What is a Fast-Track Merger?
Fast-track mergers (FTMs) are a significant reform in India's corporate law, designed to streamline mergers and amalgamations for specific company classes. Enacted under Section 233 of the Companies Act 2013, to be read with Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules 2016, FTMs offer an alternative to the National Company Law Tribunal (NCLT) process, providing a simpler, more cost-effective mechanism for intra-group restructuring and consolidation of small companies.
From its initial narrow scope in 2016 to their expansion in 2021 to include startups, and further liberalisation done through the April 2025 draft amendments released by the Ministry of Corporate affairs (MCA), FTMs are evolving to accommodate a broader range of companies and transactions. This article traces the evolution of FTMs, explains the current and proposed frameworks, and evaluates their implications for stakeholders.
Legal Basis for Fast-Track Mergers in India
The JJ Irani Committee Report emphasized the need for faster corporate restructuring to promote ease of doing business. Based on these recommendations, the MCA introduced FTMs to reduce time and costs by eliminating court hearings, special audits, and public notices. This route allows eligible companies to merge without NCLT approval, significantly shortening procedural timelines.
Current Legal Framework
The legal framework defines specific eligibility criteria for companies to use the FTM route. Under the current law, FTMs are available to small companies, which are defined as those having a paid-up capital of not more than ₹4 crore and a turnover of not more than ₹40 crore, as well as mergers between a holding company and its wholly owned subsidiary. Further, since 2021, the regime has been expanded to include startups registered with the Department for Promotion of Industry and Internal Trade (DPIIT), enabling them to merge with each other or with small companies. However, FTMs are not available to all types of companies. Publicly listed companies (except where a holding company is merging with its wholly-owned listed subsidiary), Section 8 companies (non-profits), and companies incorporated under special Acts remain excluded from the framework.
This had been received as a welcome move as it directly helps in improving India's ease of doing business standards. It reduces the time taken for mergers and eliminates many of the high-cost formalities associated with the traditional route, such as public advertisements and tribunal hearings. It also significantly reduces compliance burdens for eligible companies, facilitating group-level restructuring with minimal disruption. Legal commentators and business analysts have noted that FTMs provide much-needed regulatory relief to smaller companies and startups, encouraging formal consolidations and greater efficiency in corporate operations.
Limitations
The regime is not without its limitations. These majorly include the extremely high approval threshold of 90% from both shareholders and creditors, which can be prohibitively difficult to achieve in companies with dispersed ownership or multiple stakeholders. Furthermore, while the process bypasses the NCLT, the Regional Director (RD) still retains discretionary power to refer schemes to the Tribunal on grounds of public or creditor interest, introducing an element of uncertainty. Additionally, the regime's limited eligibility restricts its usefulness to a narrow segment of the corporate ecosystem. Larger unlisted companies, public companies, and charitable organizations remain outside the scope of this otherwise beneficial framework. Moreover, the process still requires no-objection reviews by the Registrar of Companies and Official Liquidator, and in certain circumstances, regulatory clearances from bodies like SEBI or RBI, particularly in transactions involving foreign entities or sector-specific regulations. Some critics have also pointed to the lack of public transparency, as FTMs do not require public notices, potentially sidelining dissenting minority shareholders or creditors.
Despite these constraints, FTMs have gained some traction in practice. While public disclosures are limited due to the private nature of most eligible companies, there are still reports the use of the FTM route in intra-group consolidations. Over the past few years, firms such as PhonePe, Groww, and Razorpay have utilized FTMs for intra-group restructuring. Such transactions highlight the increasing significance of FTMs as a flexible mechanism for strategic reorganization, particularly in industries driven by innovation and rapid expansion.
Proposed 2025 Amendments
In April 2025, the MCA released a draft notification proposing significant amendments to Rule 25. This move was in line with the 2025–26 Union Budget's broader policy commitment to rationalize regulatory requirements and promote ease of doing business for startups, small enterprises, and emerging companies. The proposed changes aim to expand the classes of companies eligible for FTM and enhance procedural clarity while maintaining basic safeguards.
