The Two-Stage Architecture
Where the transferor company is incorporated outside India and the transferee is an Indian company, the scheme requires approval in both jurisdictions. The foreign transferor must obtain the sanction of its home-country court or regulator, and the Indian transferee must obtain the NCLT’s sanction under Sections 230–232. The two approvals are cumulative, not alternative.
The Sequencing
The foreign approval should be obtained first, or in parallel with the NCLT process, because the NCLT will require evidence that the foreign transferor has the power to transfer its assets and liabilities. The NCLT may adjourn the Indian petition until the foreign approval is produced. A scheme that is sanctioned by the NCLT before the foreign approval is vulnerable to being rendered ineffective.
The FEMA Overlay
The cross-border transfer also requires FEMA compliance. The RBI’s approval (or deemed approval) under the Cross-Border Merger Regulations must be obtained, and the pricing guidelines, sectoral conditions, and reporting requirements must be satisfied. The NCLT will require the FEMA approval to be placed on record before sanctioning the scheme.
The Foreign Transferor’s Creditors
The foreign transferor’s creditors may object to the scheme in the foreign jurisdiction. The NCLT should be informed of the foreign proceedings and the resolution of the creditors’ objections. A scheme that leaves the foreign creditors’ claims unresolved may be challenged in India on the ground that it prejudices the creditors.
The Practical Coordination
The company should appoint counsel in both jurisdictions and coordinate the filings so that the approvals are obtained within the same timeframe. The NCLT’s order should record the foreign approval and the FEMA compliance, so that the scheme’s effectiveness is not challenged later.
Call to Action: For cross-border transferor scheme sequencing, FEMA approval coordination, or two-stage NCLT strategy, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.