Summary: The winding racetrack of geopolitics and the global economic realignment currently underway is a once in a lifetime opportunity for India to claim its rightful place in the new economic order – this race is on and the agility of doing M&A will play a key role in driving outcomes for India’s development. The 2025 fast-track merger amendments promise to turbo-charge M&A for mid-market companies, are incremental reforms enough, or is it time for an overhaul?

Incremental Change or Next Gen Reform?

The Report of the Irani Committee (2005) recognised that the Indian court-based process for schemes of mergers / amalgamations was slow and not business-friendly. Stating that “in the context of increasing competitiveness in the market, speed is of the essence”, the Committee recommended a “short form of amalgamation”. As a result, the Companies Act, 2013 (“Act”), introduced fast-track mergers (“FTM”) in Section 233 for a limited class of companies. To operationalise the FTM framework, the Ministry of Corporate Affairs (“MCA”) introduced Rule 25 of the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016 (“Rules”).

Since 2016, the FTM framework has undergone significant but piecemeal performance upgrades, extending FTM to more companies, including start-ups, and making the process more time bound. Since 2024, FTM framework has also permitted reverse-flips of foreign holding companies through mergers with their Indian wholly owned subsidiaries (“WOS”).

Despite these steps, the FTM framework has failed to deliver for India Inc. due to several factors:

• The framework remains inaccessible to listed companies.
• Lack of clarity persists on whether demergers and slump sales can be undertaken through the FTM route.
• Voting thresholds for shareholders’ and creditors’ approvals are very high (exceeding 90 per cent).
• The approval process in Regional Director (“RD”) offices across different states is neither streamlined nor consistent.

Consequently, the industry has consistently sought more meaningful reform.

The Finance Minister’s Budget Speech for 2025–2026 stated that “Requirements and procedures for speedy approval of company mergers will be rationalized. The scope for fast-track mergers will also be widened and the process made simpler”. It is in this context that amendments were keenly awaited, and the MCA flagged off the race to Viksit Bharat by 2047 by notifying the 2025 Amendment on September 4, 2025.

Turbo Charging the FTM Framework: Impact of 2025 Amendment

The FTM route has now been extended to a wider set of entities, as below:

• Unlisted Companies with Limited Leverage: FTM may now be undertaken between two or more unlisted companies (excluding Section 8, not-for-profit companies). The key requirement is that none of the entities should have debt exposure exceeding INR 200 crore, including outstanding loans, debentures, or deposits. The companies must also have no subsisting defaults in repayment, and the company’s auditor must certify compliance with these conditions. This provision enables unrelated medium-sized private and unlisted companies to undertake mergers and restructuring without the National Company Law Tribunal (“NCLT”) process. The INR 200 crore threshold is four times that proposed in the April draft rules. This higher threshold is a meaningful relaxation and reflects the contemporary scale of Indian businesses today, but this may have to be periodically reviewed, as companies accelerate through different growth phases.
• Holding Companies and Subsidiaries: FTMs are now permitted between holding companies (listed or non-listed) and their subsidiaries (listed or non-listed), provided the transferor company is not listed. Note that prior to the 2025 Amendment, the scope was limited to mergers between holding company – WOS, and this change was also recommended by the Company Law Committee Report (2022).
• Subsidiaries of the Same Holding Company: FTMs would also be permitted between subsidiary companies of the same holding company, provided the transferor companies are not listed. This provision would enable intra-group consolidations.
• Cross-Border Reverse-Flips: In line with the 2024 Amendment to Rule 25A (which deals with cross-border schemes under Section 234 of the Act), pursuant to which reverse-flips through cross-border mergers of the foreign holding companies and their Indian WOS had been permitted through the FTM route, Rule 25 (which deals with FTM) has been amended to include a mirroring clause for abundant clarity.

The 2025 Amendment shifts India’s M&A landscape into high gear, significantly expanding the scope of fast-track mergers to enable a broader range of corporate restructuring transactions. The FTM framework now explicitly covers demergers and transfer of business undertakings, not just amalgamations. The 2025 Amendment also provides clarity for reverse-flip transactions, ensuring smoother track conditions for India’s start-ups. These changes will collectively enable faster M&A for mid-market companies and streamlined group reorganisations, though the chequered flag for listed companies remains elusive, as benefits to them will remain limited.

A Missed Opportunity at Closing the Gap

While the 2025 Amendment will certainly accelerate the adoption of the FTM framework, there are several questions left unanswered and other unintended consequences that may cause the FTM regime to skid off-track.

