INTRODUCTION
The recent notification of the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025 (“Amendment”), issued by the Ministry of Corporate Affairs dated September 04, 2025, constitutes a significant step towards ease of business and corporate restructuring. By extending the Fast-Track Merger route (“FTM”), to unlisted companies and subsidiary of same holding company, the Amendment broadens the accessibility of FTM to a wider spectrum of corporate entities.
It is pertinent to recall that the FTM route was originally introduced under Section 233 of the Companies Act, 2013 (“the Act”), enabling specified classes of companies to obtain sanction of their merger schemes from the Regional Director (“RD”) having jurisdiction over the transferee company, in lieu of approaching the NCLTs having jurisdiction over both the transferor and transferee entities. This mechanism was designed to relieve the NCLTs of routine merger applications, offering a streamlined process with a deemed approval timeline of 60 (sixty) days, thereby rendering it both time-efficient and cost-effective.
This article undertakes an analysis of the key amendments brought forth by the Amendment, as well as the practical considerations and potential legal challenges that companies may encounter in pursuing this route.
ADDITIONAL CLASSES OF COMPANIES ELIGIBLE UNDER THE FAST-TRACK ROUTE
Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (“CAA Rules”), presently prescribes for mergers between, (i) holding company and its wholly-owned subsidiary; (iii) mergers between two or more start-up companies; and (iii) mergers between one or more start-ups and one or more small companies.
However, pursuant to the Amendment, the scope of the FTM has been broadened to include the following additional classes of arrangements:
A. Schemes between Holding and Subsidiary Companies: The Amendment now permits mergers or amalgamation between a holding company (whether listed or unlisted) and its subsidiary company (whether listed or unlisted), thereby eliminating the earlier restriction limiting eligibility to wholly-owned subsidiaries.
B. Schemes between Two or More Unlisted Companies (other than Section 8 company): Another significant addition is the inclusion of schemes between two or more unlisted companies (other than Section 8 company), subject to compliance with the following conditions as on both (i) the date falling thirty days prior to the issuance of notices inviting objections under Section 233(1), and (ii) the date of filing the declaration of solvency in Form CAA-10:
- The aggregate of outstanding loans, debentures and deposits of each company shall not exceed INR 200 crores( Indian Rupees Two Hundred Crore); and
- There shall be no default in repayment of such borrowings.
Further, the declaration of solvency is now required to be accompanied by an auditor’s certificate in the newly introduced Form CAA-10A, confirming satisfaction of the aforesaid conditions. Notably, there is no requirement of common shareholding, promoter group or control between the merging entities. Consequently, even unrelated unlisted companies may avail themselves of the FTM route, provided the prescribed thresholds and conditions are met.
C. Schemes between Subsidiaries of same Holding Company: The Amendment also brings within its fold schemes of arrangement between fellow subsidiaries, i.e., two or more subsidiaries of a common holding company. The only limitation imposed is that the transferor company must be unlisted, while the transferee may be listed. Although this extension is significant, a regulatory overlap with the SEBI (LODR) Regulations, 2025 (“Regulation”) persists. Under Regulation 37, read with the SEBI Master Circular dated 20 June 2023, listed entities are required to obtain prior approval from stock exchanges before filing any scheme of arrangement. The exemption from such prior approval presently extends only to mergers between a holding company and its wholly-owned subsidiary. SEBI, in its informal guidance, has further clarified that the exemption does not cover schemes involving step-down subsidiaries. Thus, while the Act now permits fellow subsidiaries and step-down subsidiaries to undertake FTMs, listed entities may still be obligated to comply with Regulation 37, thereby diluting some of the efficiency gains envisaged by the Amendment.
D. Reverse Cross-Border Mergers: The Amendment aligns the provisions of Rule 25 with Rule 25A of the CAA Rules, by incorporating within its ambit mergers between a foreign holding company and its Indian wholly-owned subsidiary. Such reverse cross-border mergers, covered under Rule 25A(5), may now be effected through FTM. However, these transactions remain subject to additional safeguards, including: (i) prior approval of the Reserve Bank of India, and (ii) filing of a declaration in Form CAA-16 at the stage of application, where the foreign transferor company shares a land border with India.
CONCLUSION
The Amendments mark an important and progressive development towards enabling quicker and more efficient corporate restructurings. By extending the ambit of FTM, prescribing objective financial thresholds for unlisted companies, and clarifying the applicability of the provisions to demergers, the reforms have the potential to significantly reduce the burden on NCLTs. However, effective implementation, consistency in regulatory approach, and adequate resourcing of RD offices will be crucial to ensure that the intended objectives of speed and cost-efficiency are fully realised.
