[Analysis] Fast-Track Merger under Companies Act 2013 – MCA Broadens Fast-Track Route for Mergers and Demergers

A Fast-Track Merger under the Companies Act, 2013, is a simplified corporate restructuring process introduced under Section 233 to make mergers and amalgamations quicker, cost-effective, and less burdensome compared to the regular NCLT route. Unlike the traditional process under Sections 230–232, which requires multiple tribunal hearings, a fast-track merger allows certain classes of companies—such as small companies, start-ups, holding and subsidiary companies, unlisted companies meeting prescribed financial conditions, fellow subsidiaries, and even foreign holding companies with Indian subsidiaries—to obtain approvals directly from the Regional Director (RD). This route shortens timelines (typically 60–90 days), reduces compliance complexity, and lowers costs, making it a preferred option for eligible companies seeking efficient business consolidation or restructuring.

Table of Contents

1. 1. Introduction
   2. Background and Rationale
   3. Regular vs. Fast-Track Merger Process under the Companies Act, 2013
   4. Existing Class of Companies to Undertake Mergers under Fast-Track Route
   5. Additional Class of Companies That Are Eligible to Opt for Fast-track Merger
   6. Statutory Recognition for Fast-Track Demergers
   7. Tabular Analysis of Class of Companies Now Eligible for Fast-Track Merger/Demerger Route
   8. Timeline for Filing Merger/Amalgamation Scheme with Central Government (Through the Regional Director) Extended to 15 Days
   9. Notice Inviting Objections/Suggestions for Fast-track Mergers Now Includes Regulators and Stock Exchanges
   10. Comparative Analysis of Forms
   11. What Are The Practical Considerations or Challenges?
   12. Conclusion

1. Introduction

The Ministry of Corporate Affairs (MCA) vide. Notification dated September 4, 2025, has notified an amendment to Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. This amendment represents a significant development in strengthening the fast-track merger (FTM) route, which was originally introduced under Section 233 of the Companies Act, 2013. The fast-track route was designed to reduce the burden on NCLTs by allowing a certain class of companies to obtain approvals directly from Regional Directors (RDs) through a simplified process, thereby making mergers and amalgamations quicker and more cost-effective as compared to the traditional Tribunal route.

With this amendment, the scope of the fast-track merger route has been substantially broadened. It now extends beyond small companies and start-ups to include unlisted companies that meet certain conditions, holding and subsidiary companies, fellow subsidiaries under the same holding company, and foreign holding companies with an Indian wholly-owned subsidiary. The amended rules are effective from September 4, 2025.

The article provides a detailed overview of the key amendments, the practical opportunities they create for faster and more economical corporate reorganisations, and the challenges and considerations companies may encounter when opting for the fast-track merger route. It aims to guide stakeholders in understanding how the amendment reshapes the corporate merger landscape, while highlighting both strategic advantages and operational implications.

2. Background and Rationale

On April 5, 2025, the MCA proposed an amendment to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, to widen the scope of fast-track mergers under Section 233 of the Companies Act, 2013. The proposed amendment is part of a broader vision outlined in the Union Budget 2025-26, in which the Honourable Finance Minister emphasised the need to simplify complex corporate processes and expedite economic reforms. The amendment was subsequently notified on September 4, 2025, representing a formal step toward streamlining corporate restructurings by providing simplified merger procedures for a broader class of companies.

3. Regular vs. Fast-Track Merger Process under the Companies Act, 2013

Sections 230–232 of the Companies Act 2013 lay down a legal framework for compromises, arrangements, and mergers applicable to all categories of companies, including listed, unlisted, private, and public entities. This process involves multiple stages and requires approval from the National Company Law Tribunal (NCLT), making it a relatively lengthy and complex process.

In contrast, Section 233 of the Act provides a simplified and fast-track mechanism for mergers/amalgamations, specifically available to certain classes of companies—namely, two or more small companies, a holding company and its wholly-owned subsidiary, or start-up companies.

