Fast Track Merger Under Companies Act, 2013

Fast-track merger under Section 233 of the Companies Act, 2013, provides a quick and efficient route for corporate restructuring in India. The mechanism is designed in a way that minimizes procedural hassles and provides a fast track to merger for eligible entities, such as small companies, startups, and holding-wholly owned subsidiary pairs, without rigorous examination by NCLT. This is basically aimed at facilitating ease of doing business by reducing the compliance burden and smoothing the integration of operations, assets, and management. Streamlining approvals while reducing timelines, the fast-track route for mergers ensures corporate growth, operational synergy, and effective organisational restructuring.

Fast Track Mergers – Eligibility

Fast-track mergers have been permitted under Section 233 of the Companies Act, 2013, which lays down the provisions for fast-track mergers among the categories of companies as specified. This route is available only in cases when the companies fulfil the eligibility criteria laid down. The fast-track merger mainly relates to:

1. Two or more small companies as defined by Section 2(85).
2. A holding company and its wholly-owned subsidiary.
3. Two or more start-up companies, or a start-up merging with a small company, as per subsequent notifications issued by the MCA.
4. Any other category of companies specified by the Central Government, including certain unlisted entities that are allowed through subsequent amendments.

If a company does not fall within these categories, then it has to undertake the normal route of merger provisions under Sections 230 to 232.

Process of Fast Track Mergers Under Companies Act 2013

Fast-track mergers are an efficient mechanism when the companies qualify for it, and it is possible to obtain a very high (near-unanimous) endorsement from shareholders and creditors.

1. Pre-checks & strategy

• Check eligibility under Rule 25 for the particular categories of companies that are involved. If not eligible, the standard Section 230/232 NCLT route has to be followed.
• Check limits of debt exposure and other regulatory conditions. Recent amendments may place ceilings or further conditions.

2. Board approval & draft scheme

• Board meeting(s): approve a draft merger scheme, approve the persons authorized to sign, and approve the exact form of member/creditor notifications
• Draft Scheme: Describe the transfer of assets/liabilities, share exchange if applicable, appointed date, accounting implications, treatment of minority/shareholder rights, etc.

3. Solvency & supporting statements

• Declaration of solvency: the boards, usually of the transferor and transferee, need to incorporate solvency declarations (as per requirements) stating that the merged entity will be able to meet its liabilities.
• Valuation report: a report from a registered valuer, where necessary, to substantiate share swap ratios, etc.
• Statement of explanation: shall accompany notifications, with Rule 6 / Section 230 style statements as applicable.

4. Notices to members & creditors (and other statutory notices)

• Notice period: meetings (where held) are commonly convened with at least 21 clear days’ notice, as is customary under Rule 25/Section 233 read with relevant Rule provisions; such notice must include the draft scheme, explanatory statement, and declaration of solvency. Members/creditors may, instead of attending a meeting, opt to give approval in writing.
• Other notices: send copies/notice to ROC, Official Liquidator (if needed), Income-tax authority and any sectoral regulator mentioned in the Rules (where applicable). Recent Rules require some notices to be served and permit the ROC/OL to state objections.

5. Members’ & creditors’ approval

• Collect approvals either by meeting (vote) or in writing.
• Remember, the 90% / 9/10th thresholds described above must be met for each company in the scheme and for each class where required.

6. Filing with the Central Government / Regional Director (RD)

• Filing: The transferee company files the approved scheme, meeting results, and necessary annexures in Form CAA.11 (or the form prescribed under the Rules) with the Central Government [which, in practice, is now often done through the Regional Director].
• The old practice was to file the scheme and results within a short period of time (this was between 7 to 15 days in many earlier practice notes) — the Rules and circulars detail the exact timelines of filing; in practice, practitioners file immediately after the meetings (and updated Rules detail the exact timing).

7. RD’s examination & implied approval/referral to NCLT

• The review time for the scheme by RD: It has to either approve the scheme or, in case of objections on any of the grounds mentioned above, it refers the same to NCLT for final consideration.
• There is a 60-day proposed period in many reports for the RD to act or to be considered to have approved the scheme in case of no objections. If there is an objection, the fast-track route shifts to the regular NCLT process.

8. Post-approval procedures

• Filing of a certified copy of RD approval with ROC, updating registers, carrying out the transfer of assets and liabilities, notifying tax authorities, and statutory filings and stamping to be completed as provided in the state regulations regarding stamp duty.
• Implementation date: The effective date/appointment date of the scheme is as stated in the scheme, and can be retrospective to the extent permitted by law.

