The Future of Fast-Track Mergers: Analyses of MCA’s September 2025 Policy Shift

[Muskan and Alisha are students at Rajiv Gandhi National University of Law.]

The recent 4 September 2025 notification issued by the Ministry of Corporate Affairs (MCA) has introduced the Companies (Compromises, Arrangements, and Amalgamations) Amendment Rules 2025 (Amendment Rules 2025), to amend the Companies (Compromises, Arrangements and Amalgamations) Rules 2016 (CAA Rules). The amendments seek to strengthen India’s position as a premier investment hub in Asia by widening the ambit of the fast-track merger (FTM) route. Prior to the amendment, only small companies, startups and holding companies with wholly owned subsidiaries could opt for the FTM route, but now the amendment has opened the door for mid-sized corporates to restructure by allowing intra-group mergers. The amendments stray away from the conventional merger process, which requires getting the National Company Law Tribunal’s (NCLT) approval as per Sections 230-232 of the Companies Act 2013, thereby saving cost and time. Although this aligns with the finance minister Nirmala Sitharaman’s 2025 budget agenda to rationalize merger approvals and make this route accessible to a larger segment of the corporate sector, but unless implemented with certain safeguards, these can prove to be ineffectual. 

In view of the same, this blog examines the introduced amendments and analyses how they will accelerate corporate restructuring and create a more predictable environment for foreign and domestic investors. The blog further identifies the potential challenges and considerations that need to be addressed for the amendments to be beneficial for India’s market economy.

Analyzing Amendments and their Strengths 

FTM comes under the purview of Section 233 of the Companies Act 2013, read with Rule 25 of the CAA Rules. It is a simplified mechanism and is commonly referred to as the Regional Director route as it is driven by statutory approvals and confirmation from the Registrar of Companies, Official Liquidator, Members and Creditors and Regional Director. 

The government has extended the FTM route for approval of mergers to the following categories. First, mergers between two or more subsidiaries of the same holding company, even if the subsidiary is not wholly owned, provided the transferor company is an unlisted company and not a Section 8 (Companies Act 2013) company. Second, mergers between unlisted companies, provided the total outstanding loans, debentures and deposits for each company is less than INR 200 crores, and there is no default in repayment of any such borrowing. Third, mergers between a foreign holding company and Indian wholly-owned subsidiaries. 

This was a much-needed move as this will not only promote ease of doing business but will also allow companies with limited external stakeholders or low debt exposure to restructure more swiftly and catalyze the trend of “reverse flipping” or the process of Indian start-ups and other companies shifting domicile to the country from overseas. This will particularly benefit foreign companies that plan to shift their base to India to leverage the buoyant capital markets for potential listings and to consolidate group companies. Over the recent years, instances of merging a foreign holding company with its Indian wholly owned subsidiary have become more frequent as many India-born or India-connected start-ups opted to shift base here. For instance, over the past 2-3 years, Flipkart, Dream11, Meesho, PhonePe, Zepto, Razorpay, and Pepperfry have changed the domiciles of their parent companies from foreign jurisdictions back to India. The FTM mechanisms will lower transactional frictions for unicorns returning to the list domestically in India. 

Until now, Regional Directors were permitted to extend the FTM provisions to division or transfer of undertakings (demergers) in practice only, but the rules now provide statutory recognition to cover such schemes under Section 232 of the Companies Act 2013. This can be a game-changer for demergers as now spin-offs and hive-offs will be treated at par with mergers. This will not only aid in procedural efficiency but can also potentially relieve the pressure on the Insolvency and Bankruptcy Code 2016, since now companies may act pre-emptively before insolvency proceedings by seeking group-level restructuring of healthy assets away from stressed units in a time-bound manner.

Although the merger rules for NCLT approval have been eased to enhance transparency, reduce post-transaction compliance risks and regulatory oversight, intimation to sectoral regulators and stock exchanges has been made mandatory. In case of a company regulated by a sectoral regulator such as RBI, SEBI, IRDAI or PFRDA, the notice shall be issued to the concerned regulator and respective stock exchanges for listed companies for objections or suggestions within a specified period. This is an attempt to overcome the time-consuming merger approvals, which are one of the biggest challenges that investors face in India’s corporate landscape. The traditional NCLT processes stretch for months, even years, especially when multiple regulators are involved. As of 30 November 2024, MCA data showed 309 merger applications pending before the NCLT, alongside 53 fast-track applications awaiting clearance. Revised forms and stricter timelines will improve process discipline and predictability, resulting in faster finalization of merger and demerger schemes and significantly reducing the workload of NCLT overall transaction costs. For investors, this provides scalability of corporate structures, aligns business timelines without the exorbitant costs of prolonged NCLT proceedings, which are crucial factors for those who seek predictability. This marks a significant policy shift in India’s corporate restructuring framework, strategically pushing India towards becoming the global hub for high-growth companies.

