Executive Summary: The Ministry of Corporate Affairs has significantly expanded India’s fast-track merger framework beyond small companies and wholly-owned subsidiaries to include unlisted companies with borrowings under INR 200 crore (with certain conditions). Additionally, demergers have also been brought under the ambit of the fast-track route. This will reduce NCLT’s burden, accelerate corporate restructuring timelines, and make restructuring more accessible to mid-sized companies across India.
Introduction
The approval of a merger under Sections 230-232 of the Companies Act, 2013 (“Act”) (which mandates the approval of the National Company Law Tribunal), usually has a timeline of around nine (9) to twelve (12) months, which can sometimes stretch to 18 months or longer. Such timelines in the current dynamic market pose many hurdles, especially for small scale companies. By the time the NCLT approves a merger, market conditions often shift so dramatically that the original merger terms are no longer commercially viable.
This is precisely why the notification dated September 04, 2025, from the Ministry of Corporate Affairs (“2025 Notification”), comes as a major boost for various companies in India. The government has widened the scope of fast-track mergers, which will benefit a larger number of companies, fundamentally changing how corporate restructuring was approached earlier.
Understanding Fast-Track Mergers
In 2005, the J.J. Irani Committee recommended legal recognition of mergers that can be implemented without court intervention. This recommendation was codified in Section 233 of the Act by inclusion of a mechanism for fast-track mergers (“Fast Track”). Fast Track mergers are governed by Section 233 of the Act, read with Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (“Rules”). Before the issuance of the 2025 Notification, the Fast Track route was available only to small companies, start-up companies and mergers between a holding company and its wholly-owned subsidiary.
The 2025 Notification: Game Changer
The 2025 Notification substantially expands the list of companies eligible for a Fast Track merger. The latest amendments to Rule 25 of the Rules broaden eligibility to also include:
- mergers between certain unlisted companies (excluding companies referred in Section 8 of the Act);
- mergers between holding and subsidiary companies, subject to specific exceptions where every company involved in the merger has, in aggregate, outstanding loans, debentures or deposits not exceeding INR 200 crore and have not defaulted on repayments;
- mergers between a holding company (listed or unlisted) and a subsidiary company (listed or unlisted), provided that the transferor company or companies are unlisted; and
- mergers between subsidiaries of the same holding company, provided the transferor company or companies are not listed; and
- mergers of a foreign holding company with its Indian wholly-owned subsidiary, as referred to in Rule 25A of the Rules;
The most significant addition is the new category for unlisted companies (S. No. (a) above). Unlisted companies (excluding companies referred in Section 8 of the Act) can use the Fast Track route only if their aggregate outstanding loans, debentures or deposits do not exceed INR 200 crore and they have not defaulted on repayments. Moreover, this must be supported by a certificate from the company’s auditor certifying that the prescribed conditions have been met. Further, it shall be filed in Form No. CAA-10A. This INR 200 crore threshold is crucial as it captures a substantial segment of India’s mid-market/ small companies that previously had to go through the NCLT process.
The 2025 Notification has now made it mandatory for companies regulated by sectoral regulators such as the Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, or Pension Fund Regulatory and Development Authority to issue notice to the concerned regulator for their objections or suggestions. Similarly, listed companies must issue notice to the relevant stock exchanges for their objections or suggestions.
Another significant addition through the 2025 Notification is that Rule 25 of the Rules has been made applicable mutatis mutandis to schemes of division or transfer of undertaking (demergers) as referred to in Section 232(1)(b) of the Act. This development will particularly benefit unlisted companies looking to spin off business divisions, separate non-core assets, or optimise their corporate structures without the time and cost burdens associated with the traditional NCLT process. With this move, corporate restructuring activity is expected to increase in the mid-market segment as companies can now efficiently reorganise their business operations through both mergers and demergers under the same Fast Track route.
Impact of the 2025 Notification
A large number of applications seeking sanction of scheme of arrangement are pending NCLT approval. The 2025 Notification has widened the ambit of Fast Track mergers that ultimately would ease the burden on NCLT benches, particularly for cases with no external shareholders and minimal lender involvement, where lengthy approval processes are not necessitated. This allows NCLTs to focus on genuinely complex disputes that require judicial intervention.
The 2025 Notification underlines the government’s intent to make corporate restructuring easier as it opens the doors for a host of unlisted companies to undertake mergers through the fast-track route, provided the conditions specified in Rule 25 of the Rules (as amended by the 2025 Notification) and Section 233 of the Act are complied with.
However, certain provisions of the 2025 Notification lack clarity. While it is provided that the INR 200 crore financial threshold must be tested within a 30-day period before issuing notice on the proposed scheme[1] and again on the date of filing of the scheme[2], it is unclear what would happen if between the said two dates the threshold is breached. As it stands, it would be advisable to take a conservative approach and continuously maintain the INR 200 crore threshold, i.e., right from the 30-day period before issuing notice on the proposed scheme under Section 233(1)(a) of the Act till the date of filing of the scheme.
Another significant challenge for companies assessing corporate restructuring through the Fast Track route is compliance with the creditor threshold, which requires approval from creditors representing at least 90% in value, as well as satisfying the shareholder threshold by obtaining approval from holders of 90% of the total number of shares.
Conclusion
The 2025 Notification is a welcome step for companies planning mergers, acquisitions, division of undertaking or restructuring, as the expanded Fast Track route offers a compelling alternative to traditional NCLT based process. The key is careful planning around the approval thresholds and ensuring that the transaction structure fits within the prescribed categories.
The real test will be how effectively the administrative machinery, i.e., the Registrar of Companies, Regional Director and other authorities, handles the anticipated surge in applications under the Fast Track route for mergers and demergers and whether the companies can adapt to the new compliance requirements while leveraging the streamlined approval process. It is expected that more mid-sized companies will undertake corporate restructuring activity to take advantage of the Fast Track route.
The 2025 Notification is more than a procedural reform. It signals India’s commitment to becoming a more business-friendly jurisdiction for corporate restructuring, potentially attracting more investment and encouraging domestic companies to optimise their corporate structures efficiently.
For further information, please contact:
Shikha Tandon, Partner, Cyril Amarchand Mangaldas
shikha.tandon@cyrilshroff.com
[1] Section 233(1)(a) of the Companies Act, 2013.
[2] Section 233(2) of the Companies Act, 2013.
