Deal
Talk
November 10, 2025
From Sealing the Deal to Breaking It Apart: Legal & Tax Considerations
for Unwinding M&A Transactions in India
Introduction
Parties to mergers and acquisitions (“M&A”)
often approach transactions with the optimism and commitment
of a couple at the altar – convinced that it is
a once-in-a-lifetime event. However, much like marriages,
M&A deals are not immune to the unpredictability
of time, changing priorities, and unforeseen circumstances.
Strategic divergences, changes to commercial priorities,
financial setbacks, or even the discovery of misrepresentations
may compel parties to explore a path that may or may
not be envisaged at the time of structuring such transactions –
unwinding
the transaction.
Unlike the forward-looking nature of a standard M&A,
the process of unwinding involves an attempt to restore
parties backwards to their pre-transaction
position (i.e. the position prior to signing of the
transaction documentation and as if the deal had never
been consummated). But reversing a deal is far more
complicated than structuring it – especially when
consideration has been exchanged between the parties,
rights have been transferred, and regulatory consents
have been received and actioned upon thereafter.
In this edition of Deal Talk, we examine the legal,
regulatory, tax and operational hurdles associated with
unwinding Indian and cross-border M&A deals and
how such unwinding would work basis the structure implemented
for a transaction. Drawing on deal experience and Indian
precedents, we also highlight practical challenges that
sellers and purchasers should proactively consider when
negotiating future M&A transactions.
M&A transactions being analysed
Based on the manner in which the consideration is
exchanged between the parties, M&A transactions
can be broadly bifurcated into the following types:
Purchaser
pays the entire consideration in upfront cash to the
sellers (“Upfront Cash Deal”):
In such deals, the entire consideration is paid to the
sellers / company (as applicable) upfront in exchange
for transfer of the shares. This model is preferred
when the purchaser has the ability and means to pay
the entire amount immediately.
Purchaser
pays some amount of the consideration upfront and defers
the balance component to a later date (“Deferred
Consideration Deal”): Such component
of the consideration which is deferred is typically
linked to (a) the achievement of specified targets (such
as KPIs / EBITDA), or (b) are guaranteed payments to
be made within the specified timelines. In case such
Deferred Consideration Deal involves a non-resident,
the deferred consideration component needs to be aligned
with the requirements specified for deferred consideration
deals under the FEMA (Non-Debt Instruments) Rules, 2019
(“NDI Rules”).
Shares of
two companies are swapped as consideration (“Share
Swap Deal”): In case of a share
swap, an acquirer acquires the shares of another company
(either through a primary or secondary acquisition)
and as consideration for the acquisition, the acquirer
issues its own shares to the other company / selling
shareholders of such company (as applicable).1
These structures are preferred in scenarios where there
are liquidity concerns.
While the above bifurcation is based solely on the
manner in which the consideration is paid by the acquirer,
in terms of the mode in which the transaction has occurred,
it can be either an acquisition by way of secondary
transfers by all existing shareholders of the company
(“Pure Secondary”), or
an acquisition by way of a combination of a primary
issuance to the proposed acquirer and secondary transfers
by all the existing shareholders (“Primary –
Secondary Combination”).
Legal Considerations to be borne
in mind while unwinding M&A transactions
General considerations
irrespective of the nature of consideration
While unwinding involves an array of legal and contractual
considerations at play, there are certain factors that
will have to be evaluated for unwinding
regardless
of the manner in which the consideration has been
disbursed.
(i) Impact
of the absence of unwinding clauses within transaction
documents
In most cases, transaction documents do not contain
express provisions for unwinding or reversing a completed
deal. This is because incorporating such clauses often
adds legal complexity to the transaction documents and
is typically not a preferred negotiation point, given
the sensitivities and implications associated with such
provisions. That said, without such contractual mechanisms
being expressly stipulated, parties must rely on mutual
agreement or resort to general legal principles and
court-driven remedies, as unilateral reversal would
not be feasible given any form of unwinding would be
a bilateral process. Often, the only unilateral recourse
available is the initiation of a dispute, which is inherently
time-consuming, uncertain, and costly.
