Section 396 of the Companies Act, 2013
Section 396 of the Companies Act, 2013 deals with the **power of the Central Government to provide for amalgamation of companies in the national interest.
📘 Section 396 – Power of Central Government to provide for Amalgamation of Companies in Public Interest
Key Provisions:
Power of the Central Government:
If the Central Government is satisfied that it is essential in the public interest that two or more companies should amalgamate into a single company, it may order such amalgamation.
This can be done by order published in the Official Gazette.
Contents of the Order:
The order may provide for:
Constitution of a single company with such constitution, property, powers, rights, interests, authorities, privileges, and liabilities.
Continuation of legal proceedings by or against the transferee company.
Dissolution (without winding up) of any transferor company.
Payment of compensation to shareholders of the transferor company.
Incidental, consequential, and supplemental matters as necessary.
Compensation:
Provision for payment of compensation to shareholders of the amalgamating companies.
The amount is determined by prescribed rules, and if aggrieved, shareholders may appeal to the Tribunal.
Effect of Order:
Upon such order, the transferor companies stand dissolved, and all property, rights, liabilities, etc., vest in the transferee company.
Right to Appeal:
Aggrieved persons may appeal the compensation part of the order to the National Company Law Tribunal (NCLT).
📝 Example Scenario:
If the government believes that merging two public utility companies (say, for efficient energy distribution) is necessary in the national interest, it can invoke Section 396 to order their amalgamation, even without the companies initiating the process.
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