• Blanket Restriction on Listed Transferors: The blanket restriction on listed transferor companies appears driven by concerns around minority protection and public interest in listed companies. However, SEBI already evaluates FTM schemes under Regulation 37 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI LODR”), from an investor protection perspective even before the scheme can be filed with the RD’s office. If so, why must schemes involving listed transferors go through the NCLT process again? This duplication of review ignores a key fact that the 12–18 month timeline for listed company schemes through NCLT may sometimes be value destructive for the very public shareholders it aims to protect.
• Mirror Demergers of Listed Companies Not Permitted: It is arguable that Section 233(12) of the Act previously permitted an FTM between a listed holding company and its WOS, where the listed company was the transferor. For example, a demerger of an undertaking from a listed company to its WOS to create a new listed company with a mirror shareholding pattern – this is no longer be permitted, despite no disadvantage to minority shareholders. This needs a rethink.
• Inconsistent Treatment of Listed Companies:The 2025 Amendment permits listed companies to be the transferee (the surviving entity) in schemes with their subsidiaries but completely prohibits them from being transferors, revealing a lack of logical consistency. While consolidation of subsidiary accounts into that of the listed holding company may partially explain this differential treatment, it does not explain the inconsistency. Even when a listed company is the transferee, issues such as fairness of share swap ratios and valuation can impact public shareholders’ interests. If the RD office is deemed competent to evaluate and approve schemes involving listed companies as transferees, the same logic should apply to listed companies as transferors as well.
• Clarity on Shareholders’ and Creditors’ Voting Thresholds: The FTM regime requires the approval of shareholders holding more than 90 per cent of total shares and creditors with more than 90 per cent (by value) of outstanding debt, compared to NCLT schemes’ requirement of a majority in number and three-fourths in value (on present and voting basis). The Company Law Committee Report (2022) noted this as a key deterrent for listed companies and recommended rationalising these thresholds. This equally applies to unlisted companies with large shareholder bases, such as late-stage start-ups. RD offices in different states have taken contrary views on whether shareholder approval is required in absolute terms or on a “present and voting basis”. This should have been clarified. Additionally, shareholders’ written consent could have been permitted, as that for creditors.
• New Interpretational Challenges: Some aspects will require interpretational views on whether the various limbs of Rule 25(1A) of the Rules should be read together or in isolation. For example, consider a composite scheme involving merger of an Indian subsidiary and a foreign subsidiary into a third Indian subsidiary of the same foreign holding company. Can this be permitted under FTM? Logically, yes. Sub-rule 25(1A)(v) permits FTM for merger between subsidiary companies of the same holding company. The definitions of “holding company” and “subsidiary company” under Section 2 include “body corporates”, which covers companies incorporated outside India. However, sub-rule 25(1A)(vi) of the Rules permits cross-border schemes through FTM only for “merger of a foreign holding company with its Indian WOS”. This creates interpretational challenges.

The Need for “Next-Gen Reforms”

The 2025 Amendment is a step in the right direction. But, in the context of the opportunity presented by the emerging shifts in geopolitics, for India to sprint through the laps and clock a podium finish, the need of the hour is “Next Gen Reforms”, involving a holistic review and reimagination of the M&A framework in India, and not merely incremental reform.

This transformation requires meaningful dialogue between all stakeholders (including the multiple regulators) and a shift from existing processes to a more progressive approach, which recognises M&A as the turbo-charged engine for India’s growth, minimises regulators and regulations for M&A, assumes absence of mal-intent on the part of corporates, and solves exceptional cases through anti-abuse provisions.  

Key steps would include bringing listed entities within the FTM process (including as “transferors”). The “single-window clearance” concept articulated by the Irani Committee should be operationalised in the FTM process. Currently, FTM provisions require notices to sectoral regulators and stock exchanges, similar to that for NCLT schemes. Then why must SEBI / stock exchange approval under Regulation 37 of LODR be a pre-condition to the RD / NCLT process? A better model would be for SEBI, stock exchanges, and sectoral regulators to submit concerns to the RD / NCLT, which would streamline the process while maintaining necessary oversight and safeguards.

In addition to broader tax and acquisition financing reforms, certain foundational challenges with FTM must also be addressed for management crews to drive India towards transformational growth at full throttle. Does approval (or deemed approval) by the RD (being an organ of the executive) of an FTM scheme hold the same sanctity as that of an NCLT order (being a quasi-judicial body), including for aspects such as registration / mutation of land records and transfer of licenses and registrations? For FTM schemes involving companies with registered offices in different states, can there be a central authority (instead of the RD office of each state) to approve the scheme? How can the FTM process before the RD’s office be made more transparent and streamlined? Perhaps e-governance could provide a helpful tool in balancing the objective of speed with clarity and transparency.

This is far from the last set changes to the FTM regime – it is, as they say, “It’s lights out and away we go!” India’s M&A transformation race has begun!

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