The Fast-Track Merger or FTM process was introduced by the JJ Irani Committee in the year 2005 with the aim of reducing the hurdles in the process of merger following the NCLT scheme and facilitating a smooth procedure for certain classes of companies such as a holding and a subsidiary company, two or more small companies, two or more start-up companies or one or more start-up company with one or more small company. Thus, Section 233 of the Companies Act 2013 (“Act”) along with Rule 25 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 was introduced which facilitated fast–track mergers.
According to Section 233 of the Act, those entities who propose for a fast-track merger and are eligible for such a merger have to seek approval from the board of directors of their companies and secondly, send a notice to the relevant Registrar of Companies (RoC) along with the Official Liquidator (“OL”) for any objections or suggestions on the scheme proposed by them.
The approval mechanism of the scheme must be fulfilled in the subsequent step wherein the following approvals have to be taken:
After the scheme has been subsequently approved, the filing of the same needs to be done with the RoC and OL having proper jurisdiction, within 30 days of which the objections are filed to the concerned Regional Director. The Regional Director or the Central Government are also empowered to file an application to NCLT to reconsider the approval if they feel that the scheme is either not in the interest of the public or the creditors.
The law pertaining to FTM was amended in the year 2023 vide Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2023 (“Amendment”) which has addressed a crucial issue of delayed timelines due to a huge number of applications. The amendment has established clear and enforceable timelines for the same to ensure an efficient and predictable process which would further lead to enhancing the confidence of foreign investors and the predictability of the process. It has also introduced the concept of deemed approval wherein if the Central Government does not respond within the prescribed time, then the merger scheme will automatically be deemed to be approved to fast-track the merger process.
Even though constant efforts are being made by the Ministry of Corporate Affairs in the domain of ease of doing business in the country, there are various hurdles that are still present leading to inevitable delays such as:
One of the most crucial processes of the Fast Track Mergers is seeking approval of creditors in value by arranging a meeting of at least 90% from each eligible entity. In case the process is unable to get completed, the whole process goes futile. This step of compliance has posed a significant hurdle or set – back in the entire process which leads to an increased cost of FTM along with a huge waste of time and effort of both the entities.
The eligible entities undertaking fast-track mergers not only need to seek approval of the shareholders and creditors but also the Registrar of Companies, the Official Liquidator, the Regional Director and the NCLT. Even if one approval is not obtained, the companies become ineligible to pursue the merger further.
Even though there are various pitfalls and drawbacks which pull the progress of entire merger backward, the measures such as introducing the recent Amendment are definitely a step in the right direction which has stated timelines for entire step and process. If the present drawbacks are overcome, this step would lead to a gigantic gain in the entire process of merger and restructuring laws in India.
 As per Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2021.