MCA Expands Fast-Track Eligibility-amends Rule 25(1A) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016
1. Introduction
The Ministry of Corporate Affairs (MCA) has notified amendments to Rule 25(1A) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 vide Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025 significantly broadening the scope of companies eligible for fast-track mergers under Section 233 of the Companies Act, 2013. Previously, the fast-track route was confined only to schemes between two or more start-ups, or between one or more start-ups and one or more small companies( paid-up share capital does not exceed ₹4 crore turnover for the immediately preceding financial year does not exceed ₹40 crore.). With the amendment, several new classes of companies have now been brought within its ambit, offering greater flexibility and ease of doing business.
Merger/Amalgamation is a restructuring tool which helps Companies in expansion & diversification of their business and to achieve their underlying objectives.
Merger means an arrangement whereby one or more existing companies merge their identity into another to form a new & different identity.
Section 233 of Companies Act, 2013 has introduced a new concept of fast track merger for Small Companies and merger of Holding companies with its wholly owned Subsidiary Companies. This is the first significant change to merger and amalgamations regime over the last six decades which has sub-served the need of simplification of procedure.
Fast Track Merger is a new concept which is introduced in India under the Companies Act, 2013. Moreover, fast Track Merger is a unique concept as it does not require approval from National Company Law Tribunal (NCLT) for the merger. Hence, approval by jurisdictional Regional Directors based on the reports by the Registrar of Companies (ROC) and Official Liquidator is sufficient.
2. Expansion of Eligible Classes of Companies
The amendment allows mergers between unlisted companies (other than Section 8 companies), subject to certain financial thresholds and compliance with repayment obligations. It also permits fast-track mergers between a holding company and its subsidiary, provided the transferor is not listed, as well as between subsidiaries of the same holding company, facilitating intra-group restructuring. In addition, a notable inclusion is the allowance for a foreign holding company to merge with its wholly owned subsidiary incorporated in India, further liberalizing cross-border restructuring within multinational group structures.
3. Conditions and Compliance Framework
To ensure financial discipline and shareholder protection, the new provisions stipulate that unlisted companies availing the fast-track merger route must have outstanding loans, debentures, or deposits not exceeding Rs. 200 crores and must not have any default in repayment. The exclusion of listed transferor companies from certain provisions highlights a cautious regulatory stance to safeguard investor interests. This expanded framework encourages group-level consolidations and international parent-subsidiary mergers, while balancing risk management with ease of corporate restructuring.
4. Updated Forms and Conclusion
Alongside these amendments, the MCA has revised several procedural forms to align with the new regime. Form CAA.9, CAA.10, and CAA.11 have been updated with enhanced disclosure requirements, while a new Form CAA.10A has been introduced to mandate an auditor’s certificate for unlisted companies engaging in a merger. These updates ensure transparency by requiring detailed disclosures on company relationships and confirmation of legal compliance. Overall, the amendments to the Companies (CAA) Rules, 2016 mark a progressive step towards simplifying corporate restructuring, enabling faster mergers while maintaining robust checks to protect creditors and stakeholders.
DETAILED ANALYSIS
Section 233 of the Companies Act, 2013 read with Rule 25 of the CAA Rules, 2016, presently allows the following classes of companies to undertake mergers under the fast-track route:
- Two or more small companies;
- Merger between a holding company and its wholly-owned subsidiary;
- Two or more start-up companies;
- One or more start-up companies with one or more small companies
Often referred to as the “RD Route” in general parlance, the key features of a FTM, include the elimination of NCLT approval, replaced instead by confirmations/approvals from the RoC, OL, members/creditors representing 90% in value, and lastly an order by the jurisdictional RD confirming such merger.
The key change introduced is to extend the benefit of the RD route beyond the presently eligible companies to include the following additional classes:
Scheme of arrangement between holding (listed or unlisted) and a subsidiary company (listed or unlisted)
- Prior to Amended Rules, Fast Track Mergers between holding company and subsidiaries were permitted only if the subsidiary was wholly-owned by the holding company/ parent.
- Pursuant to Amended Rules, mergers between a holding company (listed or unlisted) and one or more unlisted subsidiaries will be permitted, even if the subsidiaries are not wholly owned.