Where an unwinding is sought against the backdrop
of strained relations between the parties (such as in
case of material breaches, fraud, commercial and strategic
misalignment etc.), these remedies become even more
difficult to seek. Even in case of initiation of a unilateral
dispute, the initiating party may only be able
to seek remedies such as damages, specific performance
or interim relief, with none of these resulting in or
being capable of having the effect of unwinding. From
a contractual standpoint, while the remedy of rescission
may be sought, it is typically granted sparingly, i.e.,
in cases of fraud, misrepresentation, or mistake (and
subject to other requirements under Indian laws). However,
the ideal remedy for rectification of certain instances
would warrant an unwinding as compared to an interim
relief or a specific performance, for instance,
a share title issue being identified immediately after
consummating a share purchase deal can potentially be
resolved only through unwinding (and not specific performance
/ interim relief, as they will not reduce the title
concerns associated with the securities). Further, this
may become even more concerning in cases where there
are no post-closing cooperation clauses in the transaction
documents. In such cases, the absence of covenants requiring
ongoing access to information, transition support, and
/ or cooperation with regulatory filings can make the
unwinding operationally unviable.
While a natural solution may be to include a detailed
unwinding clause in the transaction documents during
negotiations, such clauses remain uncommon. This is
partly because defining the specific events that may
trigger an unwinding and prescribing the process is
complex, and also because the uncertainties that arise
in unwinding scenarios cannot be fully anticipated or
legislated at the time of negotiation and documentation.
The key reasons why mutually agreed unwinding clauses
are yet to see the light of Indian M&A market is
as follows:
-
Unwinding clauses may sometimes be used strategically
to create leverage or facilitate an exit from a
transaction – outcomes that are not their
intended purpose. Accordingly, since such clauses
must be specifically negotiated and tailored to
the circumstances of each deal, they are considered
highly sensitive.
-
Parties may opt to rely on standard clauses like
force majeure, termination, or material adverse
change clauses to address potential disruptions
or unforeseen circumstances, rather than creating
a specific unwinding mechanism, considering the
general lack of circumstances within which a need
to unwind a transaction is required. Additionally,
unwinding mechanisms are often litigious and would
introduce uncertainty in the transaction.
-
Unwinding of a Pure Secondary and / or Primary –
Secondary Combination remains subject to the prevalent
legal, regulatory and tax regime at the time of
unwinding, which may not guarantee success to the
parties unless the mechanism for unwinding is so
created as to be exempt from any such approvals
/ detrimental requirements.
-
Another reason why unwinding clauses are not
popularly negotiated clauses is that in essence
an unwinding clause is predicting a structure for
a problem that is yet to arise. This brings in a
lot of uncertainty, for example the position of
the parties at such future point with respect to
liquidity availability, residency status, regulatory
arbitrage, etc. Additionally, irrespective of whether
the transaction is a Pure Secondary or a Primary –
Secondary Combination or any other variation, any
unwinding would impact the credibility or marketability
of the asset and thereby lead to value deterioration
in the long run.
(ii) Legal
challenges / considerations associated with unwinding
of primary issuances
M&A transactions may involve a Primary –
Secondary Combination, in which case the unwinding of
the secondary component and primary component will need
to be evaluated separately.
Typically, a primary transaction after the security
has been issued can only be unwound by the company by
way of a buy-back or capital reduction in India. However,
this is posed with the following challenges that are
unique to each of the two routes mentioned above –
Buyback:
Buyback refers to the process of buying back, by
a company, of its own shares from the existing shareholders
(in exchange for consideration). Under the framework
of Section 68 of the Companies Act, 2013 (“CA
2013”), a company is required to meet
multiple requirements prior to undertaking
a buyback, and some are as below –
-
Board and / or shareholders’ approval (the
latter by way of a special resolution) should be
obtained, depending on the size of the buyback;
-
The buyback can be made only out of free reserves,
securities premium, or proceeds of a fresh issue
(excluding the same kind of shares);
-
The ratio of the aggregate of secured and unsecured
debts owed by the company after buyback is not more
than twice the paid-up capital and its free reserves;
-
The buyback offer has been provided only a year
after the date of closure of any previous buyback
provided by the company;
-
The maximum equity shares that can be bought
back in a financial year should not exceed 25% of
the total paid-up equity capital in that financial
year
Due to the stringent requirements prescribed above,
there is a possibility that companies may not be able
to unwind transactions through a buyback in case they
are not able to meet any of the above. Additionally,
given that a buyback legally needs to be opened up to
all the existing shareholders on a proportionate basis,
the offer for buyback is made to all shareholders (including
those who are not intended to be a part of the unwinding),
and in such case if such shareholder also tenders its
shares, the company will be obligated to buy the shares
back even from such shareholder, which will lead to
unintended leakages and impact the commercials associated
with the unwinding.
