A scheme of amalgamation transfers the transferor company’s undertaking, assets, and liabilities to the transferee company. But the transfer of a statutory licence or permit is not automatic. The NCLT order vests the property and the contractual rights, but a licence that is granted to a specific legal person is not necessarily transferable without the regulator’s consent.
The Statutory Vesting
Section 232(3) provides that the assets and liabilities of the transferor company shall vest in the transferee company. A licence is a statutory permission, not an asset in the ordinary sense, and the vesting provision does not override the terms of the licence or the governing statute. The Bombay High Court, in United Breweries Ltd. v. Commissioner of Excise, held that the amalgamation resulted in the transfer of the excise licence, and the transferee company was liable to pay the transfer fee.
The Regulator’s Consent
Many licences contain a condition that the licence is personal to the licensee and is not transferable without the regulator’s prior approval. The scheme should identify the licences that are material to the business and should provide for the application to the regulator for the endorsement or the fresh grant. The NCLT’s order can direct the regulator to take the order on record, but it cannot compel the regulator to transfer a licence that the governing statute prohibits from being transferred.
The Practical Steps
The transferee company should conduct a licence audit before the effective date, identify the transferability conditions, and initiate the applications. The scheme should include a clause that the transfer of the licences is subject to the regulator’s approval, and the effective date should be aligned with the receipt of the material approvals.
A technically sound scheme addresses the government approvals as a separate workstream, with a clear timeline and a contingency plan for the approvals that cannot be obtained before the effective date.
Call to Action
Anuj Desai & Associates advises companies on the government approvals aspects of an NCLT scheme—from the licence audit and the transferability analysis to the regulator applications and the scheme conditions. If your scheme involves regulated licences, we can help you plan the approvals.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
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