WINDING UP – AMALGAMATION AND MERGERS OF BANKS :

A banking company may be amalgamated with another banking company as per the BR Act. The banking companies have to prepare a scheme of amalgamation, the draft copy of the scheme of amalgamation covering terms and conditions needs to be placed separately by the companies to their shareholders. Each shareholder needs to be given notice. The scheme of amalgamation should be approved by a resolution passed by majority of members representing two-thirds in value of the shareholders of each company present in person or by proxy. A shareholder, who votes against the scheme of amalgamation and gives necessary notice, may claim the value of his shares from the banking company, in case the scheme is sanctioned by the Reserve Bank. Once the scheme is sanctioned by the Reserve Bank then the assets and liabilities of the amalgamated company pass on to the other company with which it is to be amalgamated. The order of the sanction of amalgamation by Reserve Bank will be the conclusive proof of amalgamation.

In case the Central Government orders amalgamation of two companies, such amalgamation would take place after consultation with the Reserve Bank

Under Section 45 of the Banking Regulation Act, the Reserve Bank can apply to the Central Government for an order of moratorium in respect of any company, on account of certain valid reasons. After considering various aspects, the Central Government may think it fit and proper to impose the moratorium. The period of moratorium can be extended from time to time for a maximum period of six months. During the period of moratorium, the banking company would not be allowed to make any payments to the depositors or discharge any liabilities or obligations to any other creditors unless otherwise directed by the Central Government in the order of moratorium or at any time thereafter.