MCA looks to simplify M&A rules, seeks inputs from other ministries

"We are in the process of doing a stakeholder discussion. Currently, the talks are being held with other ministries. We will finalise our proposal thereafter," a MCA senior official said

The Ministry of Corporate Affairs (MCA) is seeking inputs from various ministries to simplify procedural requirements and expand the scope of fast track for mergers & acquisitions (M&As), a senior official said. 

 

“We are in the process of doing a stakeholder discussion. Currently, the talks are being held with other ministries. We will finalise our proposal thereafter,” the senior official said. 

 

Union Finance Minister Nirmala Sitharaman, in her Budget speech, had said the government would rationalise the requirements and procedures for speedy approval of mergers. She had said that the scope for fast-track mergers will also be widened and the process will be simpler. 

 

The proposal relates to the merger and demerger of listed and unlisted companies and two listed companies. 

 

“Many of these changes can be made through rules while some would require a change in the law,” the senior official added.

 

The fast-track mechanism of merger requires no involvement of the National Companies Law Tribunal (NCLT), and can be availed by small companies, startups, and for mergers between holding companies and its wholly-owned subsidiaries. 

 

Company law experts said that listed companies are unable to take the benefit of the fast-track mechanism for mergers with a wholly owned subsidiary since approval of all shareholders is required. 

 

“One agency is overburdened, especially with Insolvency and Bankruptcy code cases.  Benches are limited and matters relating to Companies Act take longer,” Ankit Singhi partner, Corporate Professionals, said. 

 

As of November 30 last year, 53 applications regarding amalgamation of small companies and mergers between a wholly owned subsidiary and holding company were pending, according to MCA data. Between April 1 and November 30, 2024, 431 such applications were disposed of. 

 

For applications which require the approval of NCLT, the MCA data showed that as of November 30 last year, 309 applications were pending. 

 

Industry bodies are also preparing their proposals to air their concerns around the current M&A regime to suggest to the MCA. 

 

A senior industry representative said, “The main idea behind the exercise has to be to reduce compliance burden especially for smaller companies and improve the ease of doing business. There has to be better alignment between regulators as well.”

 

The expert committee on company law, in its proposal for changes in Act while reviewing the provisions for M&A, said that the fast track process for mergers can be made more robust while also protecting the minority shareholder’s interest. 

 

The expert committee also suggested that the Section 233 of the Act should be amended to permit fast-track mergers between a holding company and its subsidiary company or companies, other than wholly-owned, if such companies are not listed and meet such other conditions that may be prescribed.  

Taking stock

 

> The fast-track mechanism of merger requires no involvement of NCLT

> It can be availed for mergers between holding companies and its wholly owned arms 

> Listed companies areunable to benefit from fast-track mechanism for mergers with a wholly owned subsidiary since approval of all shareholders is required

> Industry bodies are also preparing their proposals to voice their concerns around current M&A regime