How The 2025 MCA Amendments Simplify Intragroup And SME Restructuring

1. Introduction

India's 2025 Amendments to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (CAA Rules) significantly widen who can use the fast track merger route under Section 233 of the Companies Act 2013. By bringing many utilised, group and SME restructurings within a Regional Director driven process instead of the NCLT, the Ministry of corporate Affairs (MCA) is turning what was once a niche tool for small companies into a mainstream option for internal M&A.

Fast Track 2.0 at a Glance

Wider Eligibility: unlisted, debt, non-defaulting companies including non-wholly-owned subsidiaries and fellow subsidiaries of the same holding company can now use Section 233.

Beyond Mergers: certain demergers/hive-offs of undertakings or divisions are also eligible, expanding use beyond straight amalgamations.

RD driven Approvals: the Regional Director is the primary approving authority. NCLT is involved only by exception where public interest or fairness concerns arise.

Financial Safeguards: use is confined to entities within notified borrowing/deposit thresholds and with a clean non-default track record, certified via enhanced CAA-10/CAA-10A declarations.

2. Why fast‑track mergers matter in 2025?

Section 233 was originally conceived as a simplified path for mergers of small companies, start‑ups and holding wholly‑owned subsidiaries, with approvals routed through the Central Government (Regional Directors) rather than the National Company Law Tribunal (NCLT). In practice, its use remained limited because eligibility was narrow and most intragroup reorganisations still had to go through full‑blown NCLT schemes under Sections 230 - 232.

Budget 2025 explicitly called out the need to rationalise and expand fast‑track mergers to de‑clog tribunals and support business reorganisations. The MCA responded by notifying the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025, effective 4 September 2025, which substantially broaden the classes of companies and schemes that can use the fast‑track route and update the associated forms and procedures.

3. What the 2025 CAA Amendments change?

3.1 Broader eligibility under Rule 25

Before 2025, fast‑track mergers were largely confined to:

1. Mergers of two or more "small companies",
2. Mergers involving a holding company and its wholly‑owned subsidiary, and
3. Certain start‑up combinations and limited cross‑border "reverse‑flip" structures.

The 2025 Amendment Rules add several new categories of eligible companies:

1. Two or more unlisted companies (other than Section 8 companies) that each meet borrowing/ deposit thresholds (for example, outstanding loans, debentures and deposits not exceeding around ₹200 crore) and have not defaulted in repayment, backed by an auditor's certificate in a new Form CAA‑10A.
2. Holding company and subsidiary mergers even where the subsidiary is not wholly‑owned, provided the transferor is not listed and prescribed financial/solvency conditions are met.
3. Mergers between two or more subsidiaries of the same holding company, again on the condition that the transferor is an unlisted company and debt‑light, non‑defaulting and within the thresholds.

This effectively opens the door for a wide range of intragroup reorganisations and SME combinations to use the fast‑track mechanism, instead of defaulting to NCLT schemes.

3.2 Coverage of demergers and certain cross‑border structures

The amendments also clarify that demergers/hive‑offs of undertakings or divisions under Section 232 can proceed via the fast‑track route where eligibility criteria are satisfied, not just pure amalgamations. Commentaries further note that, building on earlier 2024 changes, certain cross‑border structures such as mergers of foreign holding companies into their Indian wholly‑owned subsidiaries can also rely on the expanded fast‑track framework, subject to separate RBI and sectoral approvals.

For corporate groups, this means a much broader palette of internal mergers, demergers and reverse‑flip consolidations can now be done without full tribunal proceedings.

4. From NCLT to Regional Director

4.1 Updated forms and declarations

The 2025 Amendment Rules revise and introduce forms to reflect the expanded scope and to ensure creditors' and regulators' interests are protected:

1. Revised Form CAA‑9 for issuing notice and capturing objections from shareholders and creditors.
2. Enhanced solvency and non‑default declarations in Forms CAA‑10 and new CAA‑10A, requiring directors and auditors to certify that each company is solvent, within the borrowing thresholds and has not defaulted.
3. Additional disclosure requirements where companies are regulated (for example, by RBI, SEBI, IRDAI), with copies of the scheme to be served on relevant regulators.

These changes are aimed at balancing speed with safeguards, ensuring that only debt‑light, non‑defaulting companies can avail the fast‑track shortcut.

4.2 Regional Director at the centre, NCLT as exception

Under the expanded framework, approval of a fast‑track merger or demerger continues to lie with the Regional Director (RD) rather than the NCLT, with the RD expected to act within defined timelines after receiving shareholder/creditor approvals and objections, if any. The NCLT's role is largely residual, coming in only if the RD considers that the scheme is not in the public interest or prejudicial to stakeholders and decides to refer it.