9. Key documents & annexures (checklist)

• Final Scheme of Merger/Amalgamation signed.
• Board resolutions approving the scheme and authorising the signatory.
• Declaration of solvency by the Board/directors (format as per rules).
• Report of a registered valuer, where a consideration/ share swap is involved.
• Explanatory statement & notice of the meeting (or written consent forms).
• Form CAA.11, Scheme and Meeting results for RD/Central Government filing.
• Copies of notices served to ROC / Official Liquidator / Income-tax / sectoral regulators, if any.

10. Timelines

• Scheme and Board Approvals Preparation: 2–4 weeks, depending on the complexity.
• Notice and members/creditors consent collection: minimum 21 days if meetings are held. Written consents may be quicker, but they may still take some time to collect 90% approvals.
• Filing to RD & RD action: Statutory review window with the RD, commonly known as 60 days, to decide or refer to NCLT. If the RD does nothing, there are provisions for deemed acceptance; if there are objections, expect referral to NCLT with a much longer timeline.

Overall, a simple fast-track merger where approvals are readily obtained and the RD has no objection can be completed in 1–3 months. If the RD refers the matter to the NCLT or if approvals are hard to achieve, the timelines extend significantly.

What happens in the case of objections or dissenting opinions?

1. In case the Regional Director has objections that the amalgamation is not in the public interest or against the interest of creditors, then it would refer the matter to NCLT. Thereafter, the companies have to follow the usual court-approved procedure.
2. Dissenting Shareholders/Creditors: Apart from the increased threshold for the fast-track route, dissenting shareholders/creditors have statutory provisions available to them; for example, they could approach the NCLT under the relevant sections. The fast-track route is thus only available for schemes that have almost unanimous approval.

Engagement with other regulatory bodies and tax implications

Tax and stamp duty:

• The mergers’ effects would need to be considered under the Income-tax Act, Goods and Services Tax, and relevant state stamp laws, and the notifications or filings to that effect would need to be made.
• The benefits of exemption or relief in respect of amalgamations under the state legislation with regard to stamp duty would need to be checked.

Sectoral and regulatory Approvals:

• If the business falls under regulation, such as for banks, insurance companies, telecommunication, NBFCs, and stock exchanges or listed entities, separate approvals by the relevant regulators or no-objection certificates may be required before finalisation.
• It is in this context that the recent 2025 amendments to the rules have explicitly mentioned that the proposed resolution plan shall necessarily be in consonance with the coordination with sectoral regulators, wherever applicable.

Recent and significant changes (2024–2025)

1. MCA has, however, proactively liberalised and expanded the fast-track process in 2024–2025 (with notified amendments taking effect in September 2025) to cover more categories, including certain unlisted companies, start-ups, and foreign parent-wholly owned Indian subsidiary combinations, among others, and also delegated approval responsibilities relating to such process to Regional Directors with a view to hastening processing.
2. While these changes make this route more useful for corporate consolidation, they also introduce new conditions and require coordinated notifications to regulators, so practitioners are advised to look at the latest text of Rule 25 and MCA circulars before proceeding.

Practical tips & best practice

1. Confirm eligibility under the latest Rule 25 & any 2025 amendments BEFORE drafting the scheme
2. Early Regulator Interactions: Where regulated activities exist, secure in-principle NDAs/NOIs from sector regulators or at least inform them early.
3. Obtain creditors’ lead consent first: approach major creditors early; if major creditors are satisfied, smaller creditors usually follow.
4. Where comfortable, use written consents to expedite approvals and ensure documentary proof of 90% thresholds.
5. Pre-book RD consultation: Many RDs offer a pre-filing clarity/meeting, which reduces the chance of referral to NCLT.
6. Maintain full and contemporaneous records of meeting minutes, notices served, proof of delivery to ROC/OL/Income tax, etc., to avoid procedural objections later.

Conclusion

Fast-track mergers under the Companies Act, 2013, prove to be the most effective and business-friendly restructuring avenue for eligible companies. This process, without involving the NCLT approval, saves tremendous time, costs, and procedural complexities and makes the mergers feasible for small companies, startups, and group entities. The simplified documentation, expedited approvals, and diminished regulatory oversight enable organisations to focus on the attainment of strategic objectives, such as operational synergy, resource optimisation, and improved competitiveness.

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