“We get talent and scale from mergers”

—Angela Braly, top American CEO 

The term ‘merger’ is not defined under the Companies Act, 1956 (“CA 1956”), and under Income Tax Act, 1961 (“ITA”).  However, the Companies Act 2013 (“CA 2013”) without strictly defining the terms explains the concept.  A ‘merger’ is a combination of two or more entities into one; the desired effect being not just the accumulation of assets and organization of such entity into one business.

An ‘acquisition’ or ‘takeover’ is the purchase by one person, of controlling interest in the share capital, or all or substantially all of the assets and / or liabilities of the target.

Acquisitions may be by way of acquisition of shares of the target, or acquisition of assets and liabilities of the target. In the latter case the business of the target is usually acquired on a going concern basis.