Companies
Act Series
September 11, 2025
Corporate Restructuring Simplified: Changes to Fast-Track
Merger Rules under Companies Act
The Ministry of Corporate
Affairs has expanded the ambit of fast-track mergers
under Section 233 of the Companies Act, 2013, to
cover a wider set of unlisted companies, group entities,
and foreign holding companies with their wholly
owned Indian subsidiaries. The amendments simplify
procedures by relaxing timelines and reducing NCLT
involvement, thereby expediting restructurings and
lowering compliance costs.
Background:
Corporate restructuring and mergers and acquisitions
in India can be pursued through private or statutory
arrangements, with the latter often slowed by regulatory
approvals and court driven procedures. To ease this
burden and de-clutter the jurisdictional company
law tribunals, the Companies Act, 2013 (“CA
2013”) introduced a “fast track
merger” process (“Fast Track
Merger”) in 2016.1
Section 233 of the CA 2013 read with rule 25
of Companies (Compromises, Arrangements and Amalgamations)
Rules, 2016 (“Rules”)
provide for a Central Government-controlled process
for certain eligible entities, including, small
companies, parent and wholly owned subsidiaries,
and start-ups. Fast Track Merger is distinct from
a traditional merger under Section 232 of CA 2013
which is a National Company Law Tribunal driven
process. A Fast Track Merger requires prior approval
of the board of the parties to the merger, shareholders,
creditors and Central Government (represented by
the Regional Director).
With effect from September 8, 2025, the Ministry
of Corporate Affairs (“MCA”)
broadened the scope of entities eligible to undertake
Fast Track Mergers by way of notification of the
Companies (Compromises, Arrangements and Amalgamations)
Amendment Rules, 2025 (“Amended Rules”).
The Amended Rules are aimed to make the corporate
restructuring of large section of companies simpler,
quicker, and more cost-effective.
Genesis of Fast Track Merger:
In 2005, the Report of the Expert Committee on
Company Law chaired by Dr. Jamshed J Irani (“Irani
Committee Report”), recommended significant
reforms to erstwhile Companies Act, 1956, focusing
on modernizing Indian corporate law to align with
global best practices, business environment, and
the evolving economic scenarios.
One of the key recommendations of the Irani Committee
Report involved introducing a “short form
of amalgamation” for mergers within a
group or mergers between holding and subsidiary
company. The report also recognized the concept
of contractual mergers as an alternative form of
mergers available. The argument made in the Irani
Committee Report was that merger between two private
limited companies and a holding company and its
subsidiary should be viewed different when compared
to merger of two public limited companies. There
is no compelling public interest in the merger of
two private / associate companies, and as such,
should lead to “less regulation”.2
Recommendations made in the Irani Committee Report
paved the way for Section 233 of CA 2013.3
Fast Track Mergers allow certain categories of companies
to amalgamate without approaching the National Company
Law Tribunal (“NCLT”).
The provisions of Section 233 of CA 2013 came into
effect on December 15, 2016, making the Fast Track
Merger procedures operative.
Fast Track Mergers:
Fast Track Mergers involve issuing notices to
the Registrar of Companies and Official Liquidator
for objections, filing a solvency declaration, and
securing approval from ≥ 90% of shareholders
and ≥ 90% in value of creditors before filing
the scheme with the Regional Director. If unopposed,
the Regional Director may confirm the scheme or
refer it to the NCLT.
Prior to the Amended Rules, Fast Track Mergers
were restricted to amalgamation of the following
companies:
Two or more ‘Small
Companies’;4 A holding company5
and its wholly-owned subsidiary; Two or more ‘start-ups’;6
and Foreign parent
company with its wholly owned subsidiary incorporated
in India.7
However, with changing corporate needs and an
increasing number of intra-groups re-organisations,
industry stakeholders had long sought an expansion
of eligibility criteria under Section 233 of CA
2013.
Recent Developments:
Based on representations made by corporate and
industry bodies for simplified mergers, the Central
Government made an announcement in the Union Budget
of 2025-26 dated February 1, 20258 to
provide for speedy approval of company mergers and
expanding the scope of eligible entities for Fast
Track Mergers. MCA on May 5, 2025 issued a public
notice inviting comments from the public on the
draft Companies (Compromises, Arrangements and Amalgamations)
Amendment Rules, 2025 (the “Draft
Amended Rules”).
