Merger of two companies under the Board for Industrial and Financial Reconstruction (BIFR) supervision is known as
Arranged merger
Understanding Mergers Under BIFR Supervision
The question asks about the specific term used for the merger of two companies when it is overseen by the Board for Industrial and Financial Reconstruction (BIFR). Let's break down the key concepts.
What is BIFR?
The Board for Industrial and Financial Reconstruction (BIFR) was a government body in India established under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). Its primary purpose was to revive sick industrial companies and, if revival was not possible, to arrange for their winding up. A company was considered 'sick' if it had accumulated losses equal to or exceeding its entire net worth.
Mergers and Corporate Restructuring
Mergers are a form of corporate restructuring where two or more companies combine to form a single new entity. This can be done for various reasons, such as achieving economies of scale, expanding market share, or rescuing financially troubled companies.
Why "Arranged Merger"?
When sick industrial companies registered with BIFR undergo restructuring, including mergers, the process is often initiated or guided by BIFR itself. BIFR would develop a rehabilitation scheme for the sick company, which might involve merging it with a healthy company. This process is not a standard market-driven negotiation between two healthy entities but is rather an arrangement facilitated or directed by BIFR as part of the rehabilitation plan. Because the merger is orchestrated and supervised by BIFR as part of a statutory process for rescuing a sick company, it is termed an "arranged merger".
Analyzing the Options
Let's look at the given options:
- Reverse merger: This typically refers to a private company merging with a publicly traded shell company to bypass the traditional IPO process and become publicly listed. This is not specifically related to BIFR supervision or rescuing a sick company in the context of BIFR.
- Negotiated merger: Most mergers involve negotiation between the parties involved. While negotiation happens in BIFR cases too, the term "negotiated merger" doesn't capture the specific statutory and supervised nature of a merger orchestrated under BIFR as part of a rehabilitation plan.
- Offer for sale: This is a method of selling shares in a company, typically as part of an IPO or a secondary market offering. It is a method of divesting shares, not a type of merger.
- Arranged merger: As explained above, this term specifically describes a merger that is organized or facilitated, often by a regulatory body like BIFR (when it was operational), as part of a scheme for rehabilitation or restructuring of sick companies. The term highlights that it is an 'arrangement' made under specific circumstances, distinct from standard market mergers.
Therefore, a merger undertaken under the supervision and arrangement of the Board for Industrial and Financial Reconstruction (BIFR) is correctly known as an Arranged merger.
Conclusion
The specific term for a merger orchestrated under the supervision of BIFR, often as part of a sick company's rehabilitation scheme, is an Arranged merger. This distinguishes it from voluntary, market-driven mergers or other forms of corporate restructuring.
Revision Table: Types of Mergers & Related Concepts
| Concept | Description | Relevance to Question |
|---|---|---|
| Arranged Merger | A merger facilitated or mandated by a regulatory body (like former BIFR) as part of a restructuring or rehabilitation plan for a sick entity. | Directly answers the question about BIFR supervision. |
| Reverse Merger | A private company becoming public by merging with an existing public shell company. | Not related to BIFR's primary function of rehabilitating sick companies via arrangement. |
| Negotiated Merger | A merger resulting from direct negotiation between the management or boards of the involved companies. | General term; doesn't capture the BIFR-specific arrangement. |
| Offer for Sale | A method of selling shares in the market. | Not a type of merger. |
| BIFR (Board for Industrial and Financial Reconstruction) | Former Indian statutory body for rehabilitating sick industrial companies. | The key regulatory body mentioned in the question. |
Additional Information on BIFR and Sick Companies
The Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), under which BIFR operated, was repealed and replaced by the Insolvency and Bankruptcy Code, 2016 (IBC). Therefore, while BIFR no longer functions, the term "arranged merger" was historically associated with its processes.
The process under BIFR for a sick company typically involved:
- Reference to BIFR by the company's board.
- Appointment of an operating agency to prepare a report and rehabilitation scheme.
- Formulation and approval of a rehabilitation scheme, which could include various measures like financial reconstruction, change in management, sale of assets, amalgamation (merger), or winding up.
- Implementation and monitoring of the approved scheme.
An arranged merger was one of the tools BIFR could use within such a scheme to ensure the revival or resolution of a sick company by merging it with a healthier entity, often with specific terms and conditions set out in the scheme.
Important Questions from Corporate Accounting
In order to compensate the investors, what kind of debentures are issued at substantial discount and the difference between the nominal value and the issue price is treated as the amount of interest related to the duration of the debentures?
If the value of debentures is less than the value of the net asset taken over, then the difference will be credited to:
The part of capital which is called-up only on winding up is called ______.
From which of the following, companies cannot buy its own shares?
In order to compensate the investors, what kind of debentures are issued at substantial discount and the difference between the nominal value and the issue price is treated as the amount of interest related to the duration of the debentures?
