MCA expands fast-track mergers to unlisted firms with loans under ₹200 cr

MCA has widened the scope of fast-track mergers to include certain holding-subsidiary companies and unlisted firms with loans under Rs 200 crore and no defaults

The Ministry of Corporate Affairs (MCA) has notified revised criteria for fast-track mergers, expanding the scope to mergers between holding and subsidiary companies that may not be wholly owned, and subsidiaries held by the same holding company. The MCA notification dated September 4 has also permitted mergers between all unlisted companies with loans of less than Rs 200 crore and no default in repayment of loans, debentures or deposits.

 

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

 

Until now, the fast-track mechanism—under which mergers bypass the National Company Law Tribunal (NCLT)—was available only to small companies, startups and mergers between a holding company and its wholly owned subsidiary. 

 

Experts said widening the scope of the fast-track mechanism would help unclog the NCLTs, especially in cases with no external shareholding and limited lender involvement, as these do not require a long-winded approval process.

 

“Schemes of arrangement need to go through an NCLT process and, in the case of listed companies, also through stock exchange and Sebi approval. The timelines are excruciatingly long and not in sync with business realities. This notification should greatly help, and one is hoping that the ecosystem and checks and balances under the new dispensation will be a significant improvement over the current situation,” said Ketan Dalal, founder of Katalyst Advisory.

 

As of November 30, 2024, 53 applications for amalgamation of small companies and mergers between wholly owned subsidiaries and holding companies were pending, according to MCA data. Between April 1 and November 30, 2024, 431 such applications were disposed of.

 

For applications requiring NCLT approval, MCA data showed that 309 were pending as of November 30, 2024.