Accordingly, given the practical, legal, and commercial
uncertainties of this process, buyback by the Company
is typically not considered when unwinding primary transactions.
Capital reduction:
Capital reduction refers to the process of “reduction”
of the “capital” of the company, whereby
a company reduces the investment of its shareholders
in its share capital through the cancellation of shares
issued to such shareholders.
In India, capital reduction is a National Company
Law Tribunal (“NCLT”) driven
process, which is initiated through a scheme filed by
the relevant company before NCLT pursuant to receipt
of necessary approvals from the board and shareholders
(the latter by way of a special resolution). Further,
the process is contingent upon receipt of regulatory
and other approvals (which is granted by the NCLT only
after it receives no-objections from other regulators
governing the company, such as the Registrar of Companies,
Regional Director, creditors of the company, etc.).
In our experience, a capital reduction often takes between
8-12 months to receive an approval from the date of
filing.
Typically, filing of the scheme also includes preparation
and attachment of multiple supporting documents set
out within the CA 2013 and allied rules / regulations,
which increases the costs associated with unwinding
the primary. That said, capital reduction may be considered
a suitable route to unwind a primary since Indian law
permits selective capital reduction or a squeeze out,
which is particularly beneficial to only unwind such
part of the transaction as was initially consummated
through a primary infusion (with the flexibility for
the secondary component being unwound through a sale
back to the original purchaser, if feasible subject
to the conditions set out below).
In sum, while capital reduction is a fairly time-consuming
and expensive exercise, it is a suitable alternative
for the unwinding of a primary (as opposed to a buyback)
given that the company does not have to have a minimum
free reserve / share premium requirement (in the manner
applicable to buyback). This provides an avenue for
unwinding to a larger number of companies. That said,
this process is subject to the approval of the NCLT
and cannot be consummated until such approval is received.
(iii)
Regulatory
approvals for unwinding
Most large-value M&A transactions in India, especially
cross-border transactions, are often subject to various
regulatory approvals (such as: (i) from the Competition
Commission of India (“CCI”))
in case it exceeds the thresholds specified under the
Competition Act, 2002; (ii) approval of the Government
of India (if the investment is not under the “automatic
route” of the Indian foreign direct investment
policy or in case of a transfer that may trigger approval
under Press Note 3 of 2020 (“PN3”));
or (iii) other sectoral regulators governing the affairs
of the underlying target company (such as in case of
change of shareholding of a non-banking financial company
or insurance company exceeding prescribed thresholds).
Unwinding a transaction may, in all likelihood, trigger
a need for fresh regulatory approvals from such regulators
which needs to be appropriately re-evaluated at the
time of structuring the unwinding transaction.
That said, only in case the law has not substantially
changed since the consummation of the transaction, there
may be more commercial viability in unwinding the transaction.
However, in case the laws have been substantially amended
between the Closing and the proposed date of unwinding
of the transaction, changes to law since the closing
date of the original transaction (such as potentially
changed sectoral limits, policy shifts, or newly introduced
valuation restrictions) may impact the commercial feasibility
of unwinding and provide less value to the parties.
Additionally, the issue of unwinding transactions
has not yet been examined by Indian regulators (except
in the case of Vikas Infotech – Shamli Steels,
discussed below, which is still pending approval). Accordingly,
it is unclear currently how regulators may approach
such transactions when these are presented before them
for their approval.
(iv)
Regulations
/ guidelines applicable to listed companies
Where the target company is listed in India, the
framework of the Securities and Exchange Board of India’s
(“SEBI”) regulations will
apply irrespective of the consideration structure or
mode of acquisition / unwinding. For instance, any transfer
of shares, whether structured through a cash deal or
a share swap, will need to comply with the pricing provisions
under the SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2018. Similarly, acquisitions / unwinding
transactions that cross the thresholds prescribed under
Regulation 3 of the SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations, 2011 may trigger
an open offer obligation, regardless of whether the
consideration is paid upfront, deferred, or in kind.
Accordingly, an analysis of the applicability and
impact of SEBI regulations on the transaction will need
to be undertaken once again at the time of unwinding,
in order to ensure that statutory requirements are complied
with.