After few months of pubic consultation and changes
consequent thereto, the MCA on September 8, 2025
notified the Amended Rules along with amendments
to Section 233 of CA 2013 along with the changes
to the Companies (Compromises, Arrangements and
Amalgamations) Rules, 2016.
Key Amendments:
The Amended Rules have expanded the scope of
eligible entities for Fast Track Mergers. Each new
eligible entity is briefly identified below:
(i) Merger between one or more unlisted company
with one or more unlisted company:
Under the Amended Rules,
any unlisted companies (not being a company
incorporated under Section 8 of CA 2013) can
now undertake a Fast Track Merger, subject to
certain qualification requirements. The qualification criteria
states that every company involved in the merger:
(a) has, in aggregate, outstanding loans, debentures,
or deposits not exceeding INR 200 Crore9;
and (b) has no default in repayment of such
loans, debentures or deposits. The qualification is
to be satisfied on a day not more than 30 days
before the scheme of amalgamation filed with
relevant authorities inviting their comments/objection. In order to satisfy
the requirement, a certificate10
from the auditor of each company is to be filed
along with the scheme.
(ii) Merger between holding company (listed or
unlisted) and a subsidiary company (listed or unlisted),
with the condition that transferor company should
not be listed:
Prior to Amended Rules,
Fast Track Mergers between holding company and
subsidiaries were permitted only if the subsidiary
was wholly-owned by the holding company/ parent. Pursuant to Amended
Rules, mergers between a holding company (listed
or unlisted) and one or more unlisted subsidiaries
will be permitted, even if the subsidiaries
are not wholly owned. Please note that, in
all cases, the transferor company should not
be listed on any stock exchanges. This change was recommended
by the Company Law Committee in its report of
March 2022.11
(iii) Merger between two fellow subsidiaries
belonging to the same parent company where transferor
company is not a listed company:
Mergers between two
or more fellow subsidiaries of the same parent
company are now eligible to the Fast Track Merger
route. Please note that, in
all cases, the transferor company(ies) should
not be listed on any stock exchanges. This will benefit conglomerates
and groups seeking internal consolidation without
going through lengthy NCLT processes.
(iv) Merger of foreign holding company / foreign
parent with its wholly owned subsidiary in India:
A foreign holding company
incorporated outside India can now merge with
its wholly-owned Indian subsidiary by way of
Fast Track Merger. MCA in September 9,
2024 had notified
Companies (Compromises, Arrangements and Amalgamations)
Amendment Rules, 2024 which expressly enabled “reverse-flip”
mergers—where a foreign holding company
merges into its wholly-owned Indian subsidiary—
to proceed by way of a Fast Track Merger, subject
to approvals and declarations. However, the
consequent amendments had not been carried out
in Section 233 of CA 2013 and associated rules. With the Amended Rules,
merger of foreign parent with its wholly owned
subsidiary incorporated in India is brought
under Section 233 of CA 2013 as well and avoids
the confusion created in the absence of such
provision in the charging section.
Beyond the scope of eligible entities being increased,
the Amended Rules have also relaxed the timeline
available to the merging companies to file the petition
with the Regional Director from 7 days to 15 days
after the conclusion of the meetings of members
or creditors, whichever is later.
Takeaways:
The recent amendments are designed to benefit
both large corporate groups and smaller enterprises
by streamlining restructuring processes. For conglomerates
that frequently reorganize their internal structures,
the fast-track route offers a practical alternative
by bypassing NCLT, thereby cutting compliance costs
and reducing merger timelines by several months.
A key change is the ability of foreign holding companies
to merge with their wholly-owned Indian subsidiaries,
which not only simplifies global group reorganizations
but also has the potential to encourage greater
foreign direct investment and facilitate cross-border
restructurings. Importantly, the reforms also extend
the fast-track mechanism to small unlisted companies
that may otherwise exceed the thresholds of a “small
company,” ensuring that a broader range of
businesses can now access a quicker and more cost-effective
merger route.
Categories of companies barred from Fast
Track Merger
Section 8 companies and listed transferor companies
remain outside the scope of the Fast Track Merger
process, largely to safeguard public interest and
ensure heightened regulatory oversight. Section
8 companies, being non-profit entities established
for charitable, educational, religious, social,
environmental, or similar purposes, are required
to apply their funds exclusively towards their stated
objects. Subjecting them to a simplified merger
route with limited NCLT scrutiny could risk misuse
of charitable funds, diversion of assets, and a
lack of transparency in the use of donor contributions.