For companies that qualify, the net effect is a shorter, less adversarial and lower‑cost approval process compared with a full Section 230-232 scheme, which typically requires multiple NCLT hearings and longer waiting periods.

5. What this means for intragroup restructurings

5.1 Group simplifications and collapses

Many Indian groups operate through complex webs of private subsidiaries and step‑down entities, often inherited from tax, financing or legacy structuring. The broadened eligibility for unlisted companies and fellow subsidiaries means that:

1. Group‑simplification exercises (collapsing intermediate holdcos, eliminating duplicative entities, aligning business verticals) can increasingly be done under Section 233.
2. Mergers of sister subsidiaries into a single operating company, or into a regional hub, can bypass NCLT where borrowing thresholds and non‑default conditions are met.

This is particularly attractive for PE‑backed groups and promoter families seeking to clean up structures ahead of exits, IPOs or strategic sales.

5.2 SME and mid‑market combinations

For SME and mid‑market unlisted companies that qualify as "debt‑light, non‑defaulting", the expanded fast‑track route offers a way to combine entities or hive off lines of business without the time and cost burden of a full tribunal process. Law firm commentaries emphasise that this could make mergers a more realistic tool for regional consolidation, family‑business reorganisations and succession planning.

However, companies with high leverage, stressed debt or recent defaults will still need to use the conventional NCLT route, reflecting the policy choice to confine fast‑track to lower‑risk cases.

6. Safeguards for creditors and minority shareholders

While the 2025 amendments liberalise eligibility, they incorporate several safeguards to protect creditors and minority shareholders:

1. Borrowing and non‑default thresholds ensure that only financially healthy companies can bypass tribunal scrutiny.
2. Mandatory notices to creditors and regulators via updated forms, with opportunities to object, help surface concerns before RD approval.
3. For companies with listed parents or affiliates, additional notice to stock exchanges and market regulators is required, increasing transparency where public investors are indirectly affected.
4. The RD can still decline approval or escalate to NCLT if a scheme appears unfair, prejudicial or raises broader public interest issues.

These mechanisms are meant to counteract fears that a wider fast‑track corridor might weaken stakeholder protections.

7. When to choose fast‑track, and how?

For boards, promoters and in‑house counsel, the question is no longer "can we use Section 233 only if we are a small company?", but rather "do we meet the new fast‑track eligibility grid, and does it make sense for this transaction?"

A practical approach is:

7.1. Check eligibility early

• Are all entities unlisted (transferor cannot be listed)?
• Do borrowing/deposit figures for each entity fall within the notified thresholds?
• Is there a clean non‑default history supported by auditor certification in CAA-10/CAA-10A?

7.2. Map scheme type

• Pure merger vs demerger/hive‑off.
• Holding subsidiary vs fellow‑subsidiary vs unlisted third‑party merger.
• Any cross‑border elements that trigger RBI or sectoral approvals.

7.3. Plan documentation and timelines

• Structure board approvals, valuation, fairness reports and creditor notices around the updated CAA forms.
• Build in realistic time for RD queries and possible clarifications, even though timelines are shorter than NCLT schemes.

7.4. Watch interfaces with other regimes

• Competition (CCI) thresholds for combinations.
• SEBI and stock‑exchange requirements where a listed parent is affected.
• Tax neutrality conditions under the Income‑tax Act for mergers/demergers.

Used thoughtfully, Section 233 in its "2.0" form can become the default route for a large subset of non‑controversial intragroup and SME restructurings.

8. Common Pitfalls to avoid

Even within the framework, some recurring mistakes can derail the benefits of fast-track:

1. Assuming eligibility without rigorous checking borrowing and default status for each entity.
2. Under estimating creditor or minority resistance and not engaging early to address commercial concerns.
3. Ignoring the need for CCI or sectoral approvals, leading to sequencing issues even if Section 233 is available.
4. Treating tax neutrality as automatic, instead of obtaining specific tax advice on whether the scheme satisfies statutory conditions.
5. Key takeaways

The 2025 MCA amendments to the CAA Rules transform fast‑track mergers from a narrow small‑company tool into a mainstream restructuring option for unlisted groups and SMEs that are financially sound and lightly leveraged. By broadening eligibility to unlisted companies, non‑wholly‑owned subsidiaries, fellow subsidiaries and certain demergers while preserving creditor safeguards and RD oversight. The reforms promise quicker, cheaper and more predictable internal M&A, and help de‑congest India's already burdened NCLT system.

For corporate counsel and deal‑makers, the message is clear and every proposed intragroup merger or hive‑off in 2025 and beyond should start with a Section 233 eligibility check. Where the grid is satisfied, fast‑track mergers 2.0 can materially compress timelines and transaction costs provided the scheme is carefully structured to respect the new financial thresholds, disclosure requirements and stakeholder‑protection mechanisms.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.