The National Company Law Tribunal admitting the scheme of merger between Reliance Industries and Walt Disney’s India branch is the first in a series of steps before the deal finally comes through, legal experts have shared.

The companies have now secured permission from NCLT to conduct a meeting of stakeholders, where they have to secure 75% votes in favour of the merger to progress further into the deal.

Recently, The Walt Disney announced that it was expecting to close the merger with RIL in the first half of 2025.

According to industry experts, the first step towards any merger or amalgamation or a scheme of compromise or restructuring is calling and holding a meeting of creditors and members.

“For calling and holding this meeting, an application (colloquially called ‘First Motion Petition’) is filed before NCLT. So, NCLT has passed its order in this First Motion Petition giving directions on the calling of the meeting of the stakeholders,” said Shashank Agarwal, Advocate, Delhi High Court, adding that it will not be completely correct to say that the NCLT has admitted the RIL-Disney merger.

As per provisions of the Companies Act and the rules made thereunder for mergers and amalgamations, the next step is to hold the meetings and seek approval of the merger with more than 75% votes of the stakeholders (i.e. the shareholders and creditors).

“The merger will first need to be approved by the stakeholders with 75% votes in favour. After the stakeholders have approved the merger, the merging entities will need to file another petition (‘Second Motion Petition’) before NCLT, seeking final nod of approval.

“At the stage of final nod of approval under the Second Motion Petition, NCLT would again invite objections from the public at large, the government departments like, ROC, Income Tax Department, Competition Commission of India, etc,” explained Agarwal.

Experts feel the NCLT approval for the stakeholders’ meeting is a significant step in the merger process as it has set the ball rolling.

“The admission of the RIL-Disney merger by the National Company Law Tribunal (NCLT) is a significant step in the merger process.

“The next step is to get approval from other regulatory bodies like SEBI, Competition Commission of India (CCI), the stock exchanges, and consent from stakeholders. Post this, submission is to be made before the NCLT for its final nod of approval,” shared Advocate Alay Razvi, Partner, Accord Juris LLP.

The approval from SEBI ensures the merger adheres to securities laws and regulations, while CCI assesses the merger for any anti-competitive practices and the Stock Exchange approval is necessary for the companies, which are publicly listed.

After all regulatory and shareholder approvals are obtained, the final merger scheme is submitted back to the NCLT for its final sanction and once the NCLT provides the final approval, the companies can proceed to implement the merger.

“This involves the actual amalgamation of assets, liabilities, operations, and possibly integration of corporate cultures and business processes,” Razvi said.

According to legal experts, the regulatory approvals can take several months as different regulatory bodies have their own timelines.

The entire process - from initial approval to final implementation - can range from 6 months to over a year, depending on the complexity of the merger and the speed at which regulatory approvals are granted. Shareholder meetings and approvals usually take around two to three months and the time taken in obtaining the final sanction from NCLT is nearly two months, said the experts.

There are certain parameters examined by NCLT before giving its nod which include compliance with legal requirements, ensuring that the merger complies with the provisions of the Companies Act, 2013, and other relevant laws and regulations.

“NCLT verifies that the merger scheme is fair and transparent to all stakeholders, including shareholders, creditors, and employees, and ensures there is no adverse effect on minority shareholders. It also scrutinizes the valuation reports and the proposed share exchange ratio to ensure they are fair and reasonable.

“The tribunal also considers whether the merger is in the public interest, promoting economic growth, competition, and efficiency. It takes into account any objections or representations made by shareholders, creditors, or regulatory bodies,” Razvi elaborated.

He said that although the primary responsibility lies with the CCI, NCLT also considers the competitive impact of the merger to some extent.

“Overall, the NCLT plays a crucial role in ensuring that mergers and acquisitions are conducted in a manner that is legally sound and fair to all parties involved. The timeline and the steps involved can vary depending on how the matter progresses,” Razvi said.

According to Advocate Vidhan Vyas, Founder, Vyas Legal, once the NCLT approves the merger, the notices for the merger will be sent to tax authorities for their comments.

“It is pertinent to state, notices for such a merger would also be sent to tax authorities for their comments and the same would also be taken into consideration by NCLT.

“Once the tribunal approved the merger, then the companies would have to submit necessary paperwork in ROC for compliances and fulfil the post-merger conditions as set out by the companies,” Vyas said, adding that approval of merger ought not to take much time if all NOCs are received but if any stakeholder objects, then it could be long drawn process.

In February this year, Mukesh Ambani-owned Reliance Industries, Viacom18 Media and Walt Disney Corporation entered an agreement to form a joint venture that would merge the television and digital streaming businesses of Viacom18 and Star India.