Consideration-linked implications
The next category of implications to be borne in
mind stem from the manner in which consideration is
disbursed within the transaction. This is particularly
relevant where either party is a non-resident of India
under the Indian foreign exchange laws, as the mode,
timing, and channel of payment can trigger regulatory
requirements under the Foreign Exchange Management Act,
1999 (“FEMA”), including
pricing guidelines, permissible routes, and repatriation
rules. Similarly, the disbursal of consideration also
has to factor in the income-tax treatment under the
Income Tax Act, 1961 (“IT Act”),
since the withholding obligations, capital gains exposure,
and taxability will vary depending on whether the purchaser
or seller is resident or non-resident under Indian tax
laws. In other words, both FEMA and IT Act considerations
directly impact how, when, and in what form consideration
may actually be paid out.
Certain general principles applicable to secondary
transactions that are to be borne in mind (from a FEMA
perspective), are as below:
-
FEMA is not applicable to transfer of shares
of an Indian company, between Indian residents (“Resident
Principle”).
-
In case of transfer of shares of an Indian company,
by a resident seller to a non-resident purchaser,
the consideration that needs to be paid will be
at a minimum price of the fair market value
(“FMV”). In other words,
the FMV will be the floor (“Floor
Principle”).
-
In case of transfer of shares of an Indian company,
by a non-resident seller to a resident purchaser,
the consideration that needs to be paid will be
at a maximum price of the fair market value
(“FMV”). In other words,
the FMV will be the cap (“Cap Principle”).
-
FEMA is not applicable to transfer of shares
of an Indian company, between non-residents (“Non-Resident
Principle”).
We have prepared below a consolidated table of key
FEMA and tax considerations that need to be appropriately
evaluated at the time of unwinding of transactions,
along with their impact on both of the parties –
|
Type of Transaction
|
FEMA Considerations
|
Tax Considerations
|
|
Upfront Cash Deal
|
-
Where a transaction is unwound between
two residents,
no FEMA implications arise at the time of
unwinding, in line with the Resident
Principle.
-
For a transaction that originally involved
a non-resident seller and a resident purchaser,
the Cap Principle would have applied.
At the time of unwinding, however, the residency
of the parties reverses (i.e. the seller becomes
a resident and the purchaser a non-resident),
and the Floor Principle applies instead for
pricing.
Therefore, in the event the FMV of the shares
between the original transaction and the unwinding
transaction has changed, such difference would
need to be kept into consideration in case of
an unwinding.
The only exception is where the FMV at the
time of the original transaction and at unwinding
is identical to the consideration amount –
in which case, the purchaser can unwind the
transaction at the original FMV. Any other differences
in FMV on account of the above can create unintended
leakages.
-
For a transaction that originally involved
a resident seller and a non-resident purchaser,
the Floor Principle would have applied.
Upon unwinding, the residencies of the parties
again switch, and any gain or loss (arising
from the variance between the FMV under
the Cap Principle and the Floor Principle)
will create a leakage.
-
Where a transaction is unwound between
two non-residents,
no FEMA implications arise at the time of
unwinding, in line with the Non-Resident
Principle.
-
While an assessment of whether prior
approval of the Government of India was
required under PN3 would have been undertaken
at the time of the original transaction,
a fresh analysis may be required if the
unwinding involves a non-resident party
or if there is any change in the entities
involved in the transaction.
|
-
In case of a transaction originally involving
a resident purchaser and resident seller,
tax is deductible at source (at a rate of
0.1%) under Section 194Q of the IT Act,
if the thresholds set out therein were met.2
At the time of unwinding the above transaction,
tax under Section 194Q of the IT Act will now
also be levied on the new resident purchaser
(i.e. the original seller in the above transaction),
again subject to meeting of thresholds.
However, it is important to note that the
period of holding will be reset for the original
sellers, who may lose the benefit of the original
period of holding applicable to them (for computation
of capital gains on any subsequent transfers)
had they not transferred their shares to the
original purchaser. This may potentially deprive
them of availing the benefit of the lower rate
/ nil rate (as applicable) of long-term capital
gains tax that may have been available to them
otherwise if they continued to hold the shares
in the absence of the original transaction (such
phenomenon, the “Holding Period
Reset”).
-
In case of a transaction originally involving
a non-resident seller and resident purchaser,
the resident purchaser would have had to
withhold taxes at the time of payment of
consideration to the non-resident sellers,
depending on the capital gains tax rate
applicable based on their period of holding
and their tax residency.
