Sony-Zee Merger Deal

What’s in today’s article?

• Why in news?
• What is National Company Law Appellate Tribunal (NCLAT)?
• What is National Company Law Tribunal?
• Background: Sony-Zee Merger
• News Summary: NCLT clears Zee-Sony deal, paves way for creation of $10-billion entertainment giant
• Market scenario after the merger

 

Why in news?

• The National Company Law Tribunal approved the merger of Zee Entertainment Enterprises with Culver Max Entertainment (formerly Sony Pictures Networks India).
  • This clears the decks for the creation of the country’s largest media company.
• This could be the final approval needed for the merger, unless some of the creditors decide to move the National Company Law Appellate Tribunal (NCLAT).

 

What is National Company Law Appellate Tribunal (NCLAT)?

• About
  • NCLAT is a quasi-judicial body in India that was established under the Companies Act, 2013 to hear appeals against the orders passed by the National Company Law Tribunal (NCLT).
  • Established in 2016, it is headquartered in New Delhi.
  • It is an appellate authority that hears appeals against the orders passed by the NCLT.
  • It is the second-highest forum for company law cases in India after the Supreme Court.
  • The decisions of the NCLAT are final and binding on the parties involved, and the orders passed by the NCLAT can be challenged only in the Supreme Court of India.
• Functions
  • The NCLAT is empowered to hear appeals against orders passed by the NCLT related to insolvency and bankruptcy, merger and acquisition, and company law matters.
  • It is also the Appellate Tribunal for order passed by the Competition Commission of India (CCI) as well for orders of the National Financial Reporting Authority.
• Composition
  • The NCLAT is headed by a Chairperson and consists of judicial and technical members who are appointed by the Central Government. 

 

What is National Company Law Tribunal?

• About
  • NCLT is a quasi-judicial authority incorporated for dealing with corporate disputes that are of civil nature arising under the Companies Act.
  • Its bench is chaired by a Judicial member who is supposed to be a retired or a serving HC Judge and a Technical member who must be from the Indian Corporate Law Service.
  • The primary function of the NCLT is to adjudicate on matters related to corporate law, including disputes between companies and their stakeholders, as well as insolvency and bankruptcy cases.
• Functions
  • Disposal of all proceedings under the Companies Act such as arbitration, arrangements, compromise, reconstruction, and winding up of the company;
  • Adjudicating Authority for insolvency proceedings under the Insolvency and Bankruptcy Code, 2016;
  • Possess the authority to dispose of cases pending before the Board for Industrial and Financial Reconstruction (BIFR), as well as, those pending under the Sick Industrial Companies (Special Provisions) Act, 1985.
  • Can take cases pending before the Appellate Authority for Industrial and Financial Reconstruction.

 

Background: Sony-Zee Merger

• Merger process initiated
  • In 2021, Sony Pictures Networks India and ZEEL entered into a non-binding term sheet to bring together their linear networks, digital assets, production operations, etc. 
  • As per the scheme of the arrangement, Sony will indirectly hold 50.86% of the combined company. 
  • The founder of Zee will own around 4% and the rest will be with the other shareholders of ZEEL.
  • Apart from the BSE and NSE approval and the Competition Commission of India’s nod, the shareholders of Zee had already given their assent to the merger.
• The NCLT order and challenge
  • The NCLT had directed NSE and BSE to reconsider their prior approvals for the merger of ZEEL and Culver Max Entertainment. 
  • The NCLT order was challenged by ZEEL before the appellate tribunal, contending that it was not granted adequate opportunity by the NCLT to present its side. 
    • It also contended that the NCLT doesn’t have jurisdiction over non-compete issues.
  • In May 2023, the NCLAT set aside the NCLT order that had directed the NSE and BSE to reconsider their approval for the Zee-Sony merger. 

 

News Summary: NCLT clears Zee-Sony deal, paves way for creation of $10-billion entertainment giant

• The National Company Law Tribunal (NCLT) allowed the merger of Zee Entertainment Enterprises Ltd and Culver Max Entertainment (earlier known as Sony Pictures Networks India).
• The tribunal also dismissed all objections regarding the merger.

 

Market scenario after the merger

• The deal would result in creating the country’s largest media and entertainment company with standalone revenues of $2 billion.
• The merger, according to analysts, would create a $10-billion media giant, with the combined entity owning: 
  • over 70 TV channels, 
  • two video streaming services (Zee5 and SonyLiv) and 
  • two film studios (Zee Studios and Sony Pictures Films India). 
• It would be the country’s largest TV network company with a 26% market share.

 

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Q1) What was Board for Industrial and Financial Reconstruction (BIFR)?

The Board for Industrial and Financial Reconstruction (BIFR) was a quasi-judicial body in India that was established under the Sick Industrial Companies (Special Provisions) Act, 1985. The primary purpose of BIFR was to address and rehabilitate sick industrial companies in the country. A "sick industrial company" is one that has been incurring losses for a prolonged period of time and is unable to pay off its debts, thus endangering its viability. In 2016, the Government of India repealed the Sick Industrial Companies (Special Provisions) Act, 1985, and dissolved BIFR. The responsibility for addressing the issues of sick companies was shifted to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016.

 

Q2) What is Insolvency and Bankruptcy Code, 2016?

The Insolvency and Bankruptcy Code, 2016 (IBC) is a comprehensive legislation enacted by the Government of India to address and streamline the insolvency and bankruptcy process in the country. The IBC aims to provide a time-bound and efficient framework for the resolution of distressed companies and individuals who are unable to repay their debts.

 

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Source: NCLT clears Zee-Sony deal, paves way for creation of $10-billion entertainment giant | Ministry of Corporate Affairs | Times of India