Fast Track Merger 2.0: How the September 2025 Amendment Opens a Faster Restructuring Route for Startups

Introduction

For most Indian startups, the word "merger" still conjures images of a year-long NCLT battle — multiple hearings, objections from regulators, and legal fees that eat into runway. That picture has been quietly changing since 2021, when the Ministry of Corporate Affairs (MCA) first let startups use the "Fast Track Merger" (FTM) route under Section 233 of the Companies Act, 2013. In September 2025, MCA went a significant step further, widening the eligibility net to cover unlisted companies with meaningful debt, fellow subsidiaries, and partially-owned subsidiary structures.

For founders restructuring their group companies, consolidating ESOP-issuing entities, or executing a reverse flip to bring a foreign holding structure back to India, this amendment is worth understanding closely. This article breaks down what changed, who benefits, and how the process actually works.

What Is a Fast Track Merger, and Why Does It Matter?

Section 233 of the Companies Act, 2013 offers an alternative to the conventional merger route under Section 232. Under Section 232, every scheme of merger or amalgamation must be approved by the National Company Law Tribunal (NCLT) — a process that commonly stretches well beyond a year once you account for multiple hearings and procedural steps.

Section 233, by contrast, removes the NCLT from the picture for eligible companies. Approval instead comes from the Regional Director (RD), acting on behalf of the Central Government, within a statutory window of 60 days from receipt of the scheme (assuming no objections are raised by the Registrar of Companies, the Official Liquidator, or other stakeholders). No tribunal hearings, no prolonged litigation risk just a structured filing and approval process.

That speed and cost advantage is exactly why MCA has been steadily expanding who can use it.

The Evolution: From a Narrow Carve-Out to "FTM 2.0"

The 2025 amendment followed directly from a commitment made in the Union Budget 2025-26 speech, where the Finance Minister announced that merger approval requirements would be rationalised and the fast-track scope widened. After a public consultation that began with draft rules in April 2025, MCA notified the final amendment on 4 September 2025.

What's New Under the September 2025 Amendment

The amendment extends the fast-track route to three additional categories:

1. Unlisted companies with debt up to ₹200 crore.

Any unlisted company (other than a Section 8 non-profit company) with outstanding loans, debentures, or deposits not exceeding ₹200 crore can now use the FTM route — provided there has been no default in repaying that debt in the 30 days before the notice is issued and before the scheme is filed. Notably, this ₹200 crore threshold is a sharp increase from the ₹50 crore limit that had been floated in the April 2025 draft rules, following stakeholder feedback. Companies relying on this category must file an auditor's certificate in a new Form CAA-10A, confirming the debt conditions are met, as part of the declaration of solvency.

2. Holding companies merging with partially-owned unlisted subsidiaries.

Previously, the holding-subsidiary route under Section 233 only worked if the subsidiary was wholly owned. Now, a holding company — whether listed or unlisted — can merge with one or more unlisted subsidiaries even if it doesn't own 100% of them. The only condition is that the transferor company (the one being merged out of existence) must be unlisted; the transferee/holding company can be listed.

3. Fellow subsidiaries under a common parent.

Two or more subsidiary companies sharing the same holding company can now merge with each other via the fast-track route, again subject to the transferor being unlisted.

The amendment also clarifies that all of this applies equally to demergers, not just mergers — removing a long-standing ambiguity and the process now extends to transfers of divisions and undertakings as well.

Why This Matters Specifically for Startups

Reverse flipping just got more practical.

Many Indian-origin startups that incorporated holding entities in Singapore, Delaware, or elsewhere to access foreign capital more easily — are now looking to "flip back" to an Indian holding structure ahead of a domestic listing or to access India-specific schemes. Since the September 2024 amendment, that flip can use the fast-track route, and the 2025 changes make group restructuring around such a flip considerably easier.

Group simplification before a fundraise or IPO.

Startups frequently end up with a sprawling group structure — multiple subsidiaries for different business lines, geographies, or historical reasons (an acquired company, a pivoted business unit, a separate ESOP-holding entity). Investors and IPO due diligence teams dislike unnecessary complexity. The ability to merge fellow subsidiaries or partially-owned subsidiaries into the parent, without an NCLT process, gives founders and CFOs a genuinely faster cleanup tool.

More startups now qualify in their own right.

Combined with the revised "small company" thresholds (paid-up capital up to ₹10 crore, turnover up to ₹100 crore, effective December 2025), a larger pool of growth-stage startups now falls within the small-company or startup-company categories that were already eligible for FTM — and an even larger pool can use the new unlisted-company-with-debt category if their balance sheet has grown.

What Founders Should Still Watch Out For

The fast-track route isn't a free pass. A few practical constraints remain:

• Section 8 companies are still largely excluded. A Section 8 (non-profit) company can only use FTM if it's merging with its own holding company, wholly-owned subsidiary, or subsidiary — not with unrelated entities.
• The 90% shareholder approval threshold is unchanged. Section 233(1) requires approval from members holding at least 90% of the total share capital (not just 90% of those present and voting) — a bar that can be difficult for startups with fragmented cap tables involving multiple investor classes.
• Regulatory overlap for listed transferees. Where the transferee company is listed, SEBI's Listing Obligations and Disclosure Requirements (LODR) framework still requires prior stock exchange approval before filing the scheme, so the RD-only route doesn't fully insulate listed group structures from securities regulator oversight.
• The RD can still refer the matter to NCLT. If objections are raised or the RD believes the scheme could prejudice the public or creditors, the matter gets pushed to the NCLT under Section 233(5) anyway — so the speed advantage isn't absolute.

The Process at a Glance

1. Board approval of the draft scheme of merger/demerger by all companies involved.
2. Notice of the proposed scheme issued to the Registrar of Companies (RoC) and Official Liquidator (OL), inviting objections within 30 days, along with notice to sectoral regulators (RBI, SEBI, IRDA, PFRDA) where applicable.
3. Auditor's certificate (Form CAA-10A) confirming eligibility conditions — such as the debt threshold and no-default condition are met.
4. Declaration of solvency filed in Form CAA-10 as an attachment to Form GNL-1.
5. Members' and creditors' approval — at least 90% in value of shareholders, and a majority representing nine-tenths in value of creditors (or their written consent).
6. Filing with the Regional Director , who has 60 days to confirm the scheme (absent unresolved objections) and issue a confirmation order, after which it's filed with the RoC and becomes effective.

Conclusion

Fast Track Merger 2.0 doesn't eliminate the need for careful legal and financial planning — the 90% approval threshold, debt-default conditions, and Section 8 exclusions still require attention. But for startups carrying out internal group restructuring, consolidating subsidiaries before a fundraise, or executing a reverse flip back to India, the September 2025 amendment meaningfully widens the door to a faster, NCLT-free process. As more startups now also qualify as "small companies" under the revised thresholds, this is a good moment for founders and their CS/CA advisors to revisit whether a planned restructuring could be executed through Section 233 instead of the traditional, slower Section 232 route.

Disclaimer: This article is for general informational purposes and does not constitute legal or professional advice. Readers should consult a qualified Company Secretary or legal professional before relying on any of the above for