At the time of unwinding, on account of the
switch in the residencies (i.e. now a resident
seller and non-resident purchaser), the non-resident
purchaser will not be required to withhold any
taxes.
Accordingly, unless commercially negotiated,
the original non-resident sellers will have
to forego the loss incurred as a result of payment
of capital gains taxes at the time of the original
transaction. Further, in case of unwinding,
the original non-resident sellers will also
suffer the impact of the Holding Period Reset,
in case of any subsequent transfers. Therefore,
there are inevitable tax leakages in case of
unwinding of such transactions.
-
In case of a transaction originally involving
a resident seller and non-resident purchaser,
the non-resident purchaser would not have
had to withhold any taxes at the time of
payment of consideration to the resident
sellers.
That said, at the time of unwinding of this
transaction and a change of residencies of the
parties (i.e. non-resident seller and resident
purchaser), the purchaser will have to withhold
taxes at the time of payment of consideration
to the non-resident sellers, depending on the
capital gains tax rate applicable based on their
period of holding and their tax residency.
Accordingly, on account of the Holding Period
Reset and depending on the time gap between
the original transaction and the unwinding,
any capital gains taxes payable to the Indian
tax authorities by the original seller at the
time of unwinding will be a loss in their hands.
-
In case of a transaction involving a
transfer between two non-residents, taxes
will have to be withheld by the non-resident
purchaser at the time of payment of consideration
depending on the residency and period of
holding of the non-resident sellers.
Even at the time of unwinding, taxes will
have to be withheld by the (now) non-resident
purchaser. That said, on account of the Holding
Period Reset and depending on the time gap between
the original transaction and the unwinding,
any capital gains taxes payable to the Indian
tax authorities by the original seller at the
time of unwinding will be a loss in their hands.
-
Lastly, in case of unwinding of a transaction
within a shorter period of time after the
completion of the original transaction,
which largely mirrors the original transaction,
an assessment of whether such transaction
may be taxed under the General Anti-Avoidance
Rule (“GAAR”)
must also be considered.
|
|
Deferred Consideration Deal
|
While most of the factors mentioned in Upfront
Cash Deal would also be applicable for a Deferred
Consideration Deal (such as FMV issues basis
the residential status of the parties to the
unwinding), one peculiar issue arises in unwinding
Deferred Consideration Deals where the unwinding
is triggered between the payment of the upfront
consideration and the deferred consideration.
As per FEMA, a Deferred Consideration Deal
can be structured with a non-resident party
only through a deferment of a maximum of 18
months from the date on which the agreement
for such arrangement is executed. Therefore,
in the event an unwinding is triggered in such
18 months or until the payment of deferred consideration
(given that there will be no maximum time limit
for deferment in case of resident purchaser
and seller), the shares would have been transferred
from the sellers to the purchaser for the upfront
consideration, however the deferred would still
be outstanding.
In the unwinding transaction, the seller
(which is now the purchaser) would need to buy
back the shares by paying the entire consideration
subject to the pricing requirements under FEMA.
Therefore, treatment of such outstanding deferred
consideration would be a key negotiation point
for such unwinding transactions.
|
Tax on a Deferred Consideration Deal can
be paid in one of the following manners: (i)
payment of tax on the initial tranche and deferred
component will occur in the financial year of
Closing (i.e. payment of the initial consideration
by the purchaser to the seller); and (ii) payment
of tax on the deferred component of consideration
subsequently, in the year of accrual.
Depending on the intricacies of the deal
that may need to be factored in on a case-to-case
basis, the tax considerations applicable to
a Deferred Consideration Deal are likely to
be similar to the tax considerations applicable
to an Upfront Cash Deal.
|
|
Share Swap Deal
|
In cases where the consideration shares were
transferred by an existing shareholder of the
Company to a new purchaser, and in return, the
purchaser transferred certain of its shares
to the existing shareholder, the unwinding may
be implemented through a re-exchange of shares.
However, such reversal could give rise to transaction
leakages on account of capital gains tax implications
triggered upon the unwinding. Parties would
need additional cash to be able to unwind a
transaction through such method given that while
the consideration would be paid in kind (through
shares), the tax liability would be required
to be addressed in cash.
