[Arjun Chaudhary is a 4th year BBA. LLB. (Hons.) student at Gujarat National Law University]
The fast-track merger route under section 233 of the Companies Act, 2013 was originally designed as a narrow mechanism to simplify mergers between small companies and between holding companies and their wholly owned subsidiaries. The objective was to remove such schemes from the jurisdiction of the National Company Law Tribunal (“NCLT”) and instead vest approval powers in the Regional Director (“RD”) on behalf of the Central Government. The rationale was that routine internal reorganisations and consolidations, which do not involve public investors or complicated creditor arrangements, should not occupy the tribunal’s time. However, for many years the provision remained underutilised, largely because its scope was too narrow and its thresholds too restrictive.
In September 2025, the Ministry of Corporate Affairs (“MCA”) introduced a significant amendment to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The amendment, notified on 8 September 2025, considerably expands the classes of companies and schemes that may use the fast-track process and alters certain procedural requirements. It is accompanied by a clear policy signal to de-clog the NCLT and facilitate quicker restructurings.
Who Qualifies Now? Broadening the Eligible Company Base
The amendment enlarges eligibility in multiple directions. Two or more unlisted companies can now merge through the fast-track route, provided that each has borrowings not exceeding ₹200 crore and that neither has defaulted on its debts. The debt threshold is certified through a new auditor’s certificate in Form CAA-10A, which must accompany the usual solvency declaration. This change allows even unrelated private companies of moderate size to use the simplified process.
Mergers between a holding company and its unlisted subsidiaries are now permitted even if the subsidiaries are not wholly owned. The earlier restriction to only 100% subsidiaries had limited the utility of the provision, especially in groups with multiple minority-owned affiliates. Fellow subsidiaries under the same parent can also merge, provided the transferor company is not listed. This enables horizontal consolidations within a corporate group.
The amendment also clarifies that a foreign holding company may merge into its wholly owned Indian subsidiary, formalising in the rules what was earlier achieved under the broader cross-border merger framework. Finally, the new rules extend the fast-track mechanism to divisions or undertakings being transferred under section 232. This means that hive-offs can also be carried out without approaching the NCLT, provided the parties satisfy the prescribed conditions.
Guardrails in the Process: Solvency, Shareholder and Creditor Approval
The expansion is accompanied by procedural safeguards. Companies must still secure approval from shareholders holding at least 90% of the share capital and from creditors representing 90% in value. Each company must file a solvency declaration and, in the case of unlisted companies, the auditor must confirm compliance with the debt and default thresholds. Regulators such as Reserve Bank of India (“RBI”), Securities and Exchange Board of India (“SEBI”), Insurance Regulatory and Development Authority of India and Pension Fund Regulatory and Development Authority must be notified where relevant, and listed companies must inform stock exchanges. The transferee company must file the application with the Regional Director within 15 days of obtaining approvals, a period increased from the earlier seven days.
The Regional Director, upon receiving no objections within 60 days, must register the scheme and issue an order. Where objections arise or the RD believes the scheme is prejudicial to public or creditor interests, the matter must be referred to the NCLT under section 233(5). Courts have held, most notably in Asset Auto India v. Union of India, that the RD cannot reject a scheme outright if the statutory conditions are met; its role is administrative and supervisory, with disputes ultimately falling to the tribunal.
Policy Rationale
The policy rationale for this amendment is clear. Mergers through the NCLT often take a year or more, involving multiple hearings and procedural delays. By contrast, the fast-track route carries a statutory 60-day timeline and avoids court involvement, saving both time and cost. The Central Government in the Union Budget 2025-2026 speech (para 101), explicitly committed to expanding the scope of section 233 to achieve these goals.
The amendment also responds to the long-standing recommendations of the J. J. Irani Committee, which had argued that mergers of private companies, especially within groups, do not implicate wider public interests and therefore warrant a simplified regime. By excluding listed transferor companies and not-for-profit entities, the amendment balances the ease of business with the protection of public stakeholders.
From Draft to Notification: What Changed Along the Way
When compared with the draft proposal circulated earlier in 2025, the final rules are more expansive. The draft had envisaged a debt ceiling of ₹50 crore for unlisted companies, whereas the final notification sets it at ₹200 crore, a fourfold increase that opens the route to much larger private enterprises. The draft did not address transfers of divisions, but the final rules explicitly permit hive-offs under section 232.
The timeline for filing with the Regional Director has also been relaxed to 15 days, acknowledging concerns from practitioners about unrealistic deadlines. The final rules are also clearer in barring listed transferors in all categories, signalling caution about allowing companies with public investors into the fast-track category. In essence, the Government has preserved the liberal intent of the proposal while accommodating business realities and policy safeguards.
Looking Outward: How India Compares Globally
Comparisons with other jurisdictions place this reform in perspective. In Singapore, short-form amalgamations between a parent and its wholly owned subsidiary are permitted with minimal formalities. Delaware law in the United Statesallows a parent owning 90% of a subsidiary to merge it without a separate shareholder vote. Canada also provides for short-form amalgamations of parent-subsidiary pairs.
These systems all share the premise that intra-group reorganisations involving overwhelming shareholder control can proceed without judicial scrutiny. India’s earlier section 233 framework fell short of this global practice, being limited to very narrow cases. By expanding eligibility to partially-owned subsidiaries, fellow subsidiaries and unlisted companies with modest debt, the amendment moves Indian law closer to international norms. At the same time, the Indian model retains strict consent thresholds and regulatory oversight, reflecting a cautious approach.
Testing the Waters: Practical Barriers and Implementation Risks
The practical impact of the reform will depend on how companies and regulators implement it. On the positive side, unlisted groups can now restructure their subsidiaries and divisions quickly, reducing costs and freeing NCLT benches to focus on complex schemes involving public interest. Recognition of cross-border mergers shall also benefit foreign parent holding companies and allow them to merge their Indian subsidiaries in order to achieve a more simplified and efficient corporate structure. For start-ups and mid-sized enterprises with relatively low borrowings, the route opens up consolidation opportunities that were previously uneconomical under the NCLT process.
However, challenges remain. The requirement of 90% shareholder approval is more stringent than the 75% threshold applicable in NCLT schemes and can be difficult to achieve, especially in companies with diverse shareholding. Some RDs have reportedly accepted 90% of those present and voting, but legal clarity on this point is lacking. Listed transferee companies may still face delays due to SEBI’s listing regulations, which require stock exchange approval for most schemes.
Cross-border mergers still need RBI clearance under the Foreign Exchange Management Act, even if the fast-track process is used. There is also uncertainty whether RD orders will be accepted by land registrars and other authorities as equivalent to court decrees for transferring immovable property. Without such recognition, companies may still need to approach NCLT to perfect title transfers, which could undercut the intended efficiency. Finally, the capacity of the seven Regional Directorates to handle a potentially higher volume of schemes is a concern, since delays at the RD’s office would blunt the advantage of the fast-track process.
Conclusion
In evaluating the amendment, it is fair to conclude that it represents a significant liberalisation of India’s corporate restructuring framework. By expanding the scope of section 233 while retaining strict consent requirements and solvency checks, the MCA has attempted to strike a balance between efficiency and protection. The exclusion of listed transferors and the insistence on auditor certification ensure that public interest is not compromised. At the same time, the widened categories create real opportunities for private and group companies to reorganise themselves more easily.
Whether these changes achieve their full potential will depend on regulatory practice and judicial interpretation, particularly in relation to consent thresholds and recognition of RD orders. It is possible that further refinements may be needed once companies begin to test the new route in practice. Overall, the amendment is a welcome and timely step. It acknowledges that not all mergers warrant the attention of the NCLT and that India’s economic growth requires a flexible yet responsible corporate law framework. By aligning more closely with global norms while maintaining necessary safeguards, the reform should help companies achieve efficient consolidations and free up judicial resources. For practitioners, it will be important to monitor early experiences, both to assess the effectiveness of the new provisions and to identify areas where further clarification may be required.
– Arjun Chaudhary