An NCLT scheme transfers the transferor company’s employees to the transferee company, and with them, the employee benefit obligations. The obligations include the gratuity, the provident fund, the leave encashment, and the post-retirement medical benefits. The accounting treatment is governed by Ind AS 19, and the legal transfer is governed by the scheme and the labour laws.
The Defined Benefit Plans
The gratuity is a defined benefit plan, and it is measured using the projected unit credit method. The company must recognise the present value of the defined benefit obligation, the fair value of the plan assets, and the net liability or asset in the balance sheet. The actuarial valuation is conducted by a registered actuary.
The Defined Contribution Plans
The provident fund is a defined contribution plan, and the company recognises the contribution payable to the fund as an expense. The company has no obligation to pay the further amounts if the fund does not hold sufficient assets.
The Transfer in the Scheme
The scheme should provide for the transfer of the gratuity fund, the provident fund trust, and the other employee benefit arrangements to the transferee company. The transfer must comply with the Income-tax Act, 1961, the EPF Act, 1952, and the Payment of Gratuity Act, 1972. The transferee company must obtain the approvals for the transfer of the funds, and it must recognise the obligations in its financial statements.
A technically sound scheme addresses the employee benefit obligations in the employee-transfer clause, obtains the actuarial valuation, and complies with the labour law approvals.
Call to Action
Anuj Desai & Associates advises companies on the employee benefit obligations in an NCLT scheme—from the Ind AS 19 valuation and the gratuity and provident fund transfer to the labour law approvals and the disclosure. If your scheme involves a workforce transfer, we can help you structure the employee benefits.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
🔗 linkedin.com/in/ca-anuj-desai-122547230
Article 300