What is Amalgamation?
Amalgamation is the process of combining two or more companies into a single new company.
It is usually done to:
⇒ Grow business operations
⇒ Reduce competition
⇒ Share resources and technology
⇒ Improve market share and profitability
✅ Types of Amalgamation:
Merger – Two companies combine and one continues to exist (the other merges into it).
New Entity Formation – Two or more companies unite to form a completely new company.
Key Steps in Amalgamation:
- Board approvals from each company
- Valuation of assets, liabilities & shares
- Drafting and approving a Scheme of Amalgamation
- Approval from shareholders, creditors, and regulatory bodies (like NCLT)
- Transfer of assets, liabilities, and operations to the new entity
- Issuance of new shares (if applicable)
What is Liquidation?
Liquidation (also known as winding up) is the process of closing a company and selling its assets to pay off debts.
Once the process is completed:
⇒ The business ceases to exist
⇒ All liabilities are settled
⇒ Remaining funds (if any) are distributed to shareholders
Types of Liquidation:
⇒ Voluntary Liquidation – Initiated by the company itself (usually when it’s solvent but no longer wants to operate).
⇒ Compulsory Liquidation – Ordered by a court, often due to insolvency or failure to pay debts.
⇒ Liquidation under IBC – If a company is unable to resolve insolvency, liquidation may be initiated under the Insolvency and Bankruptcy Code, 2016.
Key Steps in Liquidation:
- Appointment of a Liquidator
- Valuation and sale of assets
- Settling claims of creditors
- Paying statutory dues (tax, PF, etc.)
- Final distribution to shareholders
- Removal of company name from the ROC (Registrar of Companies)
Amalgamation vs. Liquidation – At a Glance
| Point | Amalgamation | Liquidation |
|---|---|---|
|
Purpose |
To combine businesses and grow |
To close the business and settle liabilities
|
|
Outcome |
Formation of a new or bigger company |
Company ceases to exist
|
|
Financial Health |
Usually healthy or strategic move |
Often done due to insolvency or losses
|
|
Value Creation |
Adds value through synergies |
Destroys value if done under financial distress
|
|
Involves |
Merging of assets, liabilities, operations |
Selling assets and paying off creditors
|
Amalgamation vs. Liquidation – At a Glance
- Amalgamation helps businesses scale and restructure for growth.
- Liquidation helps close operations legally and settle dues fairly.
- Both require expert support in terms of valuation, compliance, legal filings, and reporting.