Introduction
Mergers and Amalgamation are an integral part of a company’s growth; they act as important strategies for companies to increase their profits. However, the procedure for Mergers and Amalgamation is a very long and strenuous one, which must be fulfilled before the company’s merger as detailed out under Sections 230 to 232 of the Companies Act, 2013. Although the elongated timeline for the procedure is necessary to maintain the careful scrutiny and diligence to protect the stakeholders of the companies, certain instances require that the process be accelerated. Fast-track mergers were introduced in 2016 under Section 233 of the Companies Act 2013, and Rule 25 of the Companies (Compromises, Arrangements, and Amalgamations) Rules 2016, based on the Irani Committee Report of 2005.
They are part of the ease of doing business proceedings that allows companies to bypass the long proceedings under NCLT, this allows companies to approach the Regional Director instead of the NCLT to get approval for their schemes of merger and amalgamation. The benefits range from efficiency and reduced costs to reduced operational costs. Provided under Section 233 of the Companies Act, 2013, this provision allows certain categories of companies to escape the broader NCLT scrutiny and approval is granted through the Central Government, Regional Director, Registrar of Companies and Official Liquidator.
It is read with Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and related amendments and notifications issued from time to time for this purpose. In this type of merger, the transferor company transfers its assets, liabilities, rights and obligations to the transferee company and upon completion of the process, the transferor company stands dissolved without winding up, other regulatory bodies are invited to raise objections.
Amendment to CAA Rules
Ministry of Corporate Affairs vide notification dated 4th September, 2025, made some key amendments to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. These amendments shall be called the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025. The CAA rules 2025 amend the initially proposed categories of two categories eligible for fast-track merger, i.e. two or more small companies or between a holding company and its wholly-owned subsidiary company, post amendment Rule 25(1A) broadens the categories eligible for fast-track mergers, extending the eligibility to; one or more small companies with start-ups, two or more start-up companies or one or more unlisted company, with one or more unlisted company, where every company involved in the merger has, in aggregate, outstanding loans, debentures or deposits not exceeding two hundred crore rupees, and has no default in repayment of loans, debentures or deposits.
To avail benefits of fast-track mergers, board approval of the scheme of merger is acquired and the company appoints professionals to complete the formalities of merger and authorize a person for issuance of notices and filings. Under the CAA Rules companies involved in merger are required to issue notice inviting objections or suggestions, it is issued in Form CAA – 9 and declares solvency. Without any objections in 30 days, the scheme shall be put in for approval by shareholders holding at least 90% of total shares, it also must be approved by creditors representing nine-tenths in value of creditors or class of creditors.
Registrar and Official Liquidator, after this approval, scrutinise the scheme and file response to the Regional Director, who if satisfied approves the merger with order. Post amendment, the notice must also be served upon sectorial regulators such as RBI, SEBI, IRDAI, and PFRDA for sector regulated entities and in the case of listed companies, to the concerned stock exchanges as well. These regulators and exchanges are entitled to furnish their objections or suggestions within the statutory period under Section 233(1)(a).
The introduction of the initial facility and its amendments allow for the smoother business transactions as it allows for approval in shorter time span, this has worked to remove excessive burdens from the NCLT, where earlier all approval requirements had to go through with the Tribunal scrutiny, the provision has allowed for some filtering of categories of companies. Transaction such as the reverse flip by RazorPay, the company redomiciled themselves in India using the FTM method completely bypassing the longwinded process of NCLT, done with the approval of Regional Director and RBI, display that FTM has been largely successful in its objective of business reforms, allowing companies to achieve synergy in a relatively simpler form while still providing protection in form of higher NCLT scrutiny, where Regional Directors can refer schemes to the NCLT if they deem it against the public interest.