This route bypasses the National Company Law Tribunal (NCLT) unless the Central Government, upon receipt of objections or suggestions, considers it necessary to refer the scheme to the Tribunal for approval. Instead, requisite approvals are obtained administratively from the Central Government (through the Regional Director), making the process quicker, more cost-effective, and efficient for eligible companies.

Aspect	NCLT-Based Process (Sec. 230-232)	Fast-Track Process (Sec. 233)
Approval Authority	National Company Law Tribunal (NCLT)	Regional Director (RD)
Time Required	Months to over a year	60-90 days (approx.)
Complexity	High (multiple court filings, hearings, affidavits)	Low (administrative filings)
Approval Threshold	Three-fourths (75%) in value of shareholders/creditors	Ninety percent (90%) of total shares and nine-tenths in value of creditors
Scope (Pre-2025 Rules)	All companies (except those eligible under Sec. 233)	Small companies, holding wholly owned subsidiaries

4. Existing Class of Companies to Undertake Mergers under Fast-Track Route

Presently, Section 233 of the Companies Act, 2013, read with Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, allows the following class of companies to undertake mergers under the fast-track route –

(a) Two or more small companies
(b) A holding company and its wholly-owned subsidiary
(c) Two or more start-up companies
(d) One or more start-up companies with one or more small companies

5. Additional Class of Companies That Are Eligible to Opt for Fast-track Merger

The additional class of companies that are now eligible to opt for fast-track merger are as follows –

5.1 Two or more unlisted companies (excluding Section 8 companies)

Fast-track mergers are allowed between two or more unlisted companies, subject to certain conditions that are as follows –

(a) The total outstanding loans, debentures and deposits for each company must not exceed Rs 200 crores and
(b) There must be no default in repayment of any such borrowings

These two conditions must be satisfied on two occasions: within 30 days prior to the date of inviting objections from the regulatory authorities under Section 233 of the Companies Act, 2013, and on the date of filing the scheme under Section 233(2) of the Act.

Further, a certificate from the auditor of the company stating that the company meets the conditions must be filed in Form No. CAA-10A (a newly introduced form), along with a copy of the approved scheme.

Example

ABC Pvt. Ltd. (a textile manufacturer) and XYZ Pvt. Ltd. (a garment exporter) are both unlisted companies. ABC has outstanding borrowings of Rs 120 crores, and XYZ has outstanding borrowings of Rs 150 crores. Neither company has defaulted in repayment of its borrowings. Both companies have decided to merge operations to streamline costs. Can the merger take place between the companies? Before the Amendment: Their merger was not eligible for the fast-track route as it was not covered under the specified class of companies. Therefore, they had to proceed through the regular NCLT approval process. After Amendment: Since both companies satisfy the loan and repayment conditions, they are eligible to opt for a fast-track merger. Accordingly, they can directly apply for approval of the merger via the Regional Director.

Example

Skylines Automotive Pvt. Ltd. (an unlisted auto parts manufacturer) has outstanding borrowings of Rs 210 crores, while Metro Motors Pvt. Ltd. (an unlisted two-wheeler distributor) has Rs 180 crores. Both companies have decided to merge in order to expand their market presence and streamline operations. Neither company has defaulted in repayment of its borrowings. Can the merger take place between the companies? Before the Amendment: Their merger was not eligible for the fast-track route as it was not covered under the specified class of companies. Therefore, they had to proceed through the regular NCLT approval process. After Amendment: The merger is not eligible for the fast-track route as the borrowings of Skylines exceed Rs 200 crores. Both conditions, i.e. borrowings below Rs 200 crores and no default in repayment of borrowings, must be satisfied simultaneously. Hence, the companies would need to proceed through the regular NCLT approval process.

