The Ministry of Corporate Affairs (‘MCA’), vide Notification dated 4 September 2025, has notified the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025 (‘Amendment’), effective from 4 September 2025, by amending Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (‘CAA Rules’). This Amendment has been notified with modifications in light of Budget 2025 which proposed rationalising the process of Fast Track Mergers (‘FTM’) in India.
1. Broadened the scope of FTM: Prior to the Amendment, the FTM route under Section 233 of the Companies Act, 2013 (‘CA 2013’) read with Rule 25 of the CAA Rules was permitted only between the following category of companies: (i) two or more small companies; (ii) holding and its wholly owned subsidiary; (iii) two or more start-up companies; and (iv) one or more start-up companies with one or more small companies.
The Amendment aims to broaden the scope of FTM permitting additional classes of companies to undertake mergers through the simplified FTM route as follows:
* FTM of unlisted companies (except Section 8 company) with one or more unlisted companies (except Section 8 company) subject to certain conditions that the companies involved in the scheme of FTM should not have: (a) an outstanding loans, debentures or deposits of INR 200 crores or more, in aggregate; and (b) defaulted in repayment of such loans, debentures or deposits, on a day, at least 30 days before issuing the notice of merger in Form CAA-9 to the Registrar of Companies (‘ROC’) and the Official Liquidator (‘OL’) inviting their objections, if any, under Section 233(1)(a) of the Act.
Additionally, the companies involved in FTM must be in compliance with the aforesaid conditions even on the date of filing of scheme with the Central Government, ROC and the OL. The companies proposing to undertake FTM under this category are required to file, in Form CAA-10A, a certificate obtained from their auditor certifying that the company meets the borrowing requirements prescribed therein.
* FTM between a holding company (listed or unlisted) and its subsidiary company (listed or unlisted) where the transferor company or companies are not listed.
* FTM of one or more subsidiary company of a holding company with one or more other subsidiary company of the same holding company, where the transferor company or companies are not listed.
* FTM of the transferor foreign company incorporated outside India being a holding company with the transferee Indian company being its wholly owned subsidiary company incorporated in India (Reverse Merger) as referred to in sub-rule (5) of Rule 25A of CAA Rules.
2. Regulatory Approvals: In terms of Rule 25(1) of CAA Rules, Form No. CAA-9 was required to be issued only to the ROC, OL and any other person affected by the scheme, for inviting their suggestions or objections, if any, to the proposed scheme. However, the Amendment is more specific and stringent that Form CAA-9 is also required to be issued to the relevant statutory regulators such as the Reserve Bank of India (‘RBI’), the Securities and Exchange Board of India (‘SEBI’), the Insurance Regulatory and Development Authority of India (IRDAI), or the Pension Fund Regulatory and Development Authority (‘PFRDA’), as per the applicability.
3. Clarity on Submission of Form No. CAA-10: As per the Amendment, Section 233(1)(c) of the CA 2013 read with Rule 25(3)(b) of the CAA Rules clarifies the companies involved in the scheme of FTM to file a declaration of solvency in Form No. CAA-10 as an attachment to Form No. GNL-1.
4. Extension of the timeline for filing the approved scheme of merger: As per Rule 25(4)(a) of CAA Rules, the scheme of FTM as approved by the members and creditors of both the transferor and transferee companies was required to be filed with the statutory regulators in Form RD-1 within 7 (seven) days from the date of such approval. Pursuant to the Amendment, the timeline for filing the approved scheme has been extended to 15 (fifteen) days from the date of approval.
5. Requirement to file reporting of result of the meetings: Form RD-1 should be filed with the regulators along with the report containing the result of the meetings of members and creditors, report of the registered valuer(s), and a statement addressing the objections and suggestions, if any, received from relevant statutory regulators in Form No. CAA-11.
6. Alignment of Rule 25 of CAA Rules with Section 233(12) of CA 2013: Section 233(12) of CA 2013 contemplates applicability of provisions of Section 233 of CA 2013 to the mergers referred to in Section 230, or the schemes involving division or transfer of undertakings as per Section 232(1)(b) of CA 2013. However, the corresponding rule (i.e., Rule 25 of CAA Rules) to Section 233 of CA 2013 is silent on such applicability. The Amendment has notified a new rule, sub-rule (9) to align with Section 233(12) of CA 2013, clarifying the process of FTM will apply mutatis mutandis to the schemes referred to in Section 230, and the schemes involving division or transfer of undertakings as referred to in Section 232(1)(b) of CA 2013.
Conclusion
The Amendment notified under Rule 25 of the CAA Rules aims at expanding the scope of entities eligible for FTM and applicability of these rules to the mergers under Section 230, and to divisions and transfers of undertakings under Section 232 of CA 2013. The enhanced regulatory oversight, extended timelines and clarity on documentation requirements aims to improve efficiency and compliance, which facilitates smooth intra-group restructurings and promotes ease of doing business.
[The authors are Senior Associate and Associate, respectively, in Corporate and M&A practice at Lakshmikumaran & Sridharan Attorneys, Hyderabad]
