MCA floats draft rules to widen scope of fast-track mergers, to benefit larger number of companies

New Delhi: The corporate affairs ministry has proposed to relax rules that would make a larger number of companies, especially the small and medium ones, eligible for fast-track mergers, in sync with an announcement in the Budget for 2025-26.

In a public notice, the ministry has sought to expand the scope of fast-track merger to include unlisted companies that have reasonable debt exposure and no default in repayment, among others. The borrowing of each of the companies involved in the merger must be less than Rs 50 crore at best 30 days prior to applying for the approval.

The relaxed rules, however, won’t apply to non-profit entities set up under Section 8 of the Companies Act, it said.

At present, the fast-track facility is available for a merger between two or more small companies, or between a holding company and its wholly-owned arm, or between two or more start-ups or between a start-up and a small company.

In case of a fast-track merger, the government has set an upper limit of 60 days for either approving it or placing views before the adjudicating authority on any objections received.

The ministry also proposed to allow fast-track merger of a company incorporated outside the country into its wholly-owned Indian arm.

In a big boost to the so-called "reverse flipping", the ministry had in September last year decided to fast-track the approval process for the merger of only a start-up incorporated outside the country into its wholly-owned Indian arm by doing away with the time-consuming clearance from the National Company Law Tribunal (NCLT).

It has sought stakeholders’ comments on the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025, by May 5.

As per the proposed amendment, a merger of subsidiaries other than the wholly-owned one with the holding company will also be allowed, provided the arm isn’t a listed entity.

Similarly, a holding company (listed or unlisted) and its one or more unlisted arms will be eligible for a fast-track merger.

The ministry has also suggested that one or more subsidiaries of a holding company with one or more of its arms (where both companies are not listed) can also avail of the fast-track facility. Currently, merger between fellow subsidiaries belonging to the same group doesn’t qualify for the expeditious approval process.

Presenting the Budget in February, finance minister Nirmala Sitharaman had said: "Requirements and procedures for speedy approval of company mergers will be rationalised. The scope for fast-track mergers will also be widened and the process made simpler.”