In a positive move to ease corporate restructuring, the Ministry of Corporate Affairs has significantly broadened the scope of the companies eligible for fast-track merger process under Section 233 of the Companies Act, 2013 (“Companies Act”), effective September 04, 2025. A merger by way of approval from National Company Law Tribunal (“NCLT”) is usually a lengthy process which may span over several months. To provide for a quicker process, Section 233 of the Companies Act introduced a ‘fast-track’ process, allowing eligible companies to seek approval from Regional Director (“RD”) instead of NCLT.
The Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025 (“New Rules”) have broadened the scope of fast-track merger process by increasing the ambit of eligible companies, has made the process faster and easier while still managing to protect lenders’ and regulators’ interests.
The noteworthy amendments to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (“CAA Rules”) by way of the New Rules are as follows:
A. Expansion of eligibility for fast-track mergers:
Under the erstwhile CAA Rules, only the following categories of mergers were eligible for the fast-track route: (i) merger of small companies; (ii) merger of start-ups, (iii) merger of a wholly owned subsidiary and holding company; (iv) merger of start-up companies and small companies.
Pursuant to the New Rules, mergers between the following additional classes of companies can be undertaken through fast-track route:
(i) Merger of two unlisted companies: The New Rules have prescribed that merger between two unlisted companies can now be undertaken through fast-track route, subject to the following conditions:
a.such companies should not have been formed under Section 8 of the Companies Act i.e. companies with charitable objects;
b. the aggregate outstanding loans, debentures, and deposits should not be more than INR 200 crore;
c. there shall have been no default in repayment of such loans, debentures or deposits.
Further, the concerned entities are now required to file a certificate of the statutory auditor along with the approved scheme stating that the aforementioned conditions are fulfilled.
(ii) Merger of a holding company and subsidiary company: While earlier only a merger between holding company and its wholly owned subsidiary (“WOS”) was permitted under the fast-track route, the benefit has now been extended to merger between a holding company and any of its subsidiaries. However, fast track route cannot be availed in case where the transferor company is a listed entity. This amendment is in line with the recommendation of the Company Law Committee Report, 2022, which had given a similar recommendation to allow fast track merger between holding company and its subsidiary company.
(iii) Merger of subsidiaries of a holding company: The erstwhile CAA Rules did not provide the ability for inter group structuring to be done through the fast track route. As mentioned above, merger of holding and a WOS was allowed through fast track route and merger between fellow subsidiaries of a holding company was to be undertaken through NCLT. The New Rules allows for merger by fast track route between fellow subsidiaries – i.e., two or more subsidiary companies of the same holding company, provided that the transferor company(ies) is unlisted.
B. Clarification in relation to demerger through fast-track route:
Section 233(12) of the Companies Act expressly stated that the provisions of Section 233(12) are mutatis mutandis applicable to demerger as mentioned in Section 232(1)(b) of the Companies Act. However, there was a bit of confusion as the CAA Rules did not have any such express mention of demergers resulting in some regional directors taking differing views in relation to demerger through fast-track route.
The New Rules have now expressly recognised demerger of eligible companies through the fast-track route by virtue of inclusion of Rule 25(9) in the CAA Rules. This means companies can use the fast-track process for division or transfer of undertakings outside the NCLT, with the Central Government empowered to set conditions similar to those used with NCLT approvals.
C. Requirement to notify sectoral regulators:
Section 233(1)(a) of the Companies Act while dealing with fast-track mergers required the relevant companies to provide a notice of the proposed scheme to the Registrar and Official Liquidator, inviting objections and suggestions on the proposed scheme. However, in case of NCLT approved mergers, representations were required to be sought from various sectoral regulators such as Reserve Bank of India (“RBI”), Securities and Exchange Board of India (“SEBI”), the respective stock exchanges, Competition Commission of India.
In case of fast-track mergers, there was no such requirement to notify the sectoral regulators. However, pursuant to the New Rules, the notice of proposed scheme must now be sent to by the companies to sectoral regulators such as RBI, SEBI, Insurance Regulatory and Development Authority, Pension Fund Regulatory and Development Authority, as well as stock exchanges, if such entities are falling within the purview of such regulators.
D. New Procedures and Forms:
New standardized forms such as, (i) Form CAA.9 (Notice of the scheme inviting objections or suggestions); (ii) Form CAA.10 (Declaration of Solvency); (iii) Form CAA.10A (Certificate by the auditor); (iv) Form CAA.11 (Notice of approval of the scheme); (v) Form CAA.12 (Confirmation order of scheme of merger or amalgamation or transfer or division of undertaking), have now been introduced through the New Rules.
RegFin Legal Comment:
The New Rules bring in significant amendment to the fast-track merger process. With the widening of ambit of companies eligible to merger / de-merger through the fast-track route, NCLT which currently faces severe backlog of pending cases, will get some respite. Further, the companies intending to rejig their corporate structure will have recourse to faster mechanism of doing so.
Though the fast-track route is intended to ensure quicker approval of schemes of arrangement, the intent may not always be fully achieved considering the current regime. For instance, in case where the transferee company is a listed entity (which is a permitted structure for fast-track route), no-objection letter from the stock exchange will be required pursuant to Regulation 37 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. This might still impact the timelines of a fast-track merger as such no-objection letter will have to be placed before the RD prior to filing the scheme. Moreover, no relaxation has been provided in relation to obtaining consent of the shareholders holding 90% of the share capital of the concerned companies for approval of the scheme. Meeting such high threshold might be smooth in case of closely held companies, however, in case of listed entities and public companies this might delay the process significantly.
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Authors: Puneet Shah (Partner), Abhinav Gupta (Senior Associate) and Shubham Rustagi (Associate) are part of the Private Equity and Venture Capital team at the Mumbai office.
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