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Flash back a decade and IPO exits for private equity were non-existent in India. As a result of uncertainty over exits, many tech-based companies set up their holding companies offshore to raise funds and look at offshore listing options.

However, since the pandemic, no-one could have imagined how the domestic IPO market has boomed and is now flavour of the month. In turn, this has driven a wave of “reverse flips” of holding companies merging back into India with their operating companies, capitalising on domestic listing eligibility, more benign valuations, or emerging data-sovereignty norms.

In September 2024, acknowledging the market’s appetite for “reverse flips”, the Ministry of Corporate Affairs amended the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, to unlock a fast-track pathway for inbound consolidation: the term for a foreign holding company merging into its Indian wholly owned subsidiary.

Fast-track mergers were grafted on to the established Companies Act, 2013, by section 233 and rule 25 of the above-mentioned rules to furnish a sharply abbreviated alternative to the National Company Law Tribunal (NCLT) process under sections 230-232.

By reallocating the approving authority from the overburdened NCLT to the jurisdictional regional director (RD), the indicative timetable shrinks from the nine-plus months typical of a tribunal-driven scheme to about 60 days.

The mechanics are also deliberately lean: board approval; dispatch of the draft scheme and declarations of solvency to the Registrar of Companies and official liquidator; shareholder consent representing at least 90% of the issued share capital and creditor consent representing at least 90% in value; followed by the RD’s confirmation.

No formal hearings are required so legal costs and deal execution risks are proportionately lower.

When first enacted, however, the regime’s utility was confined to a narrow population: two or more “small” companies, two or more recognised startups, a startup merging with a small company, or a holding company consolidating with its wholly owned subsidiary.

Groups that graduated beyond the small company thresholds – or that employed offshore holding structures – had no option but to revert to the full NCLT route.

Cross-border mergers were technically liberalised in 2017, with the central government and the Reserve Bank of India permitting both inbound and outbound amalgamations under sections 230-232, and the Foreign Exchange Management (Cross-Border Merger) Regulations, 2018, codifying the attendant foreign exchange conditions.

But given these regulations were bolted to the tribunal process, actual uptake remained modest; the time and cost economics simply mismatched the needs of businesses.

Opening the gates

Now the draft Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025, propose to widen the definition of eligible entities in three discrete directions:

1. 1. Any two or more unlisted Indian companies (other than not-for-profits companies), regardless of size;
   2. A holding company, listed or unlisted, could merge with one or more unlisted subsidiaries – or allow subsidiaries of the same parent to merge with each other – provided the transferor entities remain unlisted; or
   3. The inbound cross-border category from rule 25A(5) would be transplanted into the main body of rule 25, erasing any residual doubt about its permanence.

If adopted in their present form, the 2025 amendments would capture a far broader swathe of M&A, marrying the tax and operational efficiencies of a statutory merger with a regulatory timetable that mirrors private acquisition norms.

Key takeaway

Taken together, the incremental reforms from the 2024 cross-border carve-out, and now the prospective 2025 expansion, evidence a conscious policy direction towards reducing friction in corporate reorganisations while preserving core creditor and minority shareholder protections.

For private groups contemplating consolidation, the door to an expedited statutory merger is now not merely ajar, but inviting.

Natashaa Shroff and Taranjeet Singh are partners and Gunjan Shrivastav is an associate at Shardul Amarchand Mangaldas & Co

Shardul Amarchand Mangaldas & Co
Amarchand Towers 216
Okhla Industrial Estate
Phase III
New Delhi 110 020, India
www.amsshardul.com
Contact details:
T: +91 11 4159 0700
E: connect@amsshardul.com