Summary: The MCA has unleashed a significant liberalisation of the fast-track merger framework, introducing four revolutionary changes by allowing unlisted companies, non-wholly owned subsidiaries and fellow subsidiary transactions to access the fast-track route, while also streamlining cross-border mergers. This change makes the fast-track route viable for a broader range of entities and seeks to reduce the NCLT’s burden, potentially allowing it to focus on contentious matters requiring judicial oversight.
Introduction
In a decisive move to modernise India’s corporate restructuring landscape, the Ministry of Corporate Affairs (MCA) has notified the Companies (Compromises, Arrangements, and Amalgamations) Amendment Rules, 2025 (CAA Rules 2025), marking the most significant liberalisation of the fast-track merger framework since its inception under the Companies Act, 2013.[1] Four key changes from the CAA Rules 2025 could transform how Indian companies approach mergers and demergers: expanded eligibility for unlisted companies (with debt thresholds quadrupled to INR 200 crore), allowing non-wholly owned subsidiaries to access the route, new provisions for fellow subsidiary transactions, and streamlined cross-border merger integration.
The evolution of the fast-track merger regime
Readers may recall that the fast-track merger regime under the Companies Act, 2013, was conceived as a faster alternative to the time-consuming process under Sections 230–232, which required all schemes of arrangement to be heard and approved by the National Company Law Tribunal (NCLT). The regime sought to unclog the NCLT by allowing mergers involving small companies, between holding companies and their wholly owned subsidiaries, and start-up companies to be processed through a quicker administrative process rather than a judicial one. The process also built in a 60-day timeline for clearance and vested oversight over the merger process with the jurisdictional Regional Director.
Subsequently, with the rise in Indian cross-border mergers and “reverse flips”, the MCA through the Companies (Compromises, Arrangements, and Amalgamations) Amendment Rules, 2024, introduced Rule 25A, allowing foreign holding companies to merge into their Indian wholly owned subsidiaries using the fast-track merger route.
The recent amendments significantly expand the scope of the fast-track route to cover unlisted companies more broadly (with some qualifying requirements), several categories of intra-group mergers, affiliate transactions, India flip transactions and demergers.
Key amendments: The four pillars of expansion
Unlisted company schemes with enhanced debt thresholds
Mergers and demergers between unlisted companies (not being companies incorporated for non-profit objectives) can be implemented under the fast-track route, provided each company involved in the restructuring has outstanding loans, debentures, or deposits not exceeding (in the aggregate) INR 200 crore (increasing the threshold from the earlier proposed INR 50 crore[2]) and has not defaulted in repayment obligations.
Holding and subsidiary companies
Fast-track mergers and demergers between a holding company and a subsidiary (i.e., including a non-wholly owned subsidiary) are now permitted if the transferor company is unlisted. The previous regime allowed mergers between a holding company and a subsidiary under the fast-track route but excluded any subsidiary with minority shareholders. The current change eliminates the previous requirement for wholly owned subsidiary status, significantly broadening the scope of transactions eligible for the fast-track route.
Fellow subsidiary companies
The CAA Rules 2025 make the fast-track route available for mergers and demergers between one or more subsidiaries of a holding company with one or more subsidiaries of the same holding company, so long as the transferor companies are unlisted. This will hopefully facilitate faster implementation of intra-group restructurings and group structure rationalisations, without necessitating a potentially lengthy NCLT process.
Cross-border merger integration
The amendments clarify that fast-track mergers between a foreign holding transferor company and an Indian wholly owned subsidiary transferee company are permitted. While these were previously enabled through Rule 25A, the new amendment absorbs the provisions of Rule 25A and makes Rule 25 self-contained.
Balancing efficiency with oversight
While the four pillars focus on enhancing operational efficiencies and ensuring regulatory alignment, the amendments bring in additional procedural and compliance safeguards. Companies regulated by sectoral regulators such as the RBI, SEBI, IRDAI, or PFRDA must notify not just the registrar and the official liquidator but also the regulator concerned by issuing a notice of the scheme to invite objections/suggestions, if any, and to the respective stock exchange(s) in case of listed companies.
The promises and the misses
The CAA Rules 2025 represent a significant liberalisation of India’s fast-track merger and amalgamation framework by expanding the categories of eligible companies and streamlining procedural requirements. The MCA has created a more accessible and efficient pathway for corporate restructuring especially for schemes of arrangement involving a common pool of shareholders or affiliated companies. That said, some issues remain unresolved:
- Single-purpose schemes only: Fast-track schemes remain confined to pure merger or demerger transactions. The route continues to be unavailable to other types of corporate restructurings involving qualifying entities, such as capital reorganisations, cancellations, etc. Some Regional Directors, however, interpret the explanation to Section 233(12) of the Companies Act, 2013, to allow schemes under Section 66 to avail the fast-track route.
- Tax neutrality: The recent Income-tax Bill, 2025, seems to have excluded fast-track demergers (though not mergers) from the benefit of tax neutrality otherwise available to demergers, creating some ambiguity around their tax treatment. It is unclear if the tax authorities’ concerns are rooted in the fact that schemes under Section 233 lack sufficient regulatory oversight.
- Takeover exemption exclusion: Regulation 10(1)(d)(ii) of the SEBI Takeover Regulations exempts acquisitions under schemes “pursuant to an order of a court or tribunal” from the requirement of making an open offer. However, the phrasing creates ambiguity around whether fast-track mergers involving listed entities qualify for the exemption. This underscores the need for corresponding amendments to the SEBI Takeover Regulations so that listed companies can fully avail the benefits of the fast-track regime.
- SEBI LODR ambiguity: Regulation 37 of the SEBI LODR Regulations requires listed entities to obtain prior approval from stock exchanges for schemes “proposed to be filed before any court or tribunal under Sections 230–234”, but it does not apply to mergers between holding companies and wholly owned subsidiaries. While the current framework also covers schemes under Section 233 (i.e., via the fast-track route), it only exempts schemes filed before any court or tribunal. Accordingly, this calls for corresponding amendments to the SEBI LODR Regulations.
- Majority trap: The fast-track route continues to potentially remain as an unviable option for listed companies, given that it requires the consent of 90 per cent of all members, rather than 90 per cent of those present and voting.
The amendments create immediate opportunities for corporate groups considering:
- intra-group consolidation without NCLT proceedings;
- faster implementation of holding company restructuring;
- streamlined cross-border flip transactions; and
- reduced transaction costs and timelines for qualifying entities.
The amendments are welcome as they aim to strike a balance between facilitating business efficiency and maintaining appropriate regulatory oversight. The CAA Rules 2025 undeniably make the scheme route a viable option for a broader range of corporate groups, especially for intra-group mergers, it significantly reduces the burden on the NCLT, potentially allowing it to focus on contentious and complex transactions requiring judicial (rather than administrative) oversight.