clearly stated in the Companies Act. Let’s see the different stages one by one:

Stage 1: Preparation or Drafting of Scheme of Amalgamation 

This is the first and very important stage. This document sets out the terms and conditions of the entire process.  Hence after a lengthy period of negotiation only, this document is drafted. It is the fundamental document which contains the following clauses:

  • Preamble
  • Definitions and Interpretations
  • Share Capital clause
  • Transfer and Vesting Clauses
  • Legal Proceedings
  • Effective and Operative dates clause
  • Employees and Staff of the Transferor Company
  • Issue of shares by the Transferee Company
  • Accounting Treatment
  • Clauses for other and general terms

Stage 2: Approval of the Board of Directors 

Once the drafting of the Scheme of Amalgamation is done, the next stage is reached. In this stage, the drafted Scheme of Amalgamation is presented before the Board of Directors for approval. Without the consent of the board, further stages are not possible.

Stage 3: Filing of the petition before National Company Law Tribunal

After obtaining consent from the Board of Directors, a petition is filed before the National Company Law Tribunal (NCLT) for approving the Scheme of Amalgamation and merger and acquisition of the company. Both the parties (transferor and transferee) should file this petition according to the provisions in the Companies Act. The Petition shall be submitted in form no. NCLT-1 along with notice of admission in form no. NCLT-2, an affidavit in form no. NCLT-6, a copy of Scheme of compromise and arrangement (Merger & Amalgamation).

Transferor and transferee should submit before the tribunal the following documents:

Documents to be submitted by Transferor:

  1. Memorandum and Articles of Association.
  2. Audited Balance Sheet.
  3. Board Resolution for approval and authorization of the scheme.
  4. List of Equity Shareholders.
  5. Consent Affidavits filed by the Equity Shareholders. 
  6. Auditors Certificate stating out the no. of Secured Creditors. 
  7. Auditor’s Certificate listing out the no. of Unsecured Creditor. 
  8. Consent Affidavit filed by no. of Unsecured Creditor. 
  9. Auditors Certificate concerning the accounting treatment proposed in the Scheme of Amalgamation.

Documents to be submitted by Transferee:

  1. Memorandum and Articles of Association. 
  2. Audited Balance Sheet. 
  3.  Board Resolution for approval and authorization of the Scheme.
  4.  List of Equity Shareholders. 
  5.  Auditors Certificate listing out the no. of Secured Creditors.
  6.  Consent Affidavit filed by the no. of Secured Creditor.
  7. Auditors Certificate listing out the no. of Unsecured Creditors.
  8.  Consent Affidavit filed by the no. of Unsecured Creditor.
  9.  Auditors Certificate concerning the accounting treatment proposed in the Scheme of Amalgamation.

Other Documents:

  • Certificate of the Chartered Accountant for Non-Applicability of obtaining a Valuation Report.
  • Fairness Opinion issued by the Merchant Banker on the Scheme of Amalgamatiomn
  • Undertaking regarding the Non-Applicability of paragraph I(A) 9(a) of Annexure I of SEBI Circular No. CIR/CFD/CMD/16/2015 dated 30 November 2015.
  • Observation Letter issued by the Stock Exchanges approving the Scheme of Amalgamation.

Stage 4: Meetings of the Shareholders and Creditors

The National Company Law Tribunal may reject the petition for an appropriate reason. Otherwise, it will direct for the meeting of shareholders and creditors for getting their consent for merger and acquisition. A notice in the form no. CAA-2 is sent to them via registered post or speed post or courier or e-mail or hand delivery or any other mode as directed by the Tribunal.

Stage 5: Obtaining approval from Regional -Director or Official Liquidator

No objection from the Regional Director or Official Liquidator is necessary.  Official Liquidator works under the Regional Director who supervises the functioning of Official Liquidators. Official Liquidators are appointed by Central Government under section 448 of the Companies Act, 1956. 

Stage 6: Filing of final petition for approval of Scheme and obtaining the order

National Company Law Tribunal will look into the entire process and if it is satisfied that the meeting of creditors and all other processes is carried out according to the provisions and will check if the company auditor has certified the accounting standards of the company, provides the order in the form no. CAA.6.

These are the different stages involved in a merger and acquisition transaction. 


We have seen that the process of merger and acquisition in India is complicated. This million-dollar business has huge contributions to make for the economic growth of the nation as a successful merger or acquisition will in turn add to the development of a nation.  However, every coin has two sides. Merger and acquisition may lead to less competition leading to a single company acquiring huge market share thereby creating a monopoly situation which ultimately results in less choice for consumers and high prices. 


  1. Documentation of a Corporate Acquisition by Henry Gilchrist.
  2. Corporate Restructuring, Insolvency, Liquidation & Winding-Up, The Institute of Company Secretaries of India.
  5. taxguru. in

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