BY PRIYAL BANSAL, FOURTH – YEAR STUDENT AT DR. RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY, LUCKNOW
I. ABSTRACT
The Fast-Track Merger (‘FTM’) regime under Section 233 of the Companies Act, 2013, was designed to enable quicker mergers without the National Company Law Tribunal’s (‘NCLT’) approval. The introduction of a deemed approval mechanism under Section 233, strengthened through later amendments aims to reduce delays and regulatory burden. However, this shift creates significant practical and legal challenges. The absence of an automatic confirmation process leads to execution gaps, leaving mergers legally approved but operationally incomplete. Further, the framework conflicts with the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 2011 (‘SEBI Takeover Regulations’), as Regional Director (‘RD’) approved schemes do not qualify for open offer exemptions. This article analyses these structural issues and proposes targeted reforms to ensure that the FTM regime functions effectively in practic
II. INTRODUCTION
The FTM regime in India was introduced in 2013 under Section 233 of the Companies Act 2013 and further implemented through the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (‘CAA Rules, 2016’). This effectuated mergers for specific classes of companies without the approval of the NCLT. The mechanism, initially intended for start-ups and small companies, was expanded in 2024 to include reverse flipping, in which a foreign holding company may merge with a wholly owned Indian subsidiary under FTM.
The application has been further expanded owing to the pendency of merger schemes before the NCLT for securing approvals. As of March 2025, over 15,000 cases remain pending. Now, the FTM includes unlisted companies with debts not exceeding Rs. 200 crore and no defaults; holding-subsidiary mergers beyond Wholly Owned Subsidiary structures (‘WOS’), where the transferor is an unlisted company; between subsidiaries of the same holding company; and cross-border reverse flips.
The Ministry of Corporate Affairs (‘MCA’) in 2023 revised the process of deemed approval through amendments to Rule 25(5) and (6) of the CAA Rules, 2016. This amendment meant that if the Registrar of Companies (‘RoC’) or the Official Liquidator (‘OL’) failed to furnish objections or suggestions within 60 days, the merger would be deemed approved. However, this idea of accelerating approvals raises deeper questions of enforceability.
III. THE EXECUTION GAP IN DEEMED APPROVAL
Under the 2025 amended rules, the 60-day statutory timeline for deemed approval has been maintained. The legal framework provides deemed approval under two circumstances. First, under Rule 25(5), if no objections are received from the ROC or the OL within 30 days and the RD does not issue a confirmation order, the application shall be deemed approved at the end of the 60th day. Secondly, under Rule 25(6), even if objections are received, but the RD neither issues a confirmation nor refers any concerns to the NCLT within 60 days, it is deemed approved again. In both cases, however, the statute still requires the issuance of a formal confirmation order.
The Bombay High Court, in Asset Auto India Pvt. Ltd. v. Union of India, clarified that the RD cannot reject a merger scheme outright. If the RD considers a merger scheme to be prejudicial, he must refer it to the NCLT under Section 233(5) of the Companies Act, 2013. Therefore, the deemed approval thus becomes a structural extension of the RD’s limited right to approve the merger scheme.
However, this deemed approval breaks down at the execution stage. There is no separate mechanism provided for operationalising a confirming order in a deemed approval case that differs from the standard confirmation process under Form CAA-12 (Confirmation order of merger scheme, amalgamation, transfer, or division of undertaking). It is a statutory confirmation order issued by the RD that shows approval of a merger scheme and without it, the scheme cannot be registered regardless of a deemed approval. These fillings and enforcement of merger orders are processed through the MCA-21 portal, which is an e-filing system for corporate filings. It does not automatically generate Form CAA-12 on the 61st day. Instead, the RD must physically sign and upload Form CAA-12 on the portal for a merger to be registered.
