Govt widens scope of fast-track mergers; move to benefit larger number of firms

The corporate affairs ministry has relaxed rules to allow the fast-track merger facility to a larger number of companies, especially the small and medium ones, in sync with the 2025-26 Budget announcement.

In a notification on Monday, the ministry expanded the scope of fast-track merger to include unlisted companies that have reasonable debt exposure and no default in repayment, among others.

The borrowing of each of the companies involved in the merger must be less than Rs 200 crore at the best 30 days prior to applying for the approval.

However, the relaxed rules won’t apply to non-profit entities set up under Section 8 of the Companies Act, it said.

The Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025, come into effect immediately, as per the notification.

Prior to the move, the fast-track facility was available for a merger between two or more small companies, or between a holding company and its wholly owned arm, or between two or more start-ups or between a start-up with a small company.

The ministry also proposed to allow fast-track merger of a company incorporated outside the country into its wholly owned Indian arm.

“The new rules reflect the government’s commitment to ease the corporate restructuring norms,” said Abheet Sachdeva, partner (M&A Tax) at Nangia Andersen LLP. “It opens doors for a host of unlisted companies to fast-track internal restructuring”, subject to stipulated conditions, he added.

In September last year, the ministry had decided to fast-track the approval process for the merger of only a start-up incorporated outside the country into its wholly owned Indian arm by doing away with the time-consuming clearance from the National Company Law Tribunal (NCLT). This was aimed at encouraging the so-called "reverse flipping".