P.M. Arun, ICFAI Law School, Hyderabad & M. Sai Deekshitha, ICFAI Law School, Hyderabad
ABSTRACT
In today’s business world, Mergers and Acquisitions (M&A) are tools used for the growth of business and optimization of resources and this process have an impact on the employees as well as the target entities. The Merger and Acquisition becomes successful and will be effective only when there is a healthy environment between the two companies and a fair balance between employees and security and business interest.
The term 'merger' is not defined under the Companies Act, 2013, in general it is a business collaboration between two or more companies where in they agree to operate their business jointly as one entity, it takes effect by transferring the agreed assets and liabilities to the transferee company. On other hand, Acquisition in broader sense includes merger wherein only after acquisition merger can take place. In acquisition, one corporate entity acquires equity stake whether majority or minority of another corporate entity. In simple terms, it can be stated the acquisition of a company means acquiring the share, the acquired company will become a subsidiary company.
Section 25FF of the ID Act, 1947 talks about the Compensation to workmen in case of transfer of undertakings1. As per this provision, the workmen should be given prior intimation regarding such transfers and the compensation should be provided for such act and their exceptions to it.
During M&A transactions the acquirer or the resultant entity implements employment related restructuring which may include changes in the designation of the employees, their remuneration, prerequisites and other benefits that were given to the employee and before taking such action the company is mandated to follow the due process of law wherein all the legal conditions and the due diligence criteria, must be made in the context of employment safety.
This Article gives a Bird’s Eye View on the rights of the employees during M&A transactions, whether the company can go for the M&A without prior approval from the employees, what are the measures that need to be taken care by the company prior to M&A with regard to employees and their compensation and also, the Impact of M&A transactions on the employees of the companies.
Keywords: Merger, Acquisition, Employees, Compensation, Due diligence
