The Unactivated Gateway: Analysing The Dormancy Of Section 234(1) Of The Indian Companies Act, 2013 And Its Impact On Outbound Cross-Border Mergers
- IJLLR Journal
- 2 hours ago
- 2 min read
Sakkcham Singh Parmaar, Sakkcham Singh Parmaar, BA LLB (Hons.) Jindal Global Law School
ABSTRACT
Section 234 of the Indian Companies Act, 2013, is envisaged to provide a fundamental structure for cross-border mergers and amalgamations between Indian companies and foreign companies, keeping in mind the ever- increasing global integration of businesses. However, a very critical part of this Section has never been in operation, thus greatly restricting its intended usefulness. As per sub-section (1) of Section 234, the provisions of Chapter XV (Compromises, Arrangements, and Amalgamations) are supposed to govern schemes concerning companies registered in India and those "constituted in the jurisdictions of such countries as may be notified from time to time by the Central Government."
The study aims to investigate the current situation, where the Central Government has not notified a single country under this sub-section. The lack of such activation effectively negates the statutory route for outbound mergers, whereby an Indian company seeks to merge into a foreign company. The study will focus on the possible reasons for this regulatory lethargy: capital flight, erosion of the Indian tax base, incompatibility of regulations with foreign jurisdictions, and enforcing Indian court orders abroad.
The contrasting legal situation is that while outbound mergers remain halted, inbound mergers (foreign company merging into an Indian company) under Sub-section 2 of Section 234 and RBI rules require prior approval from the Reserve Bank of India. Such asymmetric corporate restructuring in the Indian landscape will be thoroughly demonstrated in this research. It will carry out an analysis of the statutory material, related rules, and current legal commentary to demonstrate that this dormancy breeds uncertainty for business and does not allow India to prove itself as a seamless player in global corporate transactions. The paper finally discusses the implications arising from this gap in notification and the necessary steps to unleash the full potential of Section 234.
Keywords: Companies Act 2013, Section 234, Cross-Border Merger, Outbound Merger, Central Government Notification, RBI Approval, Foreign Company, Corporate Restructuring.
