Government Expands Scope of Fast Track Mergers Under Companies Act for Corporate Restructuring

The government has expanded the fast track merger rules under the Companies Act, 2013. This change simplifies the process for more companies to undergo mergers and demergers. An official statement on Thursday highlighted that this will speed up corporate restructuring. The new framework is especially beneficial for unlisted companies and groups aiming for internal reorganisations without lengthy tribunal approvals.

The Ministry of Corporate Affairs (MCA) amended the Companies Compromises, Arrangements and Amalgamations Rules, 2016. This amendment followed stakeholder consultations and was notified on September 4, 2025. The changes align with the Union Budget 2025-26, which aimed to ease business operations and reduce approval delays.

Fast Track Mergers: Expanded Scope

Under the updated framework, fast track mergers or demergers can now involve two or more unlisted companies, excluding section 8 companies. These companies must meet specific thresholds for outstanding loans, debentures, or deposits. Section 8 companies are non-profit organisations registered under the Companies Act, 2013.

Mergers between a holding company and its subsidiary are also included in the streamlined process. However, this excludes cases where the transferor company is listed. Additionally, mergers between two or more subsidiaries of the same holding company are permitted, again excluding listed transferors.

Streamlined Approval Process

Section 233 of the Companies Act allows certain classes of companies to merge with central government approval. This approval is delegated to regional directors. Previously, this route was available to small companies, startups, and holding companies with their wholly-owned subsidiaries.

A 2021 amendment had already extended this scope to include startups and small companies. In 2024, the fast track route was opened for reverse flipping—mergers of foreign holding companies with their wholly-owned Indian subsidiaries.

This expansion of fast track mergers aims to facilitate quicker corporate restructuring processes. By reducing bureaucratic hurdles, it supports businesses in achieving efficient internal reorganisations.

With inputs from PTI