Demergers: An Analysis
- IJLLR Journal
- Apr 24, 2023
- 1 min read
Rupanshi Kohli, University of Petroleum and Energy Studies
INTRODUCTION
With the ever-growing advancements and competition in the market, a company always needs to be on its toes. The companies have to downsize their operations in this era of globalization, since it no longer fits into the company plans.1 Companies use corporate restructuring as a strategy to keep up with the continually changing environment. Corporate restructuring means rearranging the business of a company for increasing its efficiency and profitability.2 One such form of corporate restructuring is Demergers.
DEMERGER: DEFINITION
AS PER THE STATUTES
Section 232 of Chapter XV of the Companies Act, 2013 along with the Companies (Compromise, Arrangements, and Amalgamations) Rules, 2013 governs mergers and amalgamations, including demergers. Although the term ‘demerger’ is not explicitly defined anywhere in The Companies Act, 2013, it has been defined under Section 2(19AA) of the Income Tax Act, 1961.3 It can be understood in terms of transfer pursuant to a scheme of arrangement given under sections 391 to 394 of the Companies Act, 1956 by the virtue of demerger:
