India’s Fast-Track Merger Framework Set For Significant Widening And Simplification

The Ministry of Corporate Affairs (MCA) has made a noteworthy announcement that shall change the restructuring of corporations in India. This is based on their Public Notice, announced on April 4, 2025, which also elicited comments from stakeholders about their future proposed changes to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.^[1] This significant development aligns directly with Para 101 of the Union Budget 2025-26 announcement, which stated that “the government will widen the scope for fast-track mergers” and “the Government intends to make the process simple” for the ultimate goal of improving the ease of doing business in India.

Understanding the Existing Fast-Track Merger Framework (Section 233, Companies Act, 2013)

Section 233 of the Companies Act, 2013 provides a fast and straightforward process for corporate mergers and amalgamations, showcasing a speedier alternative and a simplified process to the lengthy processes in Sec. 230 and 232. The “fast-track” mechanism allows for eligible companies to amalgamate with permission from the Central Government, which has reasonably delegated power to the Regional Directors (RDs) to facilitate the process. As it stands the simplified avenue is available only for mergers of two or more small companies or a holding company with its wholly owned subsidiary. Additionally, a forward-looking amendment in February 2021 expanded the scope of companies eligible to engage in fast-track amalgamation to include mergers of start-up companies (two or more) or a start-up company with one or more small companies; highlighting that the start-up ecosystem offers a dynamic and improvised growth potential for the country of India.

The Impetus for Further Expansion

The present batch of proposed amendments is a direct follow-up of the guidelines provided in the Union Budget 2025-26, which emphasized the government’s strong commitment to developing a more business-friendly regulatory environment. Specifically, Paragraph 101 of the Budget Speech was an express mandate to both widen and simplify the existing fast-track merger route. To make these proposed amendments practical and responsive to the dynamics of the real world, the MCA actively sought preliminary feedback and suggestions in a Post-Budget Seminar conducted on March 4, 2025. The coherent feedback received from these consultations with industry practitioners and stakeholders has been given serious regard while finalizing the draft amendments, hence making it a joint effort in the drafting of future corporate law. The over-arching aim is to make the scope of Rule 25 of the CAA Rules, 2016 available to much more diverse businesses throughout the country.

Detailed Breakdown of Proposed Amendments to Rule 25 of CAA Rules, 2016

The draft notification outlined the several (5) new types of companies that will now be able to pursue the fast-track merger process, which is a significant expansion on the types of companies that will be eligible:

1. Merger of Unlisted Companies with Moderate Debt & No Default in Repayment: This is not only a new kind but also an important new category for expanding mergers between one or more unlisted companies (except for Section 8 companies, which are “non-profits”). To be eligible for the fast-tracked merger, each of the merging companies must meet certain criteria concerning borrowings: it must not have any borrowings from banks, financial institutions or any other body corporate in excess of fifty crore rupees. More critically, the company must not have defaulted on any repayment of that borrowing, and that must be certified by an auditor’s certificate within 30 days prior to the notice of the merger. The purpose of the inclusion is to help less risky unlisted entities to be able to facilitate a merger with another company that demonstrated financial discipline. This is particularly important for carrying out due diligence efficiently and quickly when integrating businesses.
2. Holding Company with its Unlisted Subsidiary (Other than Wholly-Owned): Presently fast-track mergers are restricted to holding companies and wholly-owned subsidiaries. The proposed amendment will radically expand this to enable a holding company (whether or not listed) to merge with one or more unlisted subsidiary companies, even if those subsidiaries are not wholly owned by the holding company. This change is in direct response to a recommendation made by the Company Law Committee (CLC) in 2022 and resolves a long-standing practical issue faced by corporate groups concerning their restructuring processes and provides more flexibility to corporate groups overall.
3. Unlisted Fellow Subsidiary Companies of the Same Holding Company: Currently there is an inconsistency with respect to fast-track merger mechanisms in relation to unlisted subsidiary companies and fellow subsidiaries of the same holding company (i.e. group companies using the same holding company). At present, fast-track mergers which involve fellow subsidiaries are not able to be conducted within the fast-track process. The proposed amendment seeks to extend the fast-track merger process to fellow subsidiaries where the transferor company or companies are unlisted. This has been proposed due to the similar risk and level of complexity associated with these types of intra-group mergers with holding-unlisted subsidiary mergers; therefore, fellow subsidiaries would be amenable to the fast-track Section 233 process, and simplify the process for consolidating groups of companies.
4. Integration of Foreign Company Merger Provision into Rule 25: Rule 25A(5) currently has specific provisions for the merger of a foreign holding company (transferor) with its wholly owned Indian subsidiary (transferee). The MCA seeks to move this specific provision directly into Rule 25. In doing so, the MCA wants to have Rule 25 as more “self-contained,” bringing all of the fast-track merger provisions into Rule 25 as a logic unit for ease in clarity and reference for the stakeholders.

Final Words

This extensive initiative by the Ministry of Corporate Affairs illustrates the government’s strong commitment to achieving a more streamlined and business-friendly regulatory environment in India. As evidenced by the MCA’s active expansion of fast-track mergers and recommended changes to those processes, the MCA is looking to significantly reduce compliance burdens and improve efficiencies for businesses, and ultimately increase economic growth in the region. The active request for stakeholder input also highlights a co-created approach to the changes, ensuring the final amendments are pragmatic, robust, and meet the needs of the moving corporate sector. This is anticipated to lead to an improved environment for corporate re-structuring, so businesses can complete the corporate re-structuring quickly and more easily.

^[1] https://www.mca.gov.in/bin/dms/getdocument?mds=Vl7V8BHbA7gmKAjfxzhiTw%253D%253D&type=open.

King Stubb & Kasiva,
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