The bigger concern arises in situations wherein
the consideration was in the form of fresh issuance
by the purchaser, of shares in the purchaser
to the sellers. In such case, a secondary unwinding
transaction would not be possible and therefore,
parties would have to explore a buyback / capital
reduction route as mentioned above. However,
in both these cases, the question would be whether
such buyback / capital reduction can be set-off
against transfer of the shares earlier acquired
by the purchaser.
|
Live Case Study: Unwinding of the
proposed Share Swap Deal of Vikas Ecotech Limited and
Shamli Steels Private Limited
While we have discussed the theoretical considerations
of unwinding various kind of transactions, there are
also real-life situations wherein an unwinding was warranted.
In this Deal Talk, we also analyse a live case study
wherein the parties had to unwind a fully consummated
transaction.
Background
On January 22, 2024, Vikas Ecotech Limited (“VEL”)
signed a share purchase agreement with the shareholders
of Shamli Steels Private Limited (“SSPL”)
to acquire 100% of SSPL’s shares. The acquisition
was structured as a share swap, where VEL issued 20
of its own shares for every 1 share of SSPL, valuing
the transaction at an enterprise value of INR 160 crores.
Based on this structure, VEL allotted 38,03,50,000 equity
shares at an issue price of INR 4.20 per share (referred
to as the “Swap”).
Alongside the Swap, VEL also provided working capital
support of INR 150 million to SSPL and had committed
to infuse an additional INR 350 – 500 million
over the next 3 – 6 months to meet ongoing operational
needs after taking over the plant.
Following the completion of the Swap, both parties
began performing their respective obligations under
the agreement. However, during the handover process,
VEL’s management conducted a due diligence exercise
on SSPL and discovered several issues – including
financial irregularities, unreported tax demands, and
misdeeds by SSPL’s erstwhile promoters and shareholders.
Despite repeated follow-ups, these issues remained
unresolved. As a result, VEL initiated legal proceedings
before the Delhi High Court against the promoters and
erstwhile shareholders of SSPL. While the court granted
interim relief in VEL’s favour, the parties eventually
reached an amicable resolution and entered into a Termination
cum Settlement Agreement (“TSA”).
This agreement was intended to undo the transaction
and restore both sides to the position they were in
before signing the original share purchase agreement,
effectively treating the deal as if it had never happened.
The TSA outlined the following terms for cancellation
of the deal –
Cancellation / extinguishment of shares of VEL
that were allotted to the erstwhile shareholders of
SSPL in May 2024; Reversal of ownership of shares in SSPL from
VEL to the erstwhile shareholders of SSPL; Handover of possession of the SSPL factory
premises to the erstwhile management; Resignation of nominee directors on the
board of SSPL; Withdrawal of all complaints, litigations and
claims instituted by the parties against one another.
Additionally, it also noted that until the SSPL erstwhile
shareholders’ shares held in VEL are not cancelled
/ reversed by VEL, they will continue to hold the same,
in trust, but will have no ownership rights over the “Retained
Assets” contemplated in the TSA (which include
the shares, benefits and certain other specified assets).
Filing
of petition with National Company Law Tribunal (“NCLT”).
The TSA was subsequently filed with the Delhi High
Court, and it noted that in order to effectuate this
reversal, VEL was required to reduce its share capital
by the previously allotted 38,03,50,000 equity shares.
This was followed by an order of the Delhi High Court
on January 31, 2025, which recorded the aforementioned
settlement terms.
Following approval from its board3 and
99.91% of its shareholders4, VEL filed a
capital reduction scheme with the NCLT under Section
66 of the CA 2013. The scheme sought to cancel 38,03,50,000
equity shares of VEL and make a corresponding reversal
of approximately INR 121.71 crores from VEL’s
securities premium account.
In parallel, VEL is also pursuing separate actions
to recover the working capital funds it had extended
to SSPL.5 Once the NCLT approves the capital
reduction scheme, SSPL will no longer be included in
VEL’s consolidated financial statements going
forward.
This scheme is currently pending approval of the
NCLT. It will be interesting to witness the practical
implementation of the capital reduction thereafter.
Conclusion
Unwinding an M&A transaction is rarely straightforward.
It is a delicate exercise that requires balancing commercial
realities with legal, regulatory, and tax frameworks
that were never designed for reverse execution. While
the instinctive response may be to mirror the original
deal in reverse, the legal landscape often necessitates
bespoke solutions involving capital reduction, buybacks,
fresh regulatory approvals, and intricate tax planning.
The Vikas Ecotech–Shamli Steels case illustrates
that while unwinding is possible, it is fraught with
operational complexity and prolonged timelines. Parties
contemplating an unwind must therefore account for potential
friction points, including but not limited to valuation
mismatches and holding period resets to procedural hurdles
with regulators and courts.