- Please note that, in all cases, the transferor company should not be listed on any stock exchanges.
- This change was recommended by the Company Law Committee in its report of March 2022.
Scheme of arrangement between two or more Unlisted Companies
- Under the Amended Rules, any unlisted companies (not being a company incorporated under Section 8 of CA 2013) can now undertake a Fast Track Merger, subject to certain qualification requirements.
- The qualification criteria states that every company involved in the merger: (a) has, in aggregate, outstanding loans, debentures, or deposits not exceeding INR 200 Crore9; and (b) has no default in repayment of such loans, debentures or deposits.
- The qualification is to be satisfied on a day not more than 30 days before the scheme of amalgamation filed with relevant authorities inviting their comments/objection.
- In order to satisfy the requirement, a certificate10from the auditor of each company is to be filed along with the scheme.
Scheme of arrangement between two or more Fellow subsidiaries
- Mergers between two or more fellow subsidiaries of the same parent company are now eligible to the Fast Track Merger route.
- Please note that, in all cases, the transferor company(ies) should not be listed on any stock exchanges.
- This will benefit conglomerates and groups seeking internal consolidation without going through lengthy NCLT processes.
Reverse Cross-Border Mergers involving Indian WOS of foreign companies
- A foreign holding company incorporated outside India can now merge with its wholly-owned Indian subsidiary by way of Fast Track Merger.
- MCA in September 9, 2024 had notified Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2024 which expressly enabled “reverse-flip” mergers—where a foreign holding company merges into its wholly-owned Indian subsidiary— to proceed by way of a Fast Track Merger, subject to approvals and declarations. However, the consequent amendments had not been carried out in Section 233 of CA 2013 and associated rules.
- With the Amended Rules, merger of foreign parent with its wholly owned subsidiary incorporated in India is brought under Section 233 of CA 2013 as well and avoids the confusion created in the absence of such provision in the charging section.
TO CONDUCT A FAST-TRACK MERGER, COMPANIES MUST FILE SPECIFIC FORMS WITH THE REGISTRAR OF COMPANIES (ROC) AND THE REGIONAL DIRECTOR (RD) AT DIFFERENT STAGES OF THE PROCESS.
Pre-approval forms
- Form CAA-9: This form is a notice of the proposed merger scheme.
- Purpose: To invite objections or suggestions on the scheme.
- Filed by: Both the transferor (merging) and transferee (new) companies.
- Filed with: The ROC, Official Liquidator (OL), and other relevant authorities, like market or financial regulators for regulated entities.
- Form CAA-10: A statutory declaration of solvency.
- Purpose: To confirm that the company is financially sound and can meet its liabilities. This must be filed before the meeting of members and creditors.
- Filed by: Both the transferor and transferee companies.
- Filed with: The ROC.
- Form CAA-10A (New Form): An auditor’s certificate for certain unlisted companies.
- Purpose: Confirms that unlisted companies merging under the new expanded eligibility criteria meet the prescribed financial limits (e.g., total outstanding loans, debentures, or deposits not exceeding ₹200 crore).
- Filed by: The merging unlisted companies.
- Filed with: The RD.
Post-approval forms
- Form CAA-11: Notice of the approval of the scheme by members and creditors.
- Purpose: To notify the Regional Director that the scheme has been approved by the necessary majority of shareholders and creditors.
- Filed by: The transferee company.
- Filed with: The Regional Director (RD), ROC, and Official Liquidator (OL).
- Timeline: Must be filed within 15 days of the conclusion of the member and creditor meetings, an extension from the previous 7 days.
- Form CAA-12: The confirmation order issued by the Regional Director.
- Purpose: The RD’s official approval of the merger scheme, which makes it legally binding.
- Filed by: The Regional Director.
- Form GNL-1: This is a general-purpose e-form used for various filings.
- Purpose: I t is used as a cover form to file Form CAA-11 and other related documents, such as the approved scheme, with the ROC.
- Filed by: The transferee company.
- Form INC-28: A final e-form used to register the RD’s confirmation order.
- Purpose: To inform the ROC that the merger has been legally concluded. The merger becomes effective from the date of filing this form.
- Filed by: The transferee and transferor companies.
- Timeline: Must be filed within 30 days of receiving the RD’s confirmation order.
