Corporate Affairs Bulletin: Expansion of Fast-Track Merger Framework under Companies Act, 2013

Corporate Affairs Bulletin: Expansion of Fast-Track Merger Framework under Companies Act, 2013

Background

The Ministry of Corporate Affairs (the "MCA") invited suggestions from stakeholders on expanding the ambit of fast-track mergers (FTM) under Section 233 of the Companies Act, 2013 (the "CA 2013"). After receiving comments, the MCA notified the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025 (the "Amended CAA Rules") on September 04, 2025 [G.S.R. 603(E)]. The objective of this amendment was to simplify corporate restructuring and promote ease of doing business.

The fast-track merger route bypasses the National Company Law Tribunal (the "NCLT") and allows quicker approvals. Previously, the scope was expanded in February 2021 to include start-ups. The Amended CAA Rules mark another step in liberalizing corporate restructuring by including more classes of companies.

Expansion of Fast-Track Merger Framework

The Amended CAA Rules introduce the following expansions to the fast-track merger framework:

1. Mergers of One or More Unlisted Companies (Excluding Section 8 companies)

The fast-track route was previously allowed only for Small companies, Start-ups, and the merger of a Wholly-Owned Subsidiary (WOS) with its holding company. The Amended CAA Rules now widen the class of eligible companies to include:

• Every unlisted company involved in the merger.
• The company must have an aggregate of outstanding loans, debentures, or deposits not exceeding ₹200 Crore.
• There must be no default in the repayment of such borrowings on a day not more than 30 days before the notice of the proposed scheme is sent.

A certificate from the auditor of the company confirming that these conditions are met must now be filed in Form No. CAA-10A.

2. Merger of Holding Company (Listed or Unlisted) and its Subsidiary (Listed or Unlisted)

The Amended CAA Rules permit a merger involving a listed/unlisted holding company and its unlisted subsidiary to be undertaken under the fast-track process.

• Under the old rules, only the merger of a wholly owned subsidiary with its holding company was covered.
• The amendment extends eligibility to subsidiaries, even if it is not a wholly owned subsidiary.
• Limitation: This clause shall not apply where the transferor company or companies are listed.

3. Merger of Different Subsidiaries of the Same Holding Company

The rules now allow a merger between fellow subsidiaries of the same group to be undertaken under the fast-track process, which can boost internal restructuring.

• Limitation: This clause shall not apply where the transferor company or companies are listed.

Illustration: If Company A is the holding company of WOS Company B, and Company C is a subsidiary of Company B, and Company D is a subsidiary of Company C, then any scheme of merger, amalgamation, transfer, or division involving Company A, B, C, or D (or any combination thereof) would be eligible for the fast-track process, subject to the prescribed conditions.

4. Merger of a Transferor Foreign Company with its Wholly Owned Subsidiary in India

Cross-border mergers between a transferor foreign holding company can now merge with its wholly owned Indian subsidiary under the fast-track route.

5. Inclusion of Divisions/Transfers

The provisions of Rule 25 have been extended to cover the division or transfer of undertakings, aligning with Section 232(1)(b) of the Act.

Ambiguity in Shareholder and Creditor Approval Thresholds & Our Remarks

The Amended CAA Rules do not address the challenge of rigid approval thresholds required from shareholders and creditors.

• Current Thresholds: Section 233(1)(b) & (d) prescribes an absolute approval threshold of 90% of the total number of shares for shareholders and 90% in value for creditors.
• Practical Difficulty: These thresholds are absolute (not based on those present and voting), which creates practical difficulties, especially with large or dispersed shareholder/creditor bases.
• Recommendation: It is recommended that the MCA align the thresholds with those under the NCLT route, i.e., approval by a majority representing three-fourths in value, present and voting. The 90% threshold could be retained to dispense with meetings if consents are received via affidavits.

The amendment also requires filing the approved scheme within 15 days of the conclusion of the meetings. A corresponding amendment in the SEBI master circular on the Scheme of Arrangement by Listed Entities would make merger under section 233 truly fast track

Procedural Updates

• Notice to Regulators: Companies regulated by RBI, SEBI, IRDAI, or PFRDA must send the scheme notice (Form CAA.9) to the concerned regulator and stock exchanges (for listed companies).
• Declaration of Solvency: Form CAA.10 must be filed as an attachment to Form GNL-1.
• Post-Meeting Filings: The transferee company must file the approved scheme, meeting results, and valuation report in Form CAA.11 (as attachment to Form RD-1) within 15 days of the meeting.
• Revised Forms: Forms CAA-9, CAA-10, CAA-10A, CAA-11, and CAA-12 have been updated.

FAQs on the Amended CAA Rules

Q1. When do these Amended CAA Rules become effective?

These rules are effective from September 4, 2025.

Q2. Which new categories of companies are now eligible for fast-track mergers and are there any limitations?

Q3. How are objections and suggestions from affected parties handled in a proposed scheme?

A notice (in Form No. CAA.9) must be issued to invite objections or suggestions from:

• The Registrar of Companies (RoC) for the area where the registered office of the transferor/transferee company is located.
• The Official Liquidator (OL) for the area where the registered office of the transferor company is located.
• Any person whose interest is likely to be affected by the proposed scheme.
• The concerned regulator and respective stock exchanges, in the case of companies regulated by sectoral regulators (e.g., RBI, SEBI, IRDAI, PFRDA) or listed companies.

Q4. What is new in Form CAA.10A?

Form CAA.10A is a certificate by the auditor, applicable only for mergers of one or more unlisted companies (not being Section 8 companies). It covers particulars on:

• Paid-up share capital
• Free reserves
• Outstanding loans
• Outstanding debentures
• Outstanding deposits

Q5. Is there any ambiguity in the timeline for filing the approved scheme?

The rules mandate filing the notice with RoC/OL within 15 days of the meeting of shareholders and creditors. However, it is unclear whether consents received after the meeting are valid and how they align with the 15-day timeline.

Q7. What are the key updates with respect to Forms CAA.9, CAA.10, and CAA.11?

Q8. What happens after the Central Government confirms a scheme?

Once the Central Government confirms a scheme, an order in Form No. CAA.12 is issued. This order ratifies the scheme and specifies the effective date from which it will take effect.