Merger & Acquisition Reforms Transform India’s Dealmaking Landscape

Introduction

Between 2024 and 2025, merger & acquisition reforms in India across company law, competition regulation, foreign investment, and taxation, continued to reshape the regulatory framework governing M&A. These changes aim to make Indian dealmaking faster, more predictable, and globally competitive while maintaining regulatory oversight in sensitive sectors.

Company Law Reforms: Fast-Track Cross-Border Mergers and Reverse Flips

Under the Companies Act, 2013, corporate restructurings traditionally required approval from the National Company Law Tribunal (NCLT). The process was often time-consuming, particularly for cross-border mergers.

Expansion of Fast-Track Mergers

Recent amendments now permit certain cross-border mergers under the fast-track route, including mergers of a foreign parent into its wholly owned Indian subsidiary subject to safeguards.

Fast-track eligibility generally requires:

• The Indian company to be a start-up, small company, or wholly owned subsidiary
• Approval of 90% of shareholders and creditors (by value)
• Solvency declarations by both entities
• Mandatory RBI approval under FEMA
• Enhanced scrutiny where the foreign entity is from a land-bordering country

Reverse Flips Facilitated

These reforms are particularly relevant for “reverse flips,” where Indian-origin businesses previously incorporated overseas re-domicile to India. The framework now provides a more efficient pathway for such restructurings, improving access to Indian capital markets and aligning governance within India’s regulatory ecosystem.

The NCLT retains powers to review transactions involving public interest concerns.

Competition Law Overhaul: Deal Value Threshold and Expanded “Control”

The Competition Act, 2002 has undergone structural reform, modernising India’s merger control regime.

Introduction of Deal Value Threshold (DVT)

A mandatory notification to the Competition Commission of India (CCI) is now required where:

• The deal value equals or exceeds ₹2,000 crore; and
• The target has “substantial business operations” in India.

Substantial business operations may be assessed based on user base, revenue, R&D presence, or ownership of IP in India.

This reform is particularly significant for:

• Digital economy transactions
• Start-up acquisitions
• Global technology deals

It ensures high-value transactions involving data-driven or asset-light businesses are captured even where traditional asset thresholds are not triggered.

Revised Asset and Turnover Thresholds

Notification is also required where updated asset or turnover thresholds are crossed, reflecting contemporary market realities and inflation adjustments.

Shorter Review Timelines

• Phase I review: 30 calendar days
• Phase II review: 150 days (reduced from 210)

These accelerated timelines improve deal certainty for time-sensitive transactions.

Broadened Definition of “Control”

The concept of control now explicitly includes certain forms of negative control, such as veto rights over strategic decisions. As a result, minority investments by private equity or venture capital investors may trigger filing requirements if governance rights confer material influence.

The Green Channel mechanism continues to allow automatic approval in non-overlapping transactions, though it does not apply where sensitive data overlaps exist.

Practical Impact: Investors must assess competition filings at an earlier stage particularly in structured minority investments and digital market transactions.

Major Revisions to the Competition Law Framework: Threshold Changes and Expanded Control Standards

The Competition Act, 2002 remains the principal legislation governing mergers and combinations in India. The amendments effective January 1, 2023, along with the Draft Competition Commission of India (Combinations) Regulations, 2023 issued for public consultation, mark a structural shift in merger assessment. Historically anchored in asset and turnover thresholds, the regime now incorporates broader transaction-based and control-based criteria, reflecting increased sophistication in reviewing complex and digital market transactions.

FDI and FEMA Reforms: Greater Clarity for Foreign Investors

Reforms under FEMA and FDI policy have addressed longstanding ambiguities affecting foreign-owned or controlled companies (FOCCs), downstream investments, and share swaps.

In January 2025, the Reserve Bank of India clarified that FOCCs may undertake downstream investments under the automatic route, subject to:

• The sector permitting 100% FDI
• Compliance with pricing guidelines
• Timely reporting

Share Swaps and Structuring Flexibility

Regulatory clarification now permits greater flexibility in secondary share swaps and cross-border share exchange structures, aligning Indian practice with global M&A norms. Reporting requirements for capital account transactions have also been streamlined, reducing procedural delays. Restrictions remain in sensitive sectors and for investors from land-bordering countries, preserving national security safeguards.

Practical Impact: Multinational corporations and private equity platforms now benefit from improved structuring certainty, though sectoral caps and geopolitical considerations require careful diligence.

Tax Reforms: Loss Carry-Forward and Start-Up Investment

Restriction on Loss Carry-Forward (Effective 1 April 2025)

For mergers effective after 1 April 2025, accumulated losses can only be carried forward for the .remaining portion of the original eight-year period from the year of incurrence. The earlier practice of effectively resetting the limitation period through amalgamation is no longer available.

This measure curbs tax arbitrage and aligns loss utilisation with economic continuity.

Abolition of Angel Tax

The removal of the so-called “angel tax” has significantly improved the investment climate for start-ups. By eliminating disputes around valuation premiums, the reform restores investor confidence and facilitates capital raising and exit opportunities.

Practical Impact: While start-up investments have become more attractive, tax-driven merger structures now require more careful modelling.

Conclusion: A More Mature M&A Regime

Further, under the new regime, businesses will require early legal planning, ongoing compliance, and proactive engagement with the regulatory authorities in order to successfully close transactions involving M&A activities in India. By executing the appropriate strategies, this reformed regime will create enhanced opportunities for both cross-border integration and domestic consolidation of businesses in India.