Ceinsys Tech and Allygrow Forge Ahead with Amalgamation to Streamline Operations

Ceinsys Tech Limited, a listed entity on the BSE, is advancing its proposed scheme of amalgamation with its wholly-owned subsidiary, Allygrow Technologies Private Limited (ATPL). The intended merger, first announced on November 7, 2023, is being pursued under Sections 230 to 232 of the Companies Act, 2013, with an appointed date of April 1, 2024.

Merger Rationale and Objectives

The main reason behind this merger is to simplify the group’s structure and make operations more efficient. Ceinsys had gradually acquired 100% of ATPL during 2022, turning it into a fully-owned subsidiary. Now, by merging the two companies, Ceinsys hopes to cut down on legal and regulatory paperwork, save costs, and improve how money is managed within the company. This move is also expected to free up funds for future growth. Having one set of books for accounting and auditing will help save both time and money.

Scope of Transfer: Assets, Liabilities, and Contracts

Under the merger plan, everything that belongs to ATPL—its assets, properties, debts, and even rights to things like patents—will automatically become part of Ceinsys. All current contracts, licenses, and agreements that ATPL is involved in will continue, just now under Ceinsys’s name. Employees of ATPL will also become part of Ceinsys and will keep the same job terms and benefits they currently have.

Share Cancellation and Ownership Structure

Since Ceinsys already owns ATPL, there’s no need to issue any new shares. All of ATPL’s shares will simply be cancelled, and this means there won’t be any change in the ownership structure of Ceinsys.

Accounting Treatment: Pooling of Interests

For accounting, Ceinsys will follow the “Pooling of Interest Method,” which is used when merging companies that are under common control. This means any financial dealings between Ceinsys and ATPL will be removed from the records, and any difference between what Ceinsys paid for ATPL and the actual value of ATPL’s assets will go into a Capital Reserve. Any taxes ATPL owes will also be passed on to Ceinsys.

Regulatory Approvals and Next Steps

Before the merger can go ahead, it still needs several approvals. Shareholders and creditors need to agree to it, and the NCLT must give its final approval. Once approved, certified copies of the court order will be submitted to the Registrar of Companies. The boards of both Ceinsys and ATPL had already approved the merger plan back on November 7, 2023, and the Audit Committee and Board of Ceinsys have also backed it and authorized key people to handle the legal filings and next steps.

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