Companies Act Series

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