The Public Notice dated 04.04.2025 issued by the Ministry of Corporate Affairs (MCA), Government of India proposes to amend the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (hereinafter referred to as “the Rules, 2016”). The proposed amendment relates to the fast-track merger provisions under Section 233 of the Companies Act, 2013. It is in line with the Union Budget 2025-26 (Para 101), which aims to simplify and widen the scope of fast-track mergers. The amendments are open for public comments until 05.05.2025 through the MCA’s e-Consultation Module.
Section 233 facilitates fast-track mergers between certain classes of companies, with approval from the Central Government (delegated to Regional Directors).
In 2021, sub-rule (1A) in Rule 25 of the Rules, 2016 was introduced which allowed (i) Mergers between two or more start-up companies; and (ii) Mergers between one or more start-ups and one or more small companies.
Proposed Amendments:
Following additional classes of companies are being proposed to be covered under Section 233:
1. Unlisted Companies (other than Section 8 companies):
It is proposed to allow mergers between two or more unlisted companies (excluding Section 8 companies) if:
- Borrowings of such companies from banks or financial institutions or any other body corporate are less than ₹50 crore, and
- The companies have made no defaults in repayment of such borrowings.
An auditor’s certificate confirming compliance of the above-mentioned conditions is required.
2. Holding Company (listed or unlisted) and its one or more Unlisted Subsidiary company or companies
Currently, only mergers of wholly owned subsidiaries with its holding company are permitted under the provisions of Section 233. The notice proposes to allow the merger of subsidiary other than wholly owned subsidiary with its wholly owned subsidiary under Section 233, however, such subsidiary should not be a listed company.
3. Mergers Between Fellow Subsidiaries (Within Same Holding Company)
Presently, mergers between fellow subsidiary companies having the same holding company are not allowed under Section 233. The notice proposes to include such mergers within the ambit of Section 233 as such mergers would be similar to mergers between holding company and unlisted subsidiary companies.
4. Inclusion of Foreign Holding Company Mergers under Rule 25 of the Rules, 2016
The notice also proposes to allow merger provided under Rule 25A (5) i.e., merger between a foreign company (incorporated outside India) with its wholly-owned Indian subsidiary to be incorporated under Rule 25 to make it self-contained.
This newsletter is compiled and contributed by Manasvi Pinge was led by India Juris, New Delhi team.
Disclaimer: The information published in the above newsletter is collected from various sources in electronic medium and analyzed by the firm. The reader is advised to consult the attorney qualified in their jurisdiction, before acting on any information contained in this newsletter. India Juris excepts no liability what so ever in this regard.
