MCA widens fast track mergers’ scope under the Companies Act, 2013

• 12 Sep 2025
• 262 Views

In India, the incorporation, responsibilities, governance and dissolution of companies is regulated by the Companies Act 2013. Section 233 of the Act provides for merger or amalgamation of certain companies (fast track merger) via approval of Central Government (Delegated to Regional Directors). 

According to Section 233(1) of the Act, mergers/demergers are allowed between (i) two or more small companies and (ii) holding company and its wholly owned subsidiary. The Section 233 empowers Central Government (Ministry of Corporate Affairs) to prescribe, by way of rules, additional classes of companies who can avail such fast track process.

For ease of doing business and enabling small companies as well as startup companies to utilize fast track procedure, an amendment was made under Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (CAA Rules) in the year 2021 to extend the scope of fast track process for merger/demerger between (a) two or more startup companies and (b) one or more startup companies with one or more small companies.  

Further, an amendment to the CAA Rules was made in September 2024 to allow merger of a transferor foreign company incorporated outside India being a holding company with the transferee Indian company being its wholly owned subsidiary company incorporated in India (reverse flipping) has also been allowed through fast track merger procedure.

Following the announcement in Paragraph 101 of the Budget Speech (2025-2026), the decision was taken to further broaden the scope of such mergers. Consequently, the CAA Rules were amended on 4 September 2025 after consultations with stakeholders. 

This amendment added the following additional categories of companies eligible for the fast-track merger/demerger procedure under Rule 25:

(i) Two or more unlisted companies excluding section 8 companies meeting prescribed thresholds for outstanding loans, deposits or debentures.

(ii) Holding company and subsidiary companies with exclusion of cases where the transferor company is a listed company.

You can find the relevant amendment notification i.e., Gazette Notification no. G.S.R 603 (E) dated 04.09.2025 on the official website of the Ministry of Corporate Affairs.

Source: Press Information Bureau (PIB)