In the case of FTM, Regional Directors limit their scrutiny to determine that the regulatory checklist is fulfilled and in cases he deems that public interest is at risk they transfer the case to NCLT. Regulations prevent the failure of mergers that are sound by reference to the Tribunal, Asset Auto India Private Limited & Ors. v. Union of India, where the RD instead of referring the case to NCLT outright rejected it, it was held that this was not fair practice and the Court mandated that RD mandatorily must approach the Tribunal, when it has formed the opinion that the merger is not in the public interest. Specific guardrails like these show that adequate protections exist for merging companies and that rejections by RD also have recourse.
Fast-track merger provisions as they exist today with their rules and amendments create a balance between the powers of RD and the scrutiny of the Tribunal. While they give the RD sufficient scope to address mergers, they also protect these mergers through NCLT scrutiny by placing the Tribunal as the last resort against RD decisions.
While these standing regulations worked well with the limited categories of companies that could avail them, there has been a change in circumstances with the inclusion of a broader variety of companies that are not tightly interrelated. The 2025 Amendment includes partly owned subsidiaries and completely unrelated unlisted companies (provided they meet certain debt thresholds). Resultantly despite the objective of the RD Route being faster compliance, it can become extensive as approaching NCLT may become necessary.
Due to this amendment, there might be minority disagreeing shareholders who, even though they are not significant in numbers, are people who have invested in that company, and they may put focus on the Share Swap Ratio. While this can be seen as a situation which would add to NCLT workload, it is a welcome step as it sets a standard for a well-protected minority as it places a recourse for those dissatisfied.
This friction with the Share Swap naturally occurs because valuation disputes cannot be resolved at the administrative level. The Regional Director overseeing the fast-track route is an administrative officer and without powers of judicial scrutiny, and it would be an overreach if he were to do so, when disputes are forced into the NCLT, it ensures that people are deprived of their shares only after a proper judicial trial. This acts as a safety valve for these transactions as the Tribunal plays the role of the final adjudicator even though it may add to the NCLT docket.
Gaps in the Existing Framework
There persists a lack of harmony between regulations; tax regulations present a question regarding their consonance with the FTM standards. Demergers executed through the long procedure of NCLT are granted exemptions that are unavailable to those demergers that take place through the fast-track route so, although regulations allow for demergers to take place through the RD Route, when not given the same tax status they may discourage entities from taking the fast-track route for their schemes.
These claims arise from the Income Tax Act 2025, where features a deliberate omission of Section 233 from the definition of “demergers” under Section 2(35), this defining clause is a position supported by the Ministry of Finance’s submissions before the Select Committee which deprives such demergers from tax neutrality. While the absence of Tribunal scrutiny can be seen as a tax evasion risk, a regulatory change is a necessary step in the bid to make fast track a widely accessible procedure.
Conversely blanket exemptions to the fast-track route, because of the lack of the Tribunal scrutiny, would also be counterproductive. Schemes of merger are scrutinised by relevant regulatory authorities, which enable the Income Tax Department to monitor such transactions, in which anti-abuse provisions such as GAAR play a role to enhance the legitimacy of these transactions as, this scrutiny would act as a deterrent against any tax evasion attempts through demerger, bridging the gap between corporate fast-track flexibilities and tax exemptions may be the next defining step of these reforms.
Furthermore, minor administrative changes can enhance the Regional Directors’ offices more efficiently, in view of the increased number of classes of companies that are now permitted to opt for the fast-track route. Amendments are needed to decentralise the office of the RDs, more than the previous expansion. In a rapidly growing and expansive economy; it might not be feasible for the current number of offices to bear the burden that comes with the variety of companies now allowed.
Conclusion
Ultimately the introduction of fast-track mergers has positively impacted companies with an increase in ease of doing business and reducing the time and cost associated with corporate restructuring. The streamlining of this fast-track has allowed companies to get operational efficiency while still balancing regulatory oversight, though over time more changes will be needed within regulations and administrative actions to achieve synergy for further smooth running of corporate operations.
Author: Jyotsna Chaturvedi, Head – corporate Practice
Co- Author: Prerna Bisht, Intern
