Amalgamation of Housing
Societies
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:-
- Amalgamate with
another society - Transfer its
assets and liabilities, in whole or in part, to any other society - Divide itself
into two or more societies - 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
- 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.
- On the very same
date that the amalgamated, divided or converted society gets registered, the
old registration is considered cancelled.
- 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.
- The registration
itself is enough conveyance to vest the assets and liabilities of the original
society.
- Even when the
society has no intention to amalgamate or divide, the Registrar has the power
to cause amalgamation, division or reorganization 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 re-organization.