MCA Notification on Fast Track Mergers

Dated: September 4, 2025

The Ministry of Corporate Affairs (MCA) has issued a notification amending the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, specifically impacting Rule 25, which governs Fast Track Mergers under Section 233 of the Companies Act, 2013.

Key Highlights of the Amendment

1. Wider Applicability of Fast Track Mergers

The amendment expands the categories of companies eligible to undertake fast track mergers. These now include:

• Start-up companies (earlier limited scope clarified).
• Section 8 companies (not-for-profit entities) merging with other unlisted companies, subject to debt and compliance conditions.
• Holding and subsidiary companies (whether listed or unlisted), except where the transferor is a listed entity.
• Subsidiaries of the same holding company, provided transferor companies are not listed.
• Cross-border mergers involving a foreign holding company (incorporated outside India) merging with its wholly owned Indian subsidiary.

2. Debt and Compliance Conditions

For Section 8 company mergers with unlisted companies:

• Aggregate outstanding loans, debentures, or deposits must not exceed ₹200 crore.
• There must be no default in repayment obligations.
• An auditor’s certificate confirming compliance with these conditions must be filed in new Form CAA-10A.

3. Revised Procedural Requirements

• Notice of Scheme: Must be issued in Form CAA-9, inviting objections/suggestions from the Registrar, Official Liquidator, sectoral regulators (RBI, SEBI, IRDAI, PFRDA), and stock exchanges in the case of listed companies.
• Filing of Approved Scheme: The transferee company must file the approved scheme within 15 days after members’/creditors’ meetings in Form CAA-11 (with valuation report attached).
• Confirmation of Scheme: A formal order confirming the scheme will be issued in Form CAA-12.

4. Inclusion of Divisions/Transfers

The provisions of Rule 25 have now been extended to cover division or transfer of undertakings, in line with Section 232(1)(b) of the Act.

Practical Impact

• Simplified Process: The expanded categories bring greater flexibility for corporate restructuring, particularly for group companies, start-ups, and foreign holding structures.
• Regulatory Oversight: Enhanced role for sectoral regulators and stock exchanges ensures transparency and protection of stakeholders.
• Compliance Burden: Companies must strictly adhere to debt thresholds and obtain mandatory auditor certification before availing the fast track route.

Analysis

This amendment represents a significant liberalization of India’s corporate restructuring regime. By expanding the ambit of fast track mergers to include cross-border structures and Section 8 companies, the MCA has provided companies with a quicker and cost-effective alternative to the regular NCLT-driven merger route. However, debt compliance and regulatory scrutiny will continue to act as safeguards against misuse.

KSK recommends that corporates intending to restructure evaluate their eligibility under the revised framework, especially with respect to debt exposure and listing status, before proceeding with a fast track merger.