The Ministry of Corporate Affairs (MCA) has initiated a transformative phase for corporate restructuring through its recent amendments to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, which took effect on September 8, 20251. These modifications greatly enhance the scope of fast-track merger route under Section 233 of the Companies Act, 2013, allowing a wider array of companies to optimise their consolidation efforts. By adding new eligible categories and fine-tuning procedural routes, the amendments are designed to expedite business reorganizations, simplify regulatory hurdles, and align India's merger framework with the evolving requirements of a dynamic global economy. This ambitious move represents a dedication to promoting agility and competitiveness, equipping companies with a robust mechanism to pursue strategic growth with remarkable efficiency.
Background on Fast-Track Mergers
The fast-track merger route, established under Section 233 of the Companies Act, 2013, was intended to provide a quicker alternative to the conventional merger process outlined in Sections 230-232, which entails protracted proceedings before the National Company Law Tribunal (NCLT). The traditional method, necessitating comprehensive court supervision, creditor gatherings, and valuations, frequently spans 12-18 months due to the backlog within the tribunal. In contrast, the fast-track process enables qualifying companies to bypass NCLT, obtaining approval from the Central Government through the Regional Director. This process requires the consent of 90% of shareholders (by value) and 75% of creditors (by value), along with notifications to the Registrar of Companies (RoC) and the Official Liquidator. If no substantial objections are raised, approval can be secured within 60 days, rendering it a cost-efficient and swift alternative.
Historically, eligibility was limited to small companies (with paid-up capital not exceeding ₹50 crore and turnover capped at ₹250 crore), holding companies with wholly owned subsidiaries, and specific start-ups. These constraints confined larger or more complex entities to the NCLT route, leading to demands for broader access to enable faster consolidations, especially in industries such as technology and finance. The MCA's amendments in 2025, alluded to in the Union Budget 2025-26, address these appeals by broadening eligibility while preserving regulatory oversight.
Key Details of 2025 Amendments
The Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025, which were announced on September 4, 2025, modify Rule 25 of the 2016 Rules to implement new provisions. The primary focus is the addition of new clauses under sub-rule (1A), which specify broadened categories for fast-track eligibility2. These amendments are further supported by procedural adjustments, such as revised forms and improved notification obligations to sectoral regulators.
A significant modification pertains to sub-rule (1), which now requires that companies overseen by entities like the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI), or Pension Fund Regulatory and Development Authority (PFRDA) must provide notices to these regulators and, in the case of listed companies, to stock exchanges for any objections or recommendations. This adjustment aligns the fast-track process more closely with the thorough examination stipulated in Sections 230-232, ensuring that sector-specific issues are promptly addressed.
Moreover, the amendments substitute Forms CAA-9 (notice for proposed scheme), CAA-10 (declaration of solvency), CAA-11 (notice to members/creditors), and CAA-12 (meeting results), and introduce a new Form CAA-10A for auditor certification in specific instances. The deadline for submitting applications to the Central Government after member or creditor meetings has been extended from 7 days to 15 days, allowing for greater compliance flexibility.
New Eligible Categories for Fast-Track Route
A key aspect of the amendment is the broadened eligibility for mergers, thereby democratising access to the fast-track process. Below is a detailed overview of the new categories:
- Mergers Among Unlisted Companies: Previously, unlisted companies (excluding those categorised under Section 8, i.e., non-profits) could only merge if they were classified as small or start-ups. Now, they can merge as long as their total outstanding loans, debentures, or deposits remain under ₹200 crore, without any defaults on repayments. This must be validated by auditors through Form CAA-10A, dated no more than 30 days prior to the scheme notice and filing. This criterion establishes a balance, enabling mid-sized firms to merge effectively while excluding high-debt companies that may warrant deeper scrutiny.
- Holding Company and Subsidiary Mergers: The revised route now encompasses mergers between a holding company (whether listed or unlisted) and its subsidiary (also listed or unlisted), as long as the transferring company is unlisted. This changes the earlier stipulation that the subsidiary must be wholly owned, allowing for partial ownership subsidiaries to engage in mergers. This is especially beneficial for group restructuring where operational efficiencies can be harnessed without the need for complete ownership.
- Mergers Between Fellow Subsidiaries: Subsidiaries under the same holding company are now permitted to merge, again with the condition that the transferring entity is unlisted. An example provided in the regulations clarifies multi-tier structures: for instance, if Company A holds B (wholly), which in turn holds C and D, mergers among B, C, and D (or any combinations thereof) qualify, as they share A as the ultimate holding company. This enables intra-group clean-ups, such as the elimination of unnecessary layers.
- Cross-Border Mergers Involving Foreign Holdings: A foreign corporation established outside of India can merge with its Indian wholly owned subsidiary through the fast-track process, building upon previous amendments to Rule 25A. This provision simplifies inbound restructuring, encouraging foreign investors to integrate operations smoothly. These extensions also apply to the transfer of divisions or undertakings among qualifying entities, thus broadening the scope beyond complete mergers to include partial demergers or hive-offs.
Procedural Enhancements and Compliance Considerations
Schemes still require initiation through board resolutions and notices in Form CAA-9 to the RoC, Official Liquidator, and now relevant sector regulators. Any objections need to be addressed, with the Central Government evaluating asset transfers, liabilities, employee safeguards, and ongoing legal matters in its directives, reflecting the mandates of the NCLT.
For cross-border aspects, adherence to FEMA regulations is vital, which includes obtaining RBI approvals for foreign entities. Listed companies, though partially encompassed, must comply with SEBI guidelines, ensuring protections for minority shareholders. The auditor's certification for the ₹200 crore threshold introduces an additional layer of verification, deterring potential misuse.
Overall, these modifications lessen documentation requirements and reduce timelines, potentially shortening the merger completion process from more than a year to just 3-6 months in straightforward scenarios.
Implications for Corporate India
The revisions signal a more business-friendly atmosphere, coinciding with India's initiative to enhance the ease of doing business. By relieving the NCLT of routine mergers, they can decongest tribunals, enabling a focus on intricate disputes. For conglomerates, this translates to swifter internal reorganisations, cost efficiencies, and enhanced competitiveness. Mid-sized unlisted companies, frequently hindered by regulatory delays, acquire the flexibility to implement growth strategies such as acquisitions or spin-offs. In the realm of cross-border transactions, incorporating foreign investments with Indian wholly-owned subsidiaries could elevate FDI inflows, especially in sectors like IT and pharmaceuticals, where international parents aim to streamline their structures. The tax consequences remain advantageous, as fast-track schemes qualify for exemptions under Section 47 of the Income Tax Act, similar to NCLT approvals though some clarity regarding equivalence may be necessary. Wider economic advantages encompass invigorated M&A activity, job retention through efficient transitions, and consistency with global standards where fast-track options are prevalent.
Conclusion
The 2025 amendments to the Companies Merger Rules represent a significant step forward in the modernization of India's corporate environment. By broadly expanding the fast-track process, the MCA has enabled a wide variety of entities to engage in restructurings with enhanced speed and effectiveness. As companies adjust to these modifications, the real challenge will be in the execution finding the right balance between efficiency and protective measures. For progressive organisations, this framework serves as a strategic asset to excel in an ever more interconnected economy, potentially paving the way for a new era of innovative mergers.
Footnotes
1. MCA Widens the scope of fast track mergers under the Companies Act, 2013. (n.d.).
2. Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025. (2025, September 8).
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