Introduction
In recent times, a number of Indian startups initially domiciled abroad, including some in Singapore, have undertaken a "reverse flip" — a process of redomiciling their parent entities back to India. This strategic move back home aligns with their aspirations to tap into India's burgeoning capital markets and favourable regulatory environment. Furthermore, this is supported by investor sentiment whereby both Indian and global investors also acknowledge India's economic growth potential. Other than by way of a share swap (which triggers capital gains tax in India for shareholders), one notable legal mechanism facilitating this transition is Singapore's Scheme of Arrangement. This client update seeks to explore how companies can go about deploying this mechanism.
A brief overview of the process
The transaction involves a Singapore-incorporated parent company transferring its entire undertaking, property and liabilities to its India-incorporated subsidiary.
The Indian subsidiary then allots and issues its shares to shareholders of the Singapore parent in exchange for shares in the parent.
In connection with the scheme, the parties will enter into an implementation agreement to carry out the transaction.
An application will be made to the Singapore High Court by the Singapore parent pursuant to section 210 read with section 212 of the Companies Act 1967 for leave to convene a meeting of its shareholders, whereby the scheme is put to the vote by the shareholders. Should the requisite statutory majority of shareholders approve the proposal, the Singapore parent will then make an application for Court approval of the scheme.
An application will also be made jointly by the Singapore and Indian entities to Court for the following orders:
- the transfer to the Indian company of the whole or any part of the undertaking and of the property or liabilities of the Singapore company;
- the allotting or appropriation by the Indian company of any shares, debentures, policies or other like interests in the Indian company;
- the continuation by or against the Indian company of any legal proceedings pending by or against the Singapore company;
- the dissolution, without winding up, of the Singapore company;
- the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the scheme
- such incidental, consequential and supplemental matters as are necessary to ensure that the scheme is fully and effectively carried out.
The parties would have to demonstrate that the scheme is commercially viable, feasible, fair, and reasonable and in the interests of both entities, including the customers, employees, shareholders, creditors and all other stakeholders of both entities.
Subsequently the Singapore parent is dissolved, such that only the Indian subsidiary remains once the transaction is completed.
The parties would also have comply with the requisite formalities under the Indian law. An application in respect of the scheme would have to be made before India's National Company Law Tribunal (the NCLT). Also, the Indian entity would have to convene a general meeting to approve the scheme. Where the Indian subsidiary is a wholly owned one, there is now a fast-track merger route which does not require the approval of the NCLT.
Why opt for Singapore's Scheme of Arrangement over amalgamation?
A Scheme of Arrangement is a statutory procedure under Singapore's Companies Act 1967 that enables a company to reorganise its affairs, including mergers and acquisitions, with the approval of its shareholders and the Singapore High Court. This process offers flexibility and can be tailored to the specific needs of the company, making it particularly suitable for complex cross-border restructurings, be it solvent or distressed situations.
In contrast, an amalgamation, while also a merger process, may not provide the same level of flexibility and could be subject to more rigid procedural requirements. Crucially, the amalgamation process under the Companies Act 1967 is only applicable where both the entities being amalgamated are incorporated in Singapore.
The Scheme of Arrangement process can be used in respect of foreign incorporated companies. Section 210(11) of the Companies Act defines a "company" under Section 210 as being any corporation liable to be wound up under the Insolvency, Restructuring and Dissolution Act 2018 (the IRDA). Under the IRDA, section 246(1)(d) provides that a foreign unregistered company qualifies for winding up in Singapore provided it can demonstrate a "substantial connection" with Singapore.
Then under the IRDA, section 246(1)(d) provides that a foreign unregistered company qualifies for winding up in Singapore provided it can demonstrate a "substantial connection" with Singapore.
Notable examples of reverse flips utilising a Scheme of Arrangement
- Zepto: In January 2025, quick commerce company Zepto successfully completed its reverse flip from Singapore to India. The company received formal approvals from both the Singapore court and India's National Company Law Tribunal to execute its cross-border merger, thereby becoming an Indian parent entity. This move underscores Zepto's confidence in the liquidity and buoyancy of Indian capital markets as it prepares for its proposed initial public offering.
- Pine Labs: The Singapore High Court approved Pine Labs' reverse flip to India, marking a significant development in the mergers and acquisitions landscape. This approval facilitated Pine Labs' transition to an Indian domicile, aligning with its strategic objectives and operational focus.
Conclusion
The utilisation of Singapore's Scheme of Arrangement by Indian companies undertaking a reverse flip to India offers a flexible and efficient legal framework for complex cross-border reorganisations. This mechanism, coupled with India's streamlined regulatory processes, has facilitated the return of several high-profile startups to their home country, positioning them favourably for future growth and public offerings.
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.
