Introduction
On September 04, 2025, the Ministry of Corporate Affairs ("MCA") notified the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025 ("2025 Amendment"). The 2025 Amendment significantly widens the fast-track merger ("FTM") route under Section 233 of the Companies Act, 2013 and clarifies that the fast-track mechanism applies, mutatis mutandis, to demergers.
Through the 2025 Amendment, MCA intends to unclog National Companies Law Tribunal ("NCLT") dockets and provide a faster, lower cost path for routine intra group and small-scale restructurings. The substance of the change is practical in the sense that more companies can now seek administrative sanction through the Regional Director ("RD") rather than navigating the full NCLT route, which usually has a longer timeline. The timeline not only created roadblocks for businesses but also at the time of NCLT approval, a lot had changed in the market, making the original deal unviable and no longer commercially valuable.
What is FTM?
The FTM route was introduced under Section 233 of the Companies Act, 2013 to provide a simplified mechanism for mergers without requiring approval from the NCLT. Under the section, schemes under this route are considered by the RDs having jurisdiction over the transferee company, thereby avoiding the need for lengthy proceedings before the NCLTs. The objective was to reduce the burden on NCLTs and create a quicker, more cost-effective process, with a deemed timeline for completion.
The concept of FTM originated from the 2005 J.J. Irani Committee Report, which recommended recognising mergers that could be implemented without intervention from the adjudicatory body. This recommendation was subsequently codified in Section 233 of the Companies Act, 2013 and later in the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (the "CAA Rules") to simplify and expedite corporate restructuring. Initially, FTM was confined to mergers between two or more small companies and between a holding company and its wholly owned subsidiary, the route has been steadily broadened to promote ease of doing business and faster corporate reorganisations.
In 2021, the MCA amended the CAA Rules to bring start-ups within the FTM ambit, permitting mergers between startups and between a startup and a small company. In 2024 the scope was extended again to cover reverse-flips, mergers of foreign holding companies into their Indian wholly owned subsidiaries, under the same simplified procedure.
Building on these changes, the Union Budget 2025 (para 101) called for still wider use of the fast-track mechanism. After stakeholder consultations, the MCA implemented that policy direction by amending the Companies (Compromises, Arrangements and Amalgamations) Rules in 2025 to expand eligible classes and clarify procedural requirements. The result is a progressively more flexible RD route that reduces tribunal involvement for routine, low-risk restructurings but one that still depends on strict documentary and timing conditions to deliver speed and certainty.
Prior to the 2025 Notification, the availability of the FTM route was restricted to (i) small companies, (ii) start-up companies, and (iii) mergers between a holding company and its wholly-owned subsidiary.
What 2025 Amendment Changes?
1. Expanded eligibility: The 2025 Amendment to Rule 25 materially widens the fast-track merger/demerger route and tightens the documentary controls. Vide this amendment, now two or more unlisted companies (section 8 companies excluded) may now use the RD route provided they meet the prescribed financial thresholds. Further, holding companies and their subsidiaries are allowed even where the subsidiary is not wholly owned, so long as the transferor company is not listed. Further, fellow subsidiary combinations (two or more subsidiaries of the same holding company) are admitted, again subject to the transferor(s) being unlisted.
2. Financial gate for unlisted companies: Unlisted companies must satisfy, on the prescribed test dates, that:
- Not a Section 8 Company;
- outstanding loans, debentures and deposits are below INR 200 Crore(Indian Rupee Two Hundred Crore only); and
- there is no default in repayment.
Compliance must be demonstrated by an auditor's certificate in the newly introduced Form CAA-10A (filed with the declaration of solvency in Form CAA-10).
3. New and revised forms: The Amendment replaces and standardises forms.
- CAA-9 (notice inviting objections);
- CAA-10 (declaration of solvency);
- CAA-10A (auditor's certificate);
- CAA-11 (filing of approved scheme with meeting results and valuation report); and;
- Introduces CAA-12 (government confirmation order format).
Form CAA-11 must be submitted with Form RD-1 and should include the valuation report and the results of shareholder/creditor meetings.
4. Regulator and listed-entity interface: Where a party is a regulated entity or listed, the scheme notice must be served on the relevant regulator/stock exchange and any objections must be addressed in the RD filing. Regulatory processes may still impose separate prior-approval requirements for listed entities.
5. Scope and executional consequences: The 2025 Amendment expressly applies to schemes involving:
- Division or transfer of undertakings under Section 232(1)(b).
- The government can apply relevant provisions from Section 232(3)(a) to (j).
Conclusion
The 2025 Amendment is a welcome, pragmatic step towards faster corporate reorganisations. It widens the scope of eligible transactions and introduces clarity on demergers. The immediate challenge is operational. The effectiveness of the RD/RoC machinery in processing a higher volume of filings, and the ability of companies to absorb new documentary requirements, will determine whether the promised speed and savings materialise.
This is another commitment by the present government to "ease of doing business". India is serious about making restructuring easier and help businesses pass through the regulatory landscape. If implementation is smooth, the reform will encourage more domestic reorganisations, sharpen corporate balance-sheet management and make India a more attractive destination for capital seeking efficient corporate structures.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