While the amendments have commendably widened the ambit of FTMs, they also bring along some potential challenges and considerations that need to be addressed. 

The Unaddressed Loopholes 

The Amendment Rules 2025 aim to streamline the corporate restructuring processes for corporate entities; however, the effectiveness of these may be called into question as the MCA has overlooked several inherent challenges. With the amended rules, the scope of the eligibility criteria for an FTM has been widened, but whether entities will be able to claim the benefit of the amendment is a question that deserves attention. 

The process is attached to a stringent approval mechanism that requires a heads-up from a minimum of at least 90% of creditors by value and 90% of shareholders by number, which is difficult for entities having a large or diverse shareholder base. Due to such a high threshold, entities may prefer to take the traditional route of NCLT approval rather than get involved in complexities and delays due to the approval process. 

The rationale behind keeping the non-profit entities out of the broadened scope of FTMs, on grounds of misuse of assets and absence of regulatory oversight, is unfounded. In reality, the non-profit entities in India operate on limited donor funding and routing them through the traditional NCLT approval process would mean subjecting them to a long and expensive procedure, which may divert their scarce resources to compliance costs. Moreover, sufficient safeguards are already in place under the Companies Act 2013 that alleviate the risks of misuse of assets far more effectively than for-profit companies. 

The intra-group mergers, which have been allowed by the Amendment Rules 2025, lack guidelines from MCA regarding the valuation of assets and liabilities of the subsidiaries, the minority shareholders' interests and the process of obtaining the 90% approval limit. Similarly, the cross-border mergers, taking place without any authority overseeing the compliance and the merger process, may leave a dangerous room for companies to escape their regulatory requirements. Adequate oversight of such mergers is essential to prevent regulatory arbitrage.

The Amendment Rules 2025 have now brought under its purview the provision for notifying the merger scheme to the relevant regulatory bodies, apart from the Regional Director. Though this move strengthens regulatory oversight, it fails to provide a clear timeline to these regulatory bodies for notifying their objections and comments. This may defy the ultimate objective of the FTM route process, which is to provide a speedy and effective mechanism for corporate restructuring. 

The Amendment Rules 2025 have provisions for subsidiaries, but whether these rules may be applicable to step-down subsidiaries or not is another question that sets out the uncertainty in the rules. Since the objective is to simplify corporate restructuring processes, particularly for small and medium-sized enterprises, the inclusion of step-down subsidiaries may be an incentive for entities to adopt the FTM route for effective restructuring.

The Amendment Rules 2025 have brought with them a heavy burden for the judiciary and increased litigation for companies. The amended rules retain the power of the Central Government to refer a merger scheme to the NCLT if it considers the scheme not to be in the public interest. The contours of what constitutes "public interest" remain undefined in the Amendment Rules 2025. With the broadened scope of the FTM provision, this becomes a serious concern as entities would approach the court questioning the interpretation and application of the phrase in their respective mergers. Further, the lack of guidelines and clarity on the aspects mentioned above may pose a problem of increased litigation in mergers taking the FTM route.

Conclusion

The Amendment Rules 2025, mark a significant reform in India’s corporate restructuring regime by bringing a wave of efficiency and attempting to minimize the dependence on NCLT for the merger approval process. The evolving structure of the market economy requires that the corporate entities be bestowed with autonomy in their restructuring processes in order to thrive and sustain in the economy.

The fate of this amendment is dependent on the addressal of these challenges by MCA, and further providing supplementary guidelines for the effective implementation of these rules. The focus should be on providing clear definitions, valuation methods and a check-and-balance mechanism within the FTM route itself, that prevents regulatory arbitrage while providing autonomy to companies in their corporate restructuring process. The amendment can turn counterproductive if sufficient safeguards are not put in place.

The amendment is a progressive step towards India’s larger aim of aligning its corporate restructuring laws with the global standards and has high potential in serving as a facilitator for ease of doing business. It is significant to view the amendment through a holistic lens with supplementary guidelines, regulatory synchronization and stakeholder involvement, to ensure that the objective of providing a fair, speedy and effective FTM route is achieved.