Some housing societies who may be struggling with efficiency in management or financial losses may choose to amalgamate with another society, divide into smaller segments or transfer its shares and liabilities to another society. Such decisions are taken strategically to benefit the original society as well as the society it wishes to amalgamate with. But proper checks and balances are put in place by the government in such scenarios. Let’s delve deeper in the procedure of amalgamation.
Cooperative housing societies are allowed to do the following:-
1. Amalgamate with another society
2. Transfer its assets and liabilities, in whole or in part, to any other society
3. Divide itself into two or more societies
4. Convert itself into another class of society (e.g convert from an individual society to a multi-cooperative or federal society).
Societies co-operative acts, Muti-cooperative act and Society Registration Acts all have provisions and guidelines for amalgamation of housing societies. For the purpose of this article, we will use the terminology from two of the most well-defined state co-operative acts which are Maharashtra and Delhi.
Procedure for amalgamation
1. File an application: The society is required to send an application to the Registrar with full details of the intention, whether it is a decision to amalgamate, transfer assets and liabilities, divide itself or to convert to another class of society.
2. Registrar approval: The Registrar gives permission to members, shareholders, creditors and any other person who may have an objection to such a decision and may be affected by it. They may ask for additional information or particulars from the cooperative society, and after a thorough examination, gives his approval.
3. Special General Meeting: The society has to convene a Special General Meeting by giving a 15-day notice to its members & creditors. The resolution to amalgamate can only be passed if there is a two-thirds majority vote by the members.
4. Resolution and statements: The resolution should contain a detailed purpose of why the society intends to amalgamate, transfer or divide along with proposed plan or scheme demonstrating how such a transformation is in the interest of the society. The proposed scheme for the transfer of liabilities and assets to another society should also be clearly laid out if such is the intention of the housing society and a statement is to be submitted with the application. If the plan consists of the transfer of liabilities or assets, the co-operative society is mandated to give written notice to all the members, creditors and any other person who are likely to be affected by such a decision.
5. Options for all parties involved: Creditors are given a chance to secure their dues from the society after the notice is put out. Members/shareholders have the opportunity to become part of a new society, or continue being part of the amalgamated society. At the same time, if the member/shareholder wishes to discontinue their involvement, they are allowed to receive payment for their shares and other dues.
6. Notice of amalgamation in Delhi: The notice shall also be published in at least one newspaper in English and Hindi and one in vernacular language in circulation in the National Capital Territory of Delhi and a copy thereof shall be exhibited on the notice board in the office of the co-operative society and the office of the Registrar. The State Government may decide against such a notice depending on the society’s financial capability and the extent of its liabilities and other pertinent factors.
7. One month waiting period: Within one month of the passing of the resolution, creditors and other people who may be affected by the amalgamation can raise objections and clear their dues. The society takes the necessary resolutions for each objection (if any raised). The amalgamation procedure cannot be completed if there are any unresolved disputes from members, creditors or other persons. If any of the parties involved fail to raise objections or demand their dues within this one month, it is automatically assumed that they have consented to the amalgamation.
8. Society’s Report: The society is required to submit a report to the registrar recounting the actions it has taken with regards to clearing dues and objections and request a decision for amalgamation, transfer or division, whichever the case may be. The new or amalgamated society has to be registered and the existing registration has to be cancelled.
9. Registration approval: After inspecting the society’s report, the Registrar if thoroughly satisfied with the proceedings, will register the amalgamated, divided or converted society and cancel the registration that was filed for the society previously.
Things to remember
1. In the case of determining the member’s share value during the entire process, the calculation will be determined on the financial position of the society based on the last audited balance sheet, but it will not exceed the actual amount the society had received from the member.
2. On the very same date that the amalgamated, divided or converted society gets registered, the old registration is considered cancelled.
3. Even if the society amalgamates, transfers its shares liabilities, divides or converts itself, it does not affect any legal proceedings that the society may have started against someone or if any such proceedings were started against the society by another party. The newly transformed society will still continue the same processes legally.
4. The registration itself is enough conveyance to vest the assets and liabilities of the original society.
5. Even when the society has not intention to amalgamate or divide, the Registrar has the power to cause amalgamation, division or reorganisation of societies if it considers that such an action is in the interest of the general public and the co-operative movement and that it will lead to better management of the society. However, the registrar sends a copy of the proposed order to each society in question. The Registrar also makes modifications based on the suggestions or objections received by the society within a period of two months. The members willing to opt out still receive their share amount and the creditors will receive their dues even if the Registrar decides for amalgamation, division, or reorganisation.
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