Looking ahead, there is merit in discussing a structured
exit and unwinding framework within M&A documentation
at the negotiation stage itself. While such clauses
may not entirely remove the inherent challenges, they
can provide a degree of contractual certainty and reduce
the risk of contentious disputes. Ultimately, successful
unwinding demands foresight, collaboration, and a pragmatic
approach, recognising that in the world of M&A (much
like marriages), even a “happily ever after”
may need a contingency plan.
Authors
-
Nishchal Joshipura,
Parina Muchhala and
Anurag Shah
You can direct your queries or comments
to the relevant member.
1Please refer to our previous Deal Talk
on this topic, available at:
https://www.nishithdesai.com/fileadmin/user_upload/Html/Hotline/Deal_Talk_Mar1925-M.html.
2Applicable only to shares of Indian unlisted
companies, as clarified in Circular No. 13 of 2021.
3Board Meeting dated March 7, 2025 pursuant
to Regulation 30 of SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015.
4Voting Result of Extra Ordinary General
Meeting along with Scrutinizer’s Report dated
March 29, 2025.
5Point d, Report Adopted by the Audit
Committee of Vikas Ecotech Limited at its Meeting held
on Friday, March 7, 2025, Recommending the Draft Scheme
of Capital Reduction Of The Company with its Specified
Shareholders.
Disclaimer
The contents of this hotline should
not be construed as legal opinion. View detailed disclaimer.
This hotline does not constitute a
legal opinion and may contain information generated
using various artificial intelligence (AI) tools or
assistants, including but not limited to our in-house
tool,
NaiDA. We strive to ensure the highest quality and
accuracy of our content and services. Nishith Desai
Associates is committed to the responsible use of AI
tools, maintaining client confidentiality, and adhering
to strict data protection policies to safeguard your
information.
This hotline provides general information
existing at the time of preparation. The Hotline is
intended as a news update and Nishith Desai Associates
neither assumes nor accepts any responsibility for any
loss arising to any person acting or refraining from
acting as a result of any material contained in this
Hotline. It is recommended that professional advice
be taken based on the specific facts and circumstances.
This hotline does not substitute the need to refer to
the original pronouncements.
This is not a spam email. You have
received this email because you have either requested
for it or someone must have suggested your name. Since
India has no anti-spamming law, we refer to the US directive,
which states that a email cannot be considered spam
if it contains the sender's contact information, which
this email does. In case this email doesn't concern
you, please
unsubscribe from mailing list.
 |
|
We aspire
to build the next generation
of socially-conscious lawyers
who strive to make the world
a better place.
At NDA, there
is always room for the right
people! A platform for self-driven
intrapreneurs solving complex
problems through research, academics,
thought leadership and innovation,
we are a community of non-hierarchical,
non-siloed professionals doing
extraordinary work for the world’s
best clients.
We welcome
the industry’s best talent -
inspired, competent, proactive
and research minded- with credentials
in Corporate Law (in particular
M&A/PE Fund Formation),
International Tax , TMT and
cross-border dispute resolution.
Write to
happiness@nishithdesai.com
To learn more
about us
Click here.
|
|
Top Tier
Law Firm:
Chambers & Partners,
Legal 500, Benchmark
Litigation, Asialaw,
IFLR1000, ITR World
Tax, Who’s
Who Legal, Asian
Legal Business (Thomson
Reuters), India
Business Law Journal,
Mergermarket
Recognised
Practices:
International Tax,
Private Equity,
Corporate/M&A,
Venture Capital,
Investment Funds,
International Dispute
Resolution: Arbitration
and Litigation,
White-Collar Crime &
Corporate Investigations,
Data Compliance &
Cybersecurity, Internet &
e-Commerce, HR and
Employment Law,
Intellectual Property,
Cross-Border Capabilities,
High Net Worth and
Private Wealth Law,
Insolvency
Recognised
Sectors:
Technology and Telecommunications,
Media and Entertainment,
Life Sciences and
Healthcare, Investment
Funds, FinTech,
Financial Services,
Sports & Gaming,
Transport, Government
and Regulatory
Innovation
Leadership:
RSG Financial Times –
India’s Most
Innovative Law Firm
(2019, 2017, 2016,
2015, 2014), Legal500
Innovative Law Firm
of the Year 2025
|
|
|
|
