How the Amalgamation Process Works: A Step-by-Step Breakdown

When companies want to simplify their ownership, reduce legal clutter, or fully merge related entities, they often turn to amalgamation. 

Unlike takeovers or acquisitions, this is a structured, legally guided process that brings everything, teams, assets, and operations under one unified company.

In this article, we’ll walk through how it works in practice: from the initial agreement to final approvals, with real-world examples and key compliance steps. Whether you're merging group companies or gearing up for a capital reorganization, here's the step-by-step process, with what it is, defined as well.

What is Amalgamation 

Amalgamation is a form of business restructuring where two or more companies legally consolidate to form a new company, closing down the previous companies and transferring their assets, liabilities, contracts, and equity into one framework.

Unlike a typical acquisition where one entity absorbs another, amalgamation forms an entirely new company, complete with a new cap table, new balance sheets, and a new operating structure.

Imagine it as a reset of the board, two current games of chess come to an end, and the pieces are distributed to a single, newly designed board with one set of rules. All is rebalanced, from equity ownership to legal burden and reporting systems.

Amalgamation is usually preferred by companies as and when they must:

• Simplify complex group structure (e.g. parent and subsidiary into one legal entity)

• Sort out overlapping ownership or situations where companies own shares in each other.

• Liberate operational efficiency through consolidation under a single balance sheet

• Enhance creditworthiness or tax status

Amalgamation Examples in Business 

Consider the example of Bank of Baroda, Dena Bank, and Vijaya Bank. These three Indian government-owned banks were merged into a new reconstituted Bank of Baroda in 2019, with explicit approval from the Government of India.

It was a real merger where all three institutions lost their identity in their erstwhile sense. Their assets, liabilities, customers, and employees were shifted to the new institution, making it one of India's biggest banks in terms of asset size.

Some other key mergers include:

• Maruti Motors and Suzuki India Ltd were merged to form Maruti Suzuki India Ltd, for simplicity in ownership and operations under the provisions of the Companies Act.

• Tata Sons and AIA Group consolidated their joint ventures operations together to form Tata AIA Life Insurance, integrating international capability with local presence within a single framework.

The Pros and Cons of Amalgamation 

On the upside, amalgamation allows businesses to eliminate redundancy, centralize resources, and unlock scale that wouldn’t be possible independently. It’s especially useful when companies want to streamline operations, restructure debt, or simplify group entities for tax and compliance reasons.

But the structural depth of an amalgamation (the legal, financial, and operational layers involved in combining two companies) means it’s not always agile. Once approved, it’s irreversible and errors in valuation, integration, or compliance can lead to long-term issues in stakeholder trust or balance sheet health. For example, poorly handled share exchange ratios often trigger disputes post-amalgamation.

How Does Amalgamation Works 

Each step in an amalgamation is tightly regulated and sequence-driven. Here’s how the process unfolds from strategic agreement to operational integration.

Amalgamation Process: 6 Key Legal and Operational Steps Explained

1. Strategic Agreement - Boards of the merging companies pass resolutions to combine into a single new entity, aligning on key terms.

2. Due Diligence & Valuation - Legal and financial advisors identify all assets and liabilities, and determine a fair share exchange ratio under regulatory norms.

3. Legal Structuring - The Scheme of Amalgamation is drafted, detailing asset transfer, share issuance, appointed date, and filed with court and regulators.

4. Transfer of Assets & Liabilities - Upon court sanction, all properties, contracts, and obligations transfer to the new entity automatically through legal effect.

5. Share Issuance & Capital Realignment - The old shares are cancelled, and new equity is issued to stakeholders based on the approved ratio.

6. Post-Amalgamation Integration - Business functions, systems, and compliance frameworks are consolidated and aligned under the new corporate structure.
   

1. Strategic Agreement

It starts when boards of two or more firms officially decide to unwind their separate entities and merge into a new legal corporation. This isn't a brand refresh, it's a complete structural reboot. It is a decision premised on the belief that having one structure will deliver better long-term value, minimize overlapping operations, or release a competitive advantage.

This strategic partnership is cemented in board resolutions, supported by high-level fiscal integration and legal advice. Both parties will have to agree from the beginning to:

• Stopping their separate corporate life

• Shifting all assets, liabilities, and shareholders into the new entity

• And allowing the new company to begin anew, with a balanced balance sheet and governance framework

Amalgamations are less frequent than acquisitions or usual mergers, but when they do happen, the stakes are high. At this point, nothing gets filed publicly, but it lays the ground for valuation, structuring, and due diligence that comes thereafter.