This also produces a self-defeating cycle. One of the primary reasons for introducing deemed approval is the RD’s failure to issue a confirmation order within the 60-day timeline. However, even when approval is deemed by operation of law, the merger cannot be implemented unless the RD issues and formalises it by a confirmation order. This delay also reflects a capacity constraint. There are only 10 RDs nationwide, as against 15 NCLT benches. The RD, who is also responsible for functions such as conversions of private to public companies and shifting of registered offices, has limited bandwidth to process the rising volume of FTM applications within a 60-day window.
Notably, a substantial revision to Rule 25, notified on 4 September 2025, gave the central government more powers. However, the automatic generation of Form CAA-12 upon expiry of the 60-day period was not introduced.
This does not end here. Upon receiving this approval order, the company must file Form INC-28 (Notice of order of the Court or Tribunal or any other competent authority) with the RoC within 30 days of receiving it to formalise the merger. Therefore, as per law, this created a vacuum state, where, in theory, the scheme is deemed approved, but the merger remains ineffective until a formal confirmation order is passed. In this stage, the order remains an inoperative finality, meaning it is legally recognised but not enforceable. For instance, the transfer of immovable property may not be recognised by the sub-registrar as a valid conveyance in the absence of such an order.
This gap is further aggravated by the lack of clarity on whether the 60-day clock pauses when the RD raises queries or seeks clarification from the companies about the scheme. This absence of a defined regime for when to pause and when to resume would thus lead to unpredictability and inconsistent practices. These issues may lead companies to abandon the FTM mechanism or to refill under Section 232 of the Companies Act, 2013 through NCLT.
IV. THE OPEN OFFER TRAP IN FTM
Another inconsistency is apparent under the SEBI Takeover Regulations. Regulation 3 requires a mandatory open offer to public shareholders when a person acquires 25% or more of the shares. This protects the minority shareholders. However, if the merger scheme is already approved by law, this exercise becomes redundant.
Therefore, Regulation 10(1)(d)(ii) exempts acquisitions, including mergers/demergers and amalgamations, by an order of a “court or a tribunal” from making an open offer. But it only exempts orders from the court and tribunals, and the earlier phrase “or a competent authority”, which would have included RD’s approval, was removed in 2019. This was targeted at overseas mergers approved by foreign regulatory authorities rather than by foreign courts. But the domestic RD approval FTM was overlooked.
The consequence would thus be that acquisitions under FTM for listed entities trigger a mandatory open offer if they result in a shareholding increase above 25%. This can occur when a listed company merges with its unlisted subsidiary through FTM. Imagine that prior to the merger, the promoter group holds 24% of the listed company. As part of the scheme, shares are issued to the shareholders of the unlisted transferor company in exchange for their holdings in the transferor company. Since the promoter group already holds a significant stake in the transferor entity, the share swap increases the promoter’s shareholding from 24% to 26%. This would now trigger a mandatory open offer obligation. Had it been through NCLT, the same acquisition would not have required an open offer. Now, any benefits FTM offered would be negated by the increased financial and compliance burdens.
V. CONCLUSION AND WAY FORWARD
The FTM mechanism undoubtedly has the potential to reduce the burden on NCLT in approving merger schemes. However, the structural drawbacks of opting for FTM over the rudimentary NCLT procedure cannot be overlooked. These concerns persist even when the stringent 90% shareholder approval threshold is met.
To address these, the MCA should first automate the generation of Form CAA-12 from the MCA-21 V3 portal when 60 days have passed, and no suggestions or comments have been made by the RoC or OL. This would also avoid the discrepancies regarding the transfer of immovable property under such transactions.
Further, if the RD or the OL asks any questions, the 60-day limit should be suspended until the applicant responds to the queries. However, the rules should explicitly permit only a reasonable extension to avoid misuse of the provision. The timeline can begin again from the date it was seized when the query was raised.
Another solution would be to amend the SEBI Takeover Regulations to recognise RD orders rather than re-inserting “or a competent authority”, which would reopen the broader concerns SEBI sought to address in 2019. This would ensure that an order of RD is given equal benefits as that of any other merger conducted through NCLT. These reforms will ensure that inoperative finality is avoided and that what the law promises is delivered.
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