Proposed Amendments to Fast-Track Mergers: A Step Towards Simplified Restructuring

The Indian Ministry of Corporate Affairs (MCA) has unveiled proposed amendments to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2025. This initiative aims to broaden the scope of fast-track mergers, making the process less complicated and more inclusive for various categories of companies.

Key Features of the Proposed Amendments

In line with the announcements made during the Union Budget 2025-26, the MCA intends to enhance the fast-track merger provisions outlined in Section 233 of the Companies Act, 2013. Union Finance Minister Nirmala Sitharaman stated, “Requirements and procedures for speedy approval of company mergers will be rationalized, and the scope for fast-track mergers will also be widened and the process made simpler.”

Current Fast-Track Merger Framework

As it stands, the eligibility criteria for fast-track mergers primarily include:

• Mergers between two or more small companies.
• Mergers involving a holding company and its wholly-owned subsidiary.
• Mergers among start-up companies or between start-up companies and small companies.

Proposed Changes to Expand Eligibility

The new draft introduces several additional categories under the fast-track merger framework, specifically:

• Mergers involving unlisted companies that maintain reasonable debt levels and have no record of repayment defaults.
• Mergers between subsidiaries and their respective holding companies.
• Mergers among subsidiaries sharing the same holding company.

Diviay Chadha, Partner at Singhania & Co., remarked, “The move to widen fast-track merger eligibility, including cross-border mergers into Indian subsidiaries, is a progressive step. It simplifies restructuring for SMEs and global businesses alike.”

Implications for Global Mergers and Acquisitions

Currently, the limited conditions surrounding fast-track mergers have posed challenges for businesses. With the proposed changes, the MCA seeks to allow for broader applicability, including mergers outlined in the existing Rule 25A (5), which pertains to foreign companies merging with their wholly-owned Indian subsidiaries. Gaurav Gupta, Founder of Bridge Counsels, stated, “This long-awaited step will definitely help multinational companies consolidate their Indian businesses without the difficult scrutiny of NCLT, subject to adherence to proper regulatory approvals.”

Streamlined Approvals and Enhanced Ease of Business

The proposed amendments are designed to facilitate quicker approvals for:

• Mergers between unlisted companies with reasonable debt.
• Subsidiaries merging with their holding companies.
• Mergers among subsidiaries of the same holding entity.

Such reforms aim to create a more conducive environment for intra-group restructuring activities, aligning with recommendations from the Company Law Committee’s 2022 report, which encouraged broader access to fast-track mechanisms for businesses.

Future Outreach and Comments

Stakeholders are invited to submit their feedback on these proposals by May 5, 2025, through the MCA’s e-Consultation Module, marking an effort to involve industry participants in refining the fast-track merger process.