Globally too, mergers of non-profits are subject
to enhanced oversight because they involve donor-funded
assets and public trust obligations. Similarly,
listed transferor companies are excluded from Section
233 to CA 2013 to protect public investors, as bypassing
the NCLT could compromise minority shareholder rights,
increase the risk of unfair valuations, and reduce
transparency in relation to swap ratios and shareholder
decision-making.
Missed Opportunities:
Under Section 233(1)(b) of the Companies Act,
2013, a scheme of amalgamation must be approved
by shareholders holding at least 90% of the total
number of shares at a general meeting, while creditors
may grant approval either at a meeting or through
written consent representing nine-tenths in value.
However, the MCA has not aligned the manner of obtaining
shareholder approval with that of creditors—written
consents from shareholders, particularly in closely
held companies, could have avoided the need for
formal meetings and saved valuable time in the process.
A further challenge lies in the stringent threshold
itself: requiring approval from members holding
90% of the total number of shares is often impractical,
particularly for large public unlisted companies
and virtually impossible for listed transferee companies,
where securing participation of such a large proportion
of shareholders is highly unlikely. In this context,
adopting a threshold based on the value of shares,
as applicable for creditors, may have been more
workable and commercially sensible approach.
Conclusion:
Despite the missed opportunities and challenges
in implementation, especially for the listed transferee
companies, the Amended Rules represent a key development
in India’s efforts to streamline corporate
restructuring process. By broadening the scope of
Section 233 of CA 2013 and simplifying merger procedures,
the MCA has moved toward reducing procedural bottlenecks,
enhancing operational flexibility, and bringing
India’s corporate laws closer to global standards.
A step in the right direction.
Author
-
Muqeet Drabu and
Santosh Gangavati
You can direct your queries or comments
to the relevant member.
1Chapter
XV The Companies (Compromises, Arrangements and
Amalgamations) Rules, 2016
2Paragraph 20, Irani Committee Report.
Link:
https://www.primedirectors.com/pdf/JJ%20Irani%20Report-MCA.pdf
3The concept of a simplified merger
process was first recommended by the Irani Committee
Report (2005), which led to introduction of a simplified
merger route in the Companies Bill 2009/2011. These
recommendations culminated in the enactment of Section
233 of the Companies Act, 2013, which formally introduced
the fast-track merger regime.
4A “small
company’’ is defined under CA 2013 to
mean a company, other than a public
company,
(i) paid-up
share capital of which does not exceed
fifty lakh rupees (approx. USD 56,800) or such higher
amount as
may be prescribed which shall not be more
than ten crore rupees (approx. USD 1,136,363);
and
(ii) turnover of
which as per profit and loss account for the
immediately preceding financial year does not
exceed two crore rupees (approx. USD 227,273) or
such higher amount as
may be prescribed which shall not be more
than one hundred crore rupees (approx. USD
11,363,636) :
Provided that nothing
in this clause shall apply to—
(A) a holding
company or a subsidiary
company;
(B) a company registered
under section
8; or
(C) a company or body
corporate governed by any special Act;
5A “holding company” as
defined in the CA 2013, in relation to one or more
other companies, means a
company of which such companies are subsidiary
companies. Explanation. For the purposes of this
definition, the expression “company”
includes any
body corporate.
6A “start-up”
or “start-up company” means a private company incorporated
under the Companies Act, 2013 (18 of 2013) or the
Companies Act, 1956 (1 of 1956) and recognised as
start-up in accordance with the notification issued
by the Department of lndustrial Policy and Promotion,
Ministry of Commerce and Industry.
7With effect from September 17, 2024.
8Para 101, Budget 2025-2026, Speech
of Nirmala Sitharaman, Minister of Finance, February
1, 2025. Available at:
https://www.indiabudget.gov.in/doc/budget_speech.pdf
9As against INR 50 Crore (approx.
USD 5.6 million) in the Draft Amended Rules.
10A certificate in Form CAA-10A from
the auditor of the company, certifying that the
company meets the specified conditions.
11Para 20.15, Report of the Company
Law Committee, Government of India, Ministry of
Corporate Affairs, March, 2022 Available at:
https://cdn.ibclaw.online/legalcontent/ibc/Reports/REPORT+OF+THE+COMPANY+LAW+COMMITTEE+(2022)+.pdf
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