Corporate restructuring in India has traditionally been associated with prolonged timelines, procedural complexity and significant compliance costs. For decades, companies seeking to amalgamate were required to obtain judicial approval before completing a merger. The introduction of Section 233 of the Companies Act, 2013 ("Act") marked a significant shift by creating the Fast Track Merger ("FTM") route, a simplified mechanism applicable to:

mergers or amalgamations between two or more small companies;
mergers or amalgamations between a holding company and its wholly owned subsidiary;
mergers or amalgamations between two or more start-up companies; and
mergers or amalgamations between one or more start-up companies and one or more small companies.

As India's corporate landscape continues to mature, recent legislative developments namely, the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025 ("2025 Rules") and the Corporate Laws (Amendment) Bill, 2026 ("2026 Bill") reflect a clear regulatory intent to liberalise and simplify internal corporate reorganisations.

1. The Rationale Behind the Fast Track Merger Framework

Under the conventional merger framework contained in Sections 230 to 232 of the Act, a scheme of arrangement requires approval from the National Company Law Tribunal ("NCLT"). The process involves scrutiny by multiple regulatory authorities, including the Income Tax Department, the Reserve Bank of India (where applicable), the Official Liquidator and the Registrar of Companies, often resulting in timelines of eight to eighteen months before a merger can be implemented.

Section 233 was introduced to provide a proportionate alternative for transactions involving entities that pose relatively limited regulatory or public interest concerns. Parliament recognised that mergers involving small companies, start-ups and wholly owned subsidiaries generally do not present the same level of stakeholder or creditor risk as mergers involving large or listed companies. Subjecting such transactions to the full NCLT process was inconsistent with the broader objective of improving the ease of doing business.

Accordingly, Section 233 shifted the approval process from the NCLT to the Central Government, acting through the Regional Director, thereby creating a faster, less expensive and administratively simpler route for eligible mergers.

2. The 2025 Expansion: Companies (Compromises, Arrangements and Amalgamations) Amendment Rules

Although Section 233 represented a significant reform, its practical utility remained limited because of its narrow scope. The Ministry of Corporate Affairs addressed this limitation through the 2025 Rules, which substantially expanded the categories of companies eligible to undertake FTMs.

The principal changes introduced are as follows:

(a) Non-wholly owned subsidiaries

Holding companies may now merge with subsidiaries that are not wholly owned, provided that the transferor company is an unlisted company.

(b) Fellow subsidiaries

Mergers between two or more fellow subsidiaries having the same holding company are now eligible under the FTM route, subject to the transferor company being unlisted.

(c) Broader category of unlisted companies

Any two or more unlisted companies may now utilise the FTM route, provided that:

their aggregate outstanding borrowings (including loans, debentures and deposits) do not exceed ₹200 crore; and
neither company has defaulted in the repayment of such borrowings.

Section 8 companies continue to remain outside the scope of the fast-track framework.

(d) Reverse-flip mergers

The amendments also permit the merger of a foreign holding company into its wholly owned Indian subsidiary, subject to applicable regulatory approvals.

Collectively, these amendments significantly broaden the availability of the FTM framework beyond traditional intra-group restructurings.

3. The 2026 Upgrade: Corporate Laws (Amendment) Bill

Despite the expanded eligibility introduced by the 2025 Rules, a significant practical impediment remained within Section 233 itself. The existing provision requires approval from shareholders holding at least 90% of the total number of shares of the company.

For many widely held unlisted companies, this threshold proved exceptionally difficult to satisfy. Even where an overwhelming majority supported the merger, the inability of a small number of shareholders to attend the meeting or participate in the voting process could result in the statutory threshold not being achieved, compelling companies to revert to the considerably lengthier NCLT process. Industry participants have consistently identified this requirement as one of the principal reasons why the FTM framework remained underutilised.

The 2026 Bill seeks to address this issue through targeted amendments.

Key proposals

(a) Rationalised voting thresholds

The Bill proposes replacing the requirement for approval by shareholders holding "90% of the total number of shares" with approval by members representing "75% in value of the members present and voting" at the meeting.

Similarly, the existing requirement for creditor approval by nine-tenths in value is proposed to be reduced to approval by creditors representing 75% in value.

These amendments would align the FTM voting thresholds more closely with the approval requirements applicable to schemes under Sections 230 to 232 of the Act, while significantly improving the practical viability of the fast-track process.

(b) Filing exemption

The 2026 Bill also proposes to exempt demergers and transfers of undertakings from the requirement of filing reports with the Official Liquidator, thereby reducing procedural duplication and easing compliance requirements.

4. Strategic Implications

Viewed together, the 2025 Rules and the 2026 Bill represent one of the most significant reforms to India's merger framework since the enactment of the Companies Act, 2013.

The 2025 Rules substantially expand the range of transactions eligible for the fast-track route, while the 2026 Bill addresses one of its most significant practical shortcomings by replacing an onerous approval threshold with a more commercially workable voting standard. Together, these reforms have the potential to transform FTMs into the preferred restructuring mechanism for a large segment of India's unlisted corporate sector.

Internal reorganisations including the consolidation of step-down subsidiaries, mergers of fellow subsidiaries and post-acquisition simplification of group structures could potentially be completed within three to five months instead of the twelve to eighteen months typically associated with the NCLT route, resulting in considerable savings in both time and transaction costs.

The reforms are also expected to ease the burden on the NCLT by diverting routine, non-contentious mergers to the Regional Directors, enabling the Tribunal to devote greater attention to complex restructuring matters, contested schemes and insolvency proceedings.

From an investment perspective, the reforms should facilitate more efficient post-acquisition integration for private equity investors and corporate groups, allowing businesses to rationalise holding structures, improve operational efficiency and create cleaner platforms for future strategic exits or initial public offerings.

While the proposed amendments promise to significantly improve the efficiency of India's corporate restructuring framework, they have not yet become law. The 2026 Bill, introduced in the Lok Sabha on 23 March 2026, is presently under examination by a Joint Parliamentary Committee. Until the Committee submits its report and Parliament formally enacts the legislation, the proposed amendments including the revised voting thresholds remain prospective. Nevertheless, the direction of reform is clear: India is steadily moving towards a faster, more commercially pragmatic and business-friendly merger regime that increasingly reduces dependence on the NCLT for routine corporate restructurings.

Beyond the NCLT: India's Evolving Fast Track Merger Regime