5.2 Holding company (listed or unlisted) and a subsidiary company (listed or unlisted)

As per Section 233(1) of the Companies Act, 2013, a scheme of merger or amalgamation may only be entered into between a holding company and its wholly-owned subsidiary (WOS) company. However, pursuant to this amendment, mergers between holding companies and their subsidiaries (whether wholly owned or not) are permitted under this FTM route.

Further, the fast-track route will not be available in cases where the Transfer or company (whether holding company or subsidiary) is a listed company.

Example

Evergreen Holdings Pvt. Ltd. owns 75% of Green Build Infra Pvt. Ltd., which is engaged in affordable housing projects. Green Build is not wholly owned, as 25% of the shares are held by private investors. Can the merger take place between the companies? Before the Amendment: The companies cannot merge via a fast-track route unless the merger takes place between the holding company and its wholly-owned subsidiary company. Since Green Build Infra Pvt. Ltd. is not a wholly-owned subsidiary, a merger cannot take place via a fast-track route. Before Amendment: Both companies can merge via the fast-track route as the requirement of a wholly-owned subsidiary has been removed.

5.3 Fellow subsidiaries under the same holding company

The amendment brings schemes between fellow subsidiaries, i.e., two or more subsidiary companies of the same holding company, within the scope of the fast track merger, subject to the condition that the transferor company is unlisted. The transferee company can be listed or unlisted.

Example

Harmony Retail Ltd. is the parent of two subsidiaries, FreshMart Pvt. Ltd. (an unlisted grocery chain) and StyleWear Ltd. (a listed apparel company). To build a stronger retail platform, the group decides to merge Fresh Mart Pvt. Ltd. into StyleWear. Can the merger take place between the companies Before Amendment: The merger was not eligible for the fast-track route as it was not covered under the specified class of companies. After Amendment: Since FreshMart (the transferor) is unlisted, the merger can proceed under the FTM route.

5.3 Mergers between a foreign holding company and its wholly-owned Indian subsidiary

Though Section 234 of the Companies Act, 2013, read with Rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, already covered mergers between a foreign holding company and an Indian wholly-owned subsidiary company, Rule 25 has now been amended to incorporate the same within the Rule itself, thereby making the class of companies eligible for fast-track route complete.

Example

A US-based company, TechSphere Inc., owns a wholly owned subsidiary in India, TechSphere India Pvt. Ltd. To simplify operations, the parent company intends to absorb the Indian subsidiary. Can the merger take place between the companies? Before Amendment: Such cross-border mergers were possible only under the regular NCLT route, requiring multiple approvals, including RBI/FEMA clearances. After Amendment: With Rule 25 explicitly recognising such mergers under Section 233 of the Companies Act, 2013, the process can be undertaken through the RD, providing a clearer and faster route.

6. Statutory Recognition for Fast-Track Demergers

A groundbreaking change is the insertion of a new sub-rule (9) in Rule 25, which explicitly states that the provisions of the rule shall apply mutatis mutandis to a scheme of division or transfer of undertakings (demergers). Previously, all demergers required mandatory NCLT approval under Sections 230-232, a time-consuming and costly process. While some Regional Directors had permitted demergers on a case-by-case basis, the new rule provides formal statutory recognition and a codified procedure. This will enable businesses to efficiently separate core and non-core divisions to unlock value, mitigate risk, and streamline operations with greater speed and certainty.

Example – The Strategic Demerger

The case of “HealthCare Group Pvt. Ltd.,” a company planning to separate its diagnostics division into a new subsidiary, would have previously required NCLT involvement under Sections 230-232 of the Act. Following the amendment and the insertion of Rule 25(9), the company can now pursue this strategic demerger via the fast-track route, saving months of delay and significant legal costs.

