The Ministry of Corporate Affairs has proposed Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025, in line with the announcement made under the Budget 2025-26 to expand the scope of fast-track mergers under Section 233 of the Companies Act, 2013.
The Union Finance Minister Nirmala Sitharaman has announced, “Requirements and procedures for speedy approval of company mergers will be rationalized. The scope for fast-track mergers will also be widened and the process made simpler.”
Presently, Section 233(1) of Companies Act, 2013 read with Rule 25(1A) of Companies (Compromises, Arrangements and Amalgamations) Amendment Rules covers the following classes of companies under fast-track mergers:
- merger between two or more small companies;
- merger between a holding company and its wholly-owned subsidiary company;
- merger between two or more start-up companies;
- merger between one or more start-up company with one or more small company.
The draft proposes a new set of companies be classified within the category for fast-track mergers under Section 233 of the Companies Act, 2013, such as mergers between unlisted companies that have reasonable debt exposure and no default in repayment, mergers of a subsidiary with its holding company, and mergers between subsidiaries of the same holding company. Karan Kalra, Partner, Bombay Law Chambers highlights that, “By doing away with the need of an approval from the NCLT for a winder set of cases, this move mirrors streamlined regimes like in the US and UK, where simpler mergers can be implemented with no or minimal court involvement.”
“For businesses and professionals, this translates into greater agility in structuring transactions, enhanced predictability of timelines and a reduction in compliance overheads,” he adds.
Global M&A
The existing frameworks restricted fast-track mergers only to specific and limited conditions. Expanding the application, The MCA proposed that the merger provided in Rule 25A (5) of Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2016, ) may also be included in Rule 25 to make Rule 25 self-contained. “By amending Rule 25 of the CAA Rules, the draft seeks to bring within its fold unlisted companies with reasonable borrowings, mergers between holding and subsidiary companies beyond wholly owned structures, fellow subsidiary combinations, and even inbound cross-border mergers,” said Abhishek Bansal, Founding Partner, Acumen Juris.
“This move is clearly aligned with the government’s vision to ease regulatory bottlenecks and enable agile corporate restructuring,” he added.
The Rule 25A(5) deals with the merger of the transferor foreign company incorporated outside India being a holding company with the transferee Indian company being its wholly owned subsidiary company incorporated in India.
The proposals are set to provide flexibility, undertaking restructuring with ease, and saving substantial time of companies before the adjudicating authority in global M&A.
Small and Medium Sized Business
The reforms are set to enable approvals without delay for merger between unlisted companies which have reasonable debt exposure and have no default in repayment; Merger of a subsidiary with its holding company; and Merger between subsidiaries of the same holding company.
“By broadening eligibility criteria and streamlining the approval process, these changes will enable a larger number of small and medium-sized companies, particularly unlisted ones, to benefit from faster and more efficient merger procedures,” said Ankur Pastor, Managing Partner, Innovis Law Partners LLP.
“This move not only encourages consolidation within the corporate landscape but also reduces regulatory complexities, fostering an environment of growth and enhancing operational agility for businesses across the country,” he added.
The proposed relaxation aims for ease of doing business through a facilitative framework for restructuring and capital inflow in India.
Intra-group restructuring
The proposed scheme is an expansion of the application limited to merger between holding company and its wholly owned subsidiary extends to include mergers of non-wholly owned subsidiaries with their holding companies, provided that such subsidiaries are unlisted entities.
“MCA’s proposed initiative to expand the scope of fast-track merger is aimed at further rationalizing the process of mergers, thereby making the process cost-effective and efficient,” said Kajal Tandon, Counsel, DMD Advocates.
She adds. “The proposed amendments, if implemented, could significantly enhance the intra-group restructuring exercise and reduce regulatory burdens,” noting that the “MCA’s move is in line with the Budget announcement 2025-26 and promotes conducive environment for conducting business.”
The expansion is set to reduce the burden on the courts. “By broadening the scope of applicants for fast-tracking mergers, the overall burden on the administration and courts should be reduced. This should also facilitate a greater number of intra-group consolidations,” said Arvind Ramesh, Partner, Vritti Law Partners
The amendment has sought comments on the proposals by May 5, 2025, through the MCA’s e-Consultation Module.
