A few days ago, the Ministry of Corporate Affairs quietly released a draft notification proposing amendments to India's fast-track merger process — a move that could open up a faster route to consolidation for a larger universe of companies, including unlisted and non-wholly owned subsidiaries.
On paper, this sounds like a win for business. But if you're a founder or an MSME promoter, it's not the headline — but the footnotes — that deserve your attention.
On paper, this sounds like a win for business. But if you're a founder or an MSME promoter, it's not the headline — but the footnotes — that deserve your attention.
What's Fast-Track Merger?
First introduced under Section 233 of the Companies Act, 2013, fast-track mergers were designed to simplify M&A between entities that are essentially part of the same corporate family — such as a company and its wholly owned subsidiary. In such cases, the lengthy court-supervised process involving shareholder and creditor approvals was considered unnecessary.
Think of it like merging two WhatsApp groups with the same admin. Why go through formalities when the control lies with one person anyway?
But now, the MCA proposes to open this route up further:
To subsidiaries that are not wholly owned.
To unlisted companies that are unrelated as long as their debt and financial health are "manageable".
To intra-group restructurings between companies under the same umbrella.
For micro, small and medium enterprises, and startups looking to streamline operations, absorb vertical partners, or consolidate group entities — this could be a blessing. Provided you understand what's at stake.
When 'Fast' Is Misnomer
In theory, the fast-track route skips the National Company Law Tribunal and approvals from multiple regulators. But in practice? Many companies report that fast-track mergers still take just as long — and sometimes longer — than regular schemes.
Why? Because approvals are still routed through the regional director's office, and bureaucratic hurdles remain deeply entrenched.
If you're a small or mid-size company without in-house legal teams or dedicated transaction counsel, this can quickly turn into a paper chase. The approval process — especially if it involves the MCA or the Registrar of Companies — often stumbles over procedural objections. And when you're chasing operational targets and investor timelines, this can derail the very objective of the merger.
So What's New?
Among the welcome changes is the MCA's recognition that ownership structures have evolved. Not every subsidiary is wholly owned. Some involve equity splits between founders and early investors. Giving such companies access to faster M&A routes shows maturity in regulatory thinking.
The proposal to include unlisted companies with low debt and clean books is also promising. But it raises tough questions:
How will 'default' be defined?
Will inter-corporate deposits be considered debt?
Can promoters restructure across unrelated entities without triggering tax scrutiny?
The answers are not yet clear — and that's exactly why legal advice at the time of drafting a merger plan is not a luxury. It's a necessity.
Legal Templates Don't Cover This Stuff
In the age of AI and downloadable contracts, founders often ask: "Why do I need a lawyer when the Companies Act is online?"
Here's why: this isn't just about drafting. It's about navigating a regulatory terrain with landmines buried in footnotes. Tax authorities, SEBI, the RBI — and yes, even the Income Tax Department — may want a say if the merger has financial implications. And let's not forget your creditors. If your legal documents miss one consent or one clause on debt rollover, you may be facing objections months later.
What Smart Businesses Are Doing Now
If you're a founder planning a group restructure, now is the time to ask your counsel some tough questions:
Do they understand the new MCA framework?
Can they pre-empt objections from the RD, SEBI or ROC?
Have they advised on fast-track mergers before — or will they learn on your transaction?
And if you don't yet have a lawyer — or only reach out for term sheets or founder agreements — it might be time to build a more strategic relationship.
What The Changes Really Signal
You can widen the fast-track lane all you want — but if the road is still broken, more cars won't make it smoother.
The MCA's proposal to include inter-group restructurings, small companies, startups, and now even unlisted, unrelated companies with sub-Rs 50 crore debt feels less like reform and more like random categorisation without transparent rationale. The core process remains unchanged: bureaucratic, ministry-led, and not exactly confidence-inspiring for businesses already wary of state scrutiny.
The truth is, founders don’t just need a faster route. They need a legal partner who can interpret grey zones, pre-empt objections, and communicate with regulators — not after things stall, but before they begin. And the current ecosystem doesn't make that easy to find. Which is precisely why more businesses are demanding curated, context-savvy legal insight — not directories, not hotlines and certainly not paperwork-heavy guesswork.
Because a fast-track is only as good as the person navigating it.
Don't Just Merge, Merge Smart
The MCA's draft amendments are a signal that the government wants to make M&A easier — but ease, in India, is always conditional. The companies that will benefit from these changes are not the ones who move fast. They're the ones who move with clarity.
So the next time someone tells you, "It's just a merger — download the form and get started," ask them this:
Would you take a shortcut through a forest if you didn't know what animals lived there?
Exactly.
Prachi Shrivastava is the founder of Lawfinity Solutions & Vakil Vetted.
Disclaimer: The views expressed here are those of the author and do not necessarily represent the views of NDTV Profit or its editorial team.
Also Read: Warning To Conscience Keepers Of A Company
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