Scope of Fast-Track Merger Expanded

The Ministry of Corporate Affairs (MCA) has notified the Companies (Compromises, Arrangements, and Amalgamations) Amendment Rules, 2025, amending Rule 25 to further expand the scope of fast-track mergers under Section 233 of the Companies Act, 2013, in line with this year’s budget announcement.

Rule 1(A), introduced in 2021, permitted fast-track mergers between:

• Two or more startups,
• One or more startups and one or more small companies,

This was in addition to the merger between two or more small companies, and a holding company and its wholly owned subsidiary provided under Section 233.

The latest amendment extends this framework to include mergers between:

• Unlisted companies (excluding non-profit entities) with outstanding debt not exceeding INR 200 crore, provided there has been no default in repayment of loans, debentures, or deposits within 30 days prior to the date of notice and the date of filing. An auditor’s certificate must be filed in Form CAA-10A along with the approved scheme.
• A holding company (listed or unlisted) and its subsidiary (listed or unlisted), subject to the transferor company not being listed.
• Subsidiaries of the same holding company, provided the transferor company is not listed.
• A foreign holding company and its Indian wholly owned subsidiary (transferee company).

The transferee company must, within 15 days of the members’ or creditors’ meeting, file the approved scheme with the Central Government, along with:

• A report on the outcome of each meeting, and
• The registered valuer’s report in Form CAA.11 (attached to Form RD-1), along with the prescribed fees.

Additionally, companies regulated by sectoral regulators such as the RBI, SEBI, IRDAI, or PFRDA must share the proposed scheme with the respective regulator. In the case of listed companies, the notice must also be submitted to stock exchanges for comments and suggestions. The notice must further include a detailed statement.

Rule 25 has also been made applicable to schemes of division or transfer of undertakings under Section 232(1)(b). An enabling provision has been introduced, empowering the Central Government to issue further measures for the effective implementation of such schemes.

Importantly, the debt threshold for unlisted companies has been finalized at INR 200 crore, a significant increase from the INR 50 crore limit proposed in the draft rules issued in April 2025.