7. Tabular Analysis of Class of Companies Now Eligible for Fast-Track Merger/Demerger Route

Class of Companies	Conditions for fast-track merger	Relevant Rule	Impact
Two or more unlisted companies (excluding Section 8 companies)	(a)    Total outstanding loans, debentures and deposits for each company ≤ Rs 200 crores (b)    No default in repayment of borrowings Both conditions must be satisfied within 30 days prior to inviting objections under Section 233 and on the date of filing the scheme under Section 233(2).	Rule 25(1A)(iii)	The amendment allows eligible unlisted companies to merge through the fast-track route, significantly reducing procedural delays and associated costs compared to the regular NCLT process. This facilitates resource optimisation and improved competitiveness for smaller and medium-sized enterprises, while ensuring financial stability through borrowings and default conditions.
Holding company and its subsidiary	(a)    Merger allowed even if the subsidiary is not wholly-owned (b)    Fast-track route is not available if the transferor company is a listed company.	Rule 25(1A)(iv)	This amendment provides greater flexibility for holding companies to merge with partially owned subsidiaries, enabling strategic group-level restructuring and operational streamlining without requiring full NCLT approvals.
Fellow subsidiaries under the same holding company	(a)    The transferor company must be unlisted (b)    The transferee company can be listed or unlisted	Rule 25(1A)(v)	The amendment enables fellow subsidiaries under the same holding company to merge efficiently under the fast-track route when the transferor is an unlisted company. The provision is particularly useful for consolidating operations to improve scale and streamline corporate governance within a group.
Foreign holding company and its wholly-owned Indian Subsidiary	Section 233 route can now be explicitly used for mergers of wholly-owned Indian subsidiaries with foreign holding companies	Rule 25(1A)(vi)	By explicitly incorporating mergers between a foreign holding company and its wholly owned Indian subsidiary into Rule 25, the amendment clearly defines their eligibility for the fast-track merger route. This clarification removes any prior uncertainty, simplifies the procedural requirements, and enables a smoother and quicker approval process.
Division or transfer of undertaking (Demerger)	Provisions of Rule 25 apply mutatis mutandis to demergers.	Rule 25(9)	Earlier, all demergers required mandatory NCLT approval, making the process costly and time-consuming. The new rule now provides statutory recognition and a codified procedure, enabling faster and more efficient business restructuring.

8. Timeline for Filing Merger/Amalgamation Scheme with Central Government (Through the Regional Director) Extended to 15 Days

As per Rule 25(4)(a) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, the transferee company is required to file a copy of the merger/amalgamation scheme as agreed to by the members and creditors in Form CAA. 11 (as an attachment to Form RD-1) with the Central Government (specifically through the Regional Director) within 7 days of the conclusion of the meeting of members or creditors. This timeline has now been extended to 15 days, providing relief to the stakeholders.

The extension provides companies with more time to gather and verify meeting results, prepare accurate filings, and coordinate with auditors and legal advisors. This reduces the risk of filing errors, avoids last-minute rushes and ensures that the application to RD is complete and accurate. For secretarial teams, it eases operational pressure and improves the overall efficiency of the merger process.

9. Notice Inviting Objections/Suggestions for Fast-track Mergers Now Includes Regulators and Stock Exchanges

As per Rule 25(1) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, the notice to invite objections or suggestions for a proposed fast-track merger from the Registrar and Official Liquidator or persons affected by the scheme must be in Form CAA.9.

Under the amended norms, the notice inviting objections or suggestions has now been broadened to include relevant sectoral regulators such as RBI, SEBI, IRDAI and the Pension Fund Regulatory and Development Authority (PFRDA) in the case of regulated entities. For listed companies, the notice must also be issued to the relevant stock exchanges.

This amendment ensures that all relevant authorities and stakeholders are informed of proposed fast-track mergers, enhancing transparency and compliance. It helps identify potential regulatory concerns early, thereby reducing the risk of objections or delays in the merger process.

