Govt Widens Scope Of Fast Track Mergers Under Companies Act

The Centre has widened the scop of Compromises, Arrangements and Amalgamations, or CAA rules (2016) to include more set of companies under the scope of fast track mergers.

In accordance to a recent notification, "two or more unlisted companies (other than section 8 companies) which meet prescribed thresholds of outstanding loans, debentures or deposits" will be eligible for fast-track mergers under the CAA rules. 

The scope has been widened to also include "holding company and subsidiary companies excluding cases where transferor company is a listed company", and "two or more subsidiaries of the same holding company excluding cases where transferor company is a listed company".

The three additional categories or classes of companies were added to those who can avail fast track mergers through amendment of the CAA rules via he gazette notification dated Sept. 4.

Notably, the Companies Act, 2013 regulates the incorporation, responsibilities, governance, and dissolution of companies in the country.

Section 233 of the Companies Act, in particular, provides for merger or amalgamation of certain companies (Fast Track Merger) through approval of Central Government.

Earlier the act allowed mergers/demergers between — two or more small companies and holding company and its wholly owned subsidiary.

An amendment was made in the CAA Rules back in 2021 in order to facilitate ease of doing business and allow small companies and start-up companies to avail such fast track procedure.

In 2021, the scope was expanded to "two or more start-up companies and one or more start-up company with one or more small company."

Subsequently, in September 2024, another amendment was made to simplify merger of foreign companies and their wholly owned subsidiaries, that is for transferor foreign companies (incorporated outside India) and transferee Indian company (incorporated in India).