This draft proposes the inclusion of general unlisted companies with total borrowings not exceeding ₹50 crore, provided they are not in default. Such companies would need to furnish an auditor's certificate confirming their debt status and solvency. Another key expansion allows holding companies to merge with their unlisted subsidiaries even if the subsidiary is not wholly owned which is a significant departure from the earlier requirement of 100% ownership. Additionally, mergers between fellow subsidiaries under a common unlisted holding company would now be permissible under the FTM route. Importantly, the draft proposes to integrate Rule 25A (relating to inbound cross-border mergers) into the main FTM framework, enabling foreign parent companies to merge with their Indian wholly-owned subsidiaries using the simplified route. These changes, once finalized, would represent a major liberalization of the FTM regime, making it more inclusive and strategically relevant to a broader spectrum of corporate structures.
From a business point of view, these proposed amendments have been widely welcomed. By extending FTM access to low-debt unlisted companies, the reform addresses a major gap in the current regime, allowing mid-sized firms to use a simplified restructuring route. Permitting non-wholly-owned and sister company mergers simplifies intra-group reorganizations, especially for business families and conglomerates with complex holding structures. MNCs, too, stand to benefit from the integrated cross-border provision, as it allows them to rationalize global operations more efficiently by consolidating Indian subsidiaries. The proposed rules also reinforce India's attractiveness as a corporate hub, enhancing investor confidence and operational agility.
Remaining Concerns
The high approval threshold of 90% for shareholders and creditors remains unchanged, which continues to limit the applicability of FTMs in cases involving wider stakeholder bases or dissent. Critics have argued that reducing this threshold to 75%, in line with the standard requirement under Section 230 for regular mergers or introducing deemed approval mechanisms for non-responsive parties would make the regime more functional without compromising protections. There is also persistent ambiguity around the RD's discretion to refer schemes to NCLT, particularly due to the vague and undefined notion of "public interest." Without objective criteria or materiality thresholds, this discretionary power could lead to unpredictability. Furthermore, the draft adds some compliance layers, such as mandatory auditor certification and default checks, which, while necessary, might disincentivize smaller firms from using the process. The exclusion of listed companies and Section 8 companies from the expanded regime has also been flagged as a missed opportunity, given that many such entities could benefit from a streamlined merger mechanism under proper safeguards.
Startups and small enterprises are likely to experience the most immediate impact if the proposed amendments are implemented. The inclusion of more unlisted companies with limited borrowings expands the universe of eligible participants. For startups, this means faster mergers with strategic partners, streamlined exits for investors, and better scalability. By avoiding the long timelines and high costs associated with tribunal-driven mergers, these entities can preserve financial resources for innovation, R&D, and market expansion. For small enterprises, particularly those operating in closely held structures, FTMs offer a viable route for formalizing previously informal partnerships or restructuring internal operations without requiring extensive professional assistance or compliance resources.
Multinational corporations (MNCs) also stand to gain significantly. Many MNCs operate in India through layered subsidiary structures, and the proposed rules allow for easier consolidation of such group entities. The integrated treatment of inbound cross-border mergers within Rule 25 enables MNCs to repatriate or re-align control more efficiently, potentially reducing tax complications and facilitating better reporting. While listed companies remain outside the FTM scope, unlisted Indian subsidiaries can now be merged more easily, supporting broader global rationalization strategies. Nevertheless, MNCs must remain vigilant of regulatory approvals that may be required from the Reserve Bank of India or sector-specific regulators, especially in sensitive or highly regulated industries.
Recommendations
Considering these developments, several suggestions have emerged from legal and industry circles. Firstly, the government should consider reducing the current 90% voting threshold, at least in phases, or creating alternative mechanisms that allow mergers to proceed with sufficient safeguards even in the presence of limited dissent. Second, expanding the scope to cover Section 8 companies or creating a parallel simplified route for nonprofits would help unlock restructuring opportunities in the charitable and social sectors. Third, clarifying the criteria for RD referrals to NCLT would provide companies with greater legal certainty and reduce the perceived risk of arbitrary intervention. Fourth, ensuring strict timelines for approvals and introducing deemed clearance mechanisms could further reduce delays. Fifth, enhancing transparency by mandating limited public disclosures post-approval would balance the need for stakeholder confidence with process efficiency and finally, industry bodies such as ICSI and ICAI could be encouraged to develop practical guidance notes or checklists for compliance with the revised FTM framework, particularly concerning auditor certifications and solvency declarations.
Conclusion
FTMs have proven effective in reducing merger complexity for eligible companies. If implemented, the 2025 amendments would mark a major step in expanding their reach, including cross-border and intra-group restructurings. Addressing remaining structural and procedural bottlenecks will help create a modern, flexible corporate restructuring framework aligned with India's economic and competitiveness goals.
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