Fast Track Mergers expanded: Decoding MCA's September 2025 Amendment
On September 4, 2025, the Ministry of Corporate Affairs issued a notification amending Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (“CAA Rules”). The amendment seeks to simplify corporate restructurings and reduce procedural delays, especially for relatively simple mergers that previously had to navigate the standard National Company Law Tribunal (NCLT) approval process. It broadens the scope of fast-track mergers, to effectuate the Union Budget 2025-26 proposal [2], by including additional classes of companies, explicitly covering demergers, and introducing related procedural changes. This article takes a closer look at the key changes introduced by the amendment and their implications for companies considering corporate restructuring.
Pre-Amendment Framework for Fast-Track Mergers
Section 233 of the Companies Act, 2013 (“Act”) was introduced in response to the JJ Irani Committee Report to provide a ‘shortform of amalgamation’ or fast-track route for certain mergers involving minimal public interest. The route allows mergers to be approved directly by the Regional Director (RD), bypassing the lengthy NCLT process. This included, prior to the amendment, mergers between the following types of companies [3]:
1. two or more small companies;
2. a holding company and its wholly owned subsidiary (“WOS”);
3. two or more startups, or startups with small companies; and
4. a foreign holding company into its Indian WOS (Reverse Flipping).
The existing framework excluded mid-sized unlisted companies and subsidiaries which are not wholly owned, requiring them to undergo the full NCLT approval process with longer timelines and higher compliance requirements.
Overview of the Key Amendments
To address the challenges, the amendment has introduced the following key changes to the fast-track merger framework:
1. Expanded the eligibility criteria to cover the following:
(a) Unlisted Companies: Two or more unlisted companies (excluding Section 8 companies) qualify for fast-track route if their aggregate outstanding loans, debentures, or deposits do not exceed INR 200crore, with no repayment defaults. These requirements must be fulfilled at two points in time: first, within 30 days before inviting objections from regulators, and second, when submitting the declaration of solvency. Notably, unlisted companies don't need shared ownership, promoters, or control to qualify. This means even independent unlisted companies can now pursue this route, as long as they meet the threshold which brings many mid-sized companies within the fast-track route.
(b) Holding-Subsidiary Mergers: Under the earlier framework, fast-track route was only available for mergers between a holding company and its WOS. The amendment expands this scope to now cover mergers between all holding companies and their subsidiaries, even if not wholly owned. However, the fast-track route will not apply where the transferor company is listed. Therefore, while mergers or demergers between holding companies and subsidiaries are now generally permitted under the fast-track route, the route is not available where the transferor is a listed company.
(c) Fellow Subsidiaries: The amendment now permits inter-group mergers such as between fellow subsidiaries or step-down subsidiaries, provided the transferor company is unlisted.
(d) Cross-Border Reverse Mergers: Section 234 of the Act read with Rule 25A of the CAA Rules, already permitted mergers between a foreign holding company and its Indian WOS under the fast-track route via the2024 amendment. The recent amendment now incorporates this provision into Rule25 itself, thereby making it comprehensive and consolidating all fast-track eligible companies in one place for greater clarity. It is to be noted that such mergers remain subject to RBI approval and the filing of form CAA-16 for land border countries.
2. Inclusion of Demergers
With the addition of sub-rule 9 to Rule 25, the fast-track route now extends to demergers as well. Currently, the demergers had to go through the lengthy and expensive NCLT route under Sections 230-232 of the Act. Though some RDs handled demergers through the fast-track route on an ad-hoc basis, the rule now offers statutory backing. This change is especially helpful for unlisted companies aiming to restructure through demergers.
3. Mandatory Notices to Regulators
The amendment mandates that companies regulated by sectoral regulators such as the RBI, SEBI, IRDAI, or PFRDA must issue notice of the proposed merger scheme to the respective regulator for any objections or suggestions. In addition, listed companies are required to issue similar notices to the relevant stock exchanges.
Missed Opportunities and Challenges
The amendment is a step in the right direction, however, a few shortcomings persist. While the fast-track, route bypasses the NCLT for quicker restructurings, obtaining 90% shareholder and creditor approval under Section 233 of the Act remains a practical challenge, especially for large unlisted companies and listed companies. Further, the Government missed the opportunity to align the manner of obtaining shareholders and creditors approval under Section 233 of the Act. Shareholders holding at least90% of the total number of shares must approve the scheme in a general meeting, while creditors can consent either in writing or at a meeting with 90% in value. Unlike creditors, shareholders cannot provide written consent, which makes the process longer, especially for closely held companies where formal meetings could have been done away in the interest of time.
The INR 200 crore threshold needs further clarifications. The threshold must be met both within 30 days prior to sending out scheme notices and again while submitting the scheme, but it's unclear on what happens if the limits are crossed during the intervening period. Another key concern is whether the RD offices (presently seven across India [4]) can efficiently manage the additional workload arising from the expanded fast-track merger framework, given that they are already tasked with several other approval functions such as public-to-private conversions, alteration of financial year, and name rectifications.
Further, in the case of inter-group mergers, regulatory uncertainty is created. Under SEBI LODR regulations [5], listed entities must secure prior stock exchange approval before filing a scheme, with exemptions available only for mergers between a holding company and its WOS. SEBI has also clarified, through informal guidance, that this exemption does not extend to step-down subsidiary mergers. As a result, while the Act now enables fellow subsidiaries and step-down subsidiaries to use the fast-track route, listed entities may still need to comply with Regulation 37 SEBILODR regulations. Unless SEBI also expands the exemption, the efficiency gains of the fast-track route could be diluted in cases involving listed companies.
Conclusion
The amendment brings in the much-needed update in the merger regime balancing speed with safeguards. With a large number of applications for scheme approvals pending before the NCLT, the amendment provides relief by broadening the scope of fast-track mergers, allowing simpler cases to proceed without NCLT intervention. The amendment reflects the government’s resolve to simplify corporate restructuring, making the fast-track option accessible to more companies. It endeavours to meet the demands for swifter processes, cheaper compliance, and easier group restructuring. A much-needed reform, the amendment is a positive move towards positioning India as an attractive and efficient destination for investments and corporate growth.
[1] Ministry of Corporate Affairs, The Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025, G.S.R. 603(E), Gazette of India, Extraordinary, 4 September 2025.
[2] Budget 2025-26, Speech of Nirmala Sitharaman, Minister of Finance, Government of India (February 1, 2025), available at https://www.indiabudget.gov.in/doc/budget_speech.pdf (last accessed on October 14,2025), Paragraph 101.
[3] Companies Act, 2013, § 233(1); Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, r. 25.
[4] Ministry of Corporate Affairs, Government of India, Regional Directors, available at https://www.mca.gov.in/content/mca/global/en/contact-us/rd.html (last accessed on September 12,2025). The seven regions comprise of Eastern Region, Southern Region, Northern Region, Western Region, North-Western Region, South-East Region and North-Eastern Region.
[5] Regulation 37 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015; SEBI Master Circular on Scheme of Arrangement dated June 20, 2023.