10. Comparative Analysis of Forms

Form	Change	Purpose	Comments
Form CAA-9	Revised Form	Notice of schemes inviting objections or suggestions	The notice now explicitly covers schemes of ‘division or transfer of undertaking’ (demergers). The Form also clarifies that notices are to be sent to the sectoral regulators (RBI, SEBI, IRDAI, and PFRDA) and, in the case of listed companies, to the relevant stock exchanges.
Form CAA-10	Filing process updated	Declaration of Insolvency	The Form must be filed for the Merger, amalgamation, division or transfer of undertakings and must be filed as an attachment to Form GNL-1
Form CAA-10A	New Form introduced	Certificate by an auditor	This is a new form that must be filed by an unlisted company to provide an auditor’s certificate confirming that it meets the financial thresholds for eligibility for the fast-track route, specifically that its aggregate outstanding loans, debentures, or deposits do not exceed ₹200 crore and that there are no defaults.
Form CAA-11	Filing timeline extended, and a new attachment is required	Notice for approval of the scheme	Require details of whether the transferor and transferee are related as: Holding and subsidiaries (other than WOS) Start-up Companies Small Companies and Start-Up Companies Foreign Holding Company and an Indian wholly owned subsidiary Others (if any) Also, requires a declaration that all legal proceedings by or against the transferor company shall be continued by or against the transferee company.
Form CAA-12	Scope expanded to cover the transfer or division of an undertaking	Confirmation of the order of the scheme of merger or amalgamation	The title of the Form is expanded to include “transfer or division of undertaking,” aligning with the new rules. The text of the Form now uses comprehensive terms like “transferor/demerged company” and “transferee/resultant company” to reflect the broader scope. The Form itself is the formal confirmation order from the Central Government for the scheme

11. What Are The Practical Considerations or Challenges?

The practical challenges are as follows –

11.1 Seeking the approval of shareholders and creditors when the transferee company is a listed company

Section 233(1)(b) of the Companies Act, 2013 requires approval of the members holding at least 90% of the total number of shares. In the case of listed companies, meeting this high threshold often becomes particularly challenging and may significantly delay the approval process, thereby undermining the very objective of enabling quicker mergers. This concern was also recognised in the CLC Report, 2022, which highlighted that the requirement is based on the entire share capital and not merely on shareholders present and voting.

11.2 Regulatory Approvals in case of Cross-Border Mergers

Cross-border mergers require certain approvals, including RBI approval and FEMA clearance. This may lead to longer timelines, as companies must obtain these clearances before giving effect to such schemes.

These delays can increase costs for companies, create uncertainty for investors and employees, and slow down the benefits expected from the merger. In some cases, the long process may even discourage companies from going ahead with cross-border mergers.

11.3 Auditor’s Certificate and Compliance Burden

For unlisted companies availing the FTM route, an auditor’s certificate in Form CAA-10A must confirm that the conditions regarding borrowings and defaults are met. Preparing such certificates requires detailed verification of financial records on two separate dates (before inviting objections and at the time of filing). This increases compliance costs, and any inconsistency or delay in certification can hinder the merger process.

11.4 Coordination with multiple Regulators and Stock Exchanges

The amendment expands the notice requirements seeking objections or suggestions for fast-track mergers to include sectoral regulators and stock exchanges in the case of listed companies. While this ensures transparency, it also increases the risk of receiving objections from multiple authorities. This can slow down the process and create uncertainty for companies.

12. Conclusion

The Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025, represent a significant evolution of India’s corporate restructuring laws. It is a significant step towards simplifying and accelerating corporate restructurings in India. By widening the class of companies eligible for the fast-track merger route, extending timelines for filings, introducing new forms and updating old forms, and including regulators and stock exchanges in the notice process, the changes enhance efficiency, reduce procedural delays, and provide greater clarity for both domestic and cross-border mergers.

Additionally, these provisions shall apply mutatis mutandis to demergers as well, thereby removing any interpretational ambiguity. While practical challenges, such as shareholder approvals, regulatory clearances, and compliance burdens, remain, the overall framework now offers a more predictable, cost-effective, and transparent mechanism for companies seeking to consolidate, restructure, or optimise their operations, supporting faster business decision-making and overall economic growth.