2. Due Diligence and Valuation

Once the two firms decide to merge, the subsequent step is to do a thorough due diligence, not to evaluate compatibility as in M&A, but to know what precisely is being transferred, how it will be priced, and how stakeholders are to be compensated.

At this stage, auditors, legal advisors, and valuation experts are brought in to:

• Catalogue all assets and liabilities, including contingent obligations and off-balance-sheet items

• Standardize accounting practices between the companies (especially when the reporting standards or financial periods differ)

• Determine a fair share exchange ratio, based on net asset value, future earnings potential, or other prescribed formulas under jurisdictional laws

In India, when companies merge under Sections 230–232 of the Companies Act, 2013, they usually need a valuation report—especially if shares are being exchanged. This valuation must be done by a registered valuer (as per Section 247) and is reviewed by both shareholders and regulators.

This is not a step that can be skipped, regulators, shareholders, and judges all depend upon this valuation to see that no party is at a disadvantage when the companies break up and re-form. It's also where amalgamations falter or stall for many, valuation differences are one of the top three reasons amalgamation proposals are delayed or withdrawn.

3. Legal Structuring

This is where the firms formulate the Scheme of Amalgamation, a formal document that specifies how the amalgamation is to be carried out according to the relevant laws.

The scheme specifies:

• Appointed date (from which the amalgamation takes effect)

• Effective date (when the scheme becomes effective)

• Share exchange ratio and treatment of stakeholders

• Transfer of all assets, liabilities, contracts, and employees

• How the new entity is to be legally structured

The draft scheme is then filed for judicial and regulatory authorization, and here jurisdiction comes into play. This also involves:

• Public announcements to creditors and investors

• Notices to stakeholders, usually requesting meetings or written approval

• Court-convened meetings for shareholder votes, as the case may be

If no one has any objections, the court makes a final order, and the Registrar of Companies (or the like authority) legally dissolves the original companies and registers the new company.

4. Transfer of Assets, Liabilities, and Contracts

After the court sanction of the scheme, the real transfer starts. All assets and liabilities of the companies to be amalgamated automatically pass to the newly created company, this includes:

• Tangible assets such as property, equipment, and stock

• Intangible assets like trademarks, licenses, and goodwill

• Liabilities like loans, payables, and employee liabilities

• Running contracts and agreements (unless otherwise specified in the scheme)

No conveyance deeds or renegotiation of contracts are required, but the court order becomes a legal document for transfer. The sensitive agreements (such as supplier or lease contracts) can still require counterparty consent based on their terms.

The merged company combines both balance sheets into one, using either the pooling of interest method or the purchase method, depending on local rules and how the merger is structured.

5. Issuance of Shares and Stakeholder Reallocation

The process of creating and distributing new equity in the merged company, while updating who owns what.

The new company issues new shares to the shareholders of the constituent companies, on the basis of the pre-approved exchange ratio. This process:

• Cancels the old shares of the amalgamating companies

• Issues fresh equity in the merged company proportionately (issuance of shares = creating new ownership stakes in the new company)

• Reduces and realigns the capital structure and shareholder register (stakeholder reallocation = updating the ownership list to reflect the new structure)

This way, no stakeholder is excluded, all previous interests are now included in the ownership of the new company, keeping it transparent as well as legally consistent.

6. Post-Amalgamation Integration

With the legal formalities complete, the focus shifts to making the amalgamated entity operationally functional. This stage involves:

• Unifying teams, systems, and reporting structures - Helps everyone operate under the same goals and reduces internal confusion.

• Aligning ERP, payroll, HR, and compliance systems under a single framework - Prevents data silos and ensures smooth day-to-day operations post-integration. 

• Eliminating duplicate roles or overlapping functions - Cuts unnecessary costs and clears up ownership across departments.

• Communicating changes to vendors, customers, regulators, and staff - Maintains trust and ensures no disruptions in service or compliance.

Without this alignment, synergies remain theoretical. That’s why most post-amalgamation plans include 30–90 day integration roadmaps, with clear milestones across finance, ops, and governance.

The Bottom Line 

Amalgamation does not stop at legal sanction. This is where the complexity starts, merging balance sheets, aligning accounting systems, issuing new shares, and reconstituting reporting from day one. If done poorly, the benefits of amalgamation, operating efficiency, financial transparency, and stakeholders' confidence can soon get undercut.

CFO Bridge assists businesses through and after amalgamation to make sure the financial unification is correct, compliant, and audit-proof. From the verification of exchange ratios for shares to installing consolidated reporting frameworks, we guide businesses through the technicalities that follow legal shutdown. Whether you're proposing or completing an amalgamation, CFO Bridge can guide you through it landing smoothly.