Appointed Date Vs Acquisition Date
Author: S K AGRAWAL AND CO CHARTERED ACCOUNTANTS LLP; Published on: December 17, 2019
The concept of ‘appointed date’ relates to the schemes for implementation of merger, demerger etc. in accordance with the provisions of Companies Act, 2013 (‘Cos Act’). The appointed date generally refers to a date from which the scheme shall be effective upon sanction by National Company Law Tribunal (‘NCLT’). Such appointed date may be determined by the Board of Directors (of the companies involved in the scheme) and mentioned in the scheme or may be a date as directed by the concerned NCLT.
• In this regard, section 232(6) of the Cos Act provides that:
- Every scheme filed under section 230-232 of the Cos Act shall clearly indicate an appointed date from which the scheme shall be effective; and
- The scheme shall be deemed to be effective from such appointed date and not any subsequent date.
What’s the debate ?
- Whether the appointed date in the scheme should mandatorily be a specific calendar date or can it be a date linked to the occurrence of an event (such as business considerations, fulfilling legal requirements such as procurement of license from sectoral regulators, filing of NCLT orders with the Registrar, etc.).
- For the purpose of accounting under Ind-AS 103 (Business Combinations), whether the ‘acquisition date’ would be the appointed date as indicated in the scheme.
- Whether the appointed date mentioned in the scheme can be retrospective and if so, how far can it be stretched.
Clarifications
The MCA has received several queries in relation to determination of ‘appointed date’ based on interpretation of provisions of section 232(6) of the Cos Act. After detailed examination of the matter, the MCA has issued a circular1 (‘MCA Circular’) with following clarifications:
- Section 232(6) of the Cos Act enables the companies to select the appointed date to be indicated in the scheme. Accordingly, the appointed date may be a specific calendar date or may be tied to the occurrence of an event which are relevant to the scheme (such as grant of license by a competent authority, fulfilment of any preconditions agreed upon by the parties, meeting any other requirements as may be agreed upon between the parties etc.).
- The ‘appointed date’ identified under the scheme shall be deemed to be the ‘acquisition date’ and the date of transfer of control for the purpose of conforming to accounting standards (including Ind-AS 103 Business Combinations).
- The appointed date chosen as a specific calendar date may precede the date of filing of application for the scheme of merger/ arrangement in NCLT. However, if the ‘appointed date’ is significantly ante-dated beyond a year from the date of filling then the justification for the same should be specifically brought out in the scheme and it should not be against public interest.
- Where the appointed date in the scheme is based on the occurrence of an event, such trigger event should be indicated in the scheme itself. However, in case the appointed date is an event based date which is a date subsequent to the date of filing the order with the Registrar under Section 232(5) of the Cos Act, then the company shall file an intimation of the same with the Registrar within 30 days of such scheme coming into force.
This brings clarity about appointed date and acquisition date and puts the debate to rest.