The Evolution of Fast Track Mergers & Acquisitions in India 2025

Introduction

Corporate restructuring, particularly through Fast Track Mergers and Acquisitions (M&A), is a cornerstone of business strategy globally, driving significant growth and transformation. While companies can undertake M&A through private, contractual agreements, statutory arrangements sometimes offer distinct advantages. However, choosing between these approaches involves careful consideration of commercial, legal, and tax implications, alongside the crucial factor of execution speed.

In India, private, contractual arrangements have traditionally been more prevalent for M&A, primarily because statutory arrangements typically require regulatory approvals. Initially, statutory mergers in India primarily necessitated approval from the National Company Law Tribunal (NCLT). The NCLT process, however, was often perceived as time-consuming, especially for straightforward transactions like those between parent and subsidiary companies or among small businesses.

Recognizing the need to simplify procedures and accelerate the timeline for statutory mergers, the Ministry of Corporate Affairs (MCA) introduced a “Fast Track Merger” (FTM) process for specific categories of companies. This initiative, embedded in the Companies Act, 2013, aims to create a more efficient platform for such transactions.

Fast Track Mergers: A Leap Towards Efficiency (Section 233 of the Companies Act)

The concept of streamlined mergers gained traction with the J.J. Irani Committee Report of 2005, which underscored M&A as vital instruments for business growth and strategic development. The Report highlighted the procedural challenges and significant delays inherent in court-driven merger processes in India. To address this, and drawing inspiration from international M&A models, the committee recommended “short-form mergers” for certain company classes.

Based on these recommendations and with a clear objective to enhance the ease of doing business in India, the MCA enacted Section 233 of the Companies Act, 2013, alongside Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (referred to as “Merger Rules”). These provisions allow for FTMs without the direct intervention and approval of the NCLT for:

• A holding company and its wholly-owned subsidiary.
• Two or more small companies.
• Any other companies as may be specified.

Furthermore, in a significant move to support the burgeoning startup ecosystem, the applicability of FTM was extended to include startup companies on February 1, 2021. These entities are collectively referred to as “Eligible Entities.”

The Fast Track Merger Process:

Under Section 233 and the Merger Rules, Eligible Entities planning an FTM must:

1. Board Approval: Obtain approval from their respective boards of directors.
2. Notice to Authorities: Send notices to the relevant Registrar of Companies (ROC) and Official Liquidator (OL) to solicit their objections or suggestions on the proposed scheme of arrangement (“Scheme”).
3. Scheme Revision (if needed): Based on any objections or suggestions from the ROC and OL, the Scheme may be revised.
4. Stakeholder Approval:
   • Secure approval from shareholders holding at least 90% of the total share capital of each company involved.
   • Obtain approval from at least 9/10ths of the creditors (or classes of creditors) of each company, by value.
5. Filing with Authorities: The approved Scheme must then be filed by the transferee company with the jurisdictional ROC and OL for any further objections or suggestions.
6. Objection Period: The ROC and/or OL have 30 days from the filing date to communicate any objections or suggestions to the concerned Regional Director (RD).
7. RD’s Role:
   • If the RD/Central Government believes the Scheme is not in public interest or in the interest of creditors (based on objections), they may apply to the NCLT for further review.
   • However, if no objections are received within 30 days, or if the RD deems the objections unsustainable, the RD is required to register the Scheme and issue a confirmation order to all participating companies.

The 2023 Amendment: Time-Bound Approvals and Deemed Consent

While the FTM process aimed to reduce delays, practical implementation sometimes fell short due to the lack of fixed timelines for the Regional Director (RD) to issue a confirmation order. This led to considerable delays, especially in regions with heavy workloads, undermining the very purpose of FTMs.

To address this, the MCA introduced crucial amendments to Rule 25(5) and Rule 25(6) of the Merger Rules, via a notification dated May 15, 2023. These “2023 Amendments” establish a time-bound approval mechanism and a “deemed approval” concept:

Expedited Timelines for RD Action (post-Objection Period):

• No Objections/Unsustainable Objections: If the RD receives no objections from the ROC/OL or finds them unsustainable, the RD must issue the confirmation order within 30 days from the expiry of the 30-day objection period.
• Minor Changes: If the RD requires minor changes to the Scheme, these must be communicated within 15 days of the expiry of the objection period. Once the changes are incorporated, the confirmation order must be issued within 15 days of receiving the revised Scheme.
• Referral to NCLT: If the RD decides to refer the Scheme to the NCLT (due to valid objections or public/creditor interest concerns), they must file an application with the NCLT within 60 days of receiving the Scheme.

Deemed Approval: A significant improvement under the 2023 Amendment is the “deemed approval” provision. If the RD fails to:

• Issue a confirmation order within the specified timelines (as per the first two points above), OR
• File an application with the NCLT within 60 days of receiving the Scheme (as per the third point above),

then the RD will be deemed to have no objections to the Scheme, and a confirmation order will be issued accordingly. This significantly enhances certainty and eliminates the open-ended timelines that previously plagued the FTM regime.

Boosting Ease of Doing Business

The 2023 Amendment directly tackles a critical bottleneck, particularly in regional jurisdictions where high volumes of merger schemes led to prolonged approval times. By establishing clear, enforceable timelines for RDs, the process for companies pursuing FTMs becomes more efficient and predictable.

This increased efficiency and predictability are particularly appealing to foreign investors considering transactions in India via the FTM route. By fostering a more business-friendly environment through these streamlined processes, the Indian government is providing greater certainty regarding timelines, which is crucial for companies evaluating statutory arrangements for M&A.

Remaining Hurdles and Future Considerations

While the 2023 Amendment is a positive stride, certain aspects could further optimize the FTM process for businesses:

• Creditors’ Approval: The current FTM process mandates obtaining approval from a substantial majority (at least 9/10ths by value) of creditors. Organizing a meeting of all creditors, especially for large companies, can be logistically challenging and costly. While obtaining written consents is an alternative, it still presents significant administrative hurdles due to the requirement of sending notices via registered post and securing responses within strict timelines. If this threshold isn’t met, companies might have to restart the FTM process or resort to the NCLT-approved merger route, defeating the FTM’s original intent. Considering that a transferor company’s liabilities automatically transfer to the transferee company in an FTM, some flexibility could be considered, especially for mergers within the same corporate group. For instance, countries like Singapore and Delaware (USA) have more relaxed requirements. In Singapore, companies only need to inform their secured creditors 21 days before a general meeting for short-form mergers.
• Shareholders’ Approval: The FTM requires prior approval from shareholders holding at least 90% of a company’s total share capital. This high threshold can be particularly difficult to achieve for public and listed companies with a large and dispersed shareholder base. A Company Law Committee Report dated March 21, 2022, proposed a “twin test” for shareholder approval: (i) at least 75% (by value) of shareholders present and voting, AND (ii) more than 50% (by value) of the total shareholders. However, this amendment has not yet been incorporated into Section 233 of the Act.Comparative jurisdictions offer more flexible approaches.
• Multiple Approval “Pitstops”:Companies undertaking FTM in India currently need approvals from both creditors and shareholders. Additionally, they must address objections and suggestions from the ROC and OL, followed by the RD’s assessment of whether the Scheme should be referred to the NCLT. This multi-layered consent requirement from various authorities and stakeholders can prolong the process.

Conclusion

The 2023 Amendment to the Fast Track Merger rules is undoubtedly a commendable step by the Ministry of Corporate Affairs towards making India a more attractive destination for corporate restructuring. By introducing clearer timelines and the concept of deemed approval, it brings much-needed certainty and predictability to the FTM process, encouraging more companies to opt for this route for internal restructuring.