CAA Rules Amended 2025: MCA Widens Scope of Fast Track Mergers/Demergers under Companies Act, 2013
Companies’ incorporation, responsibilities, governance, and dissolution are controlled by the Companies Act, 2013. Section 233 of the Companies Act, 2013, allows amalgamation of certain companies through the approval of the Central Government. Similarly, Section 233(1) of the act permits mergers/demergers between two or more small companies and a holding company and its wholly owned subsidiary. Section 233 of the act grants the Ministry of Corporate Affairs (MCA) and the Central Government powers to notify by rules or additional classes of companies who are eligible to claim such a fast-track process.
To make the process of setting up businesses easier and permit small companies and startup companies to claim such fast-track procedures. The government introduced changes in the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (CAA Rules) in 2021. This was done to extend the scope of the fast-track process for mergers/demergers between two or more start-up companies and one or more start-up companies with one or more small companies.
Thereafter, the government further introduced changes in CAA rules in September 2024. The merger of a transferor foreign company incorporated outside India, being a holding company, with the transferee Indian company, being its wholly owned subsidiary company incorporated in India (reverse flipping), has also been allowed through the fast-track merger procedure.
In use of para 101 of the Budget Speech 2025-26, the government further decided to improve the scope of such mergers. To take this action, the government needed to change the CAA Rules, which were done on September 04, 2025, after holding stakeholder consultations. This change further added mergers/demergers in respect of the following additional classes of companies in rule 25 of such rules for claiming the fast-track merger/demerger procedure:
- Two or more unlisted companies (other than section 8 companies) that meet prescribed thresholds of outstanding loans, debentures, or deposits;
- Holding company and subsidiary companies, excluding cases where the transferor company is a listed company;
- Two or more subsidiaries of the same holding company, excluding cases where the transferor company is a listed company.
The above-discussed amended notification (Gazette Notification no. G.S.R 603 (E) dated 04.09.2025) can be accessed at the official website of the Ministry of Corporate Affairs (MCA), i.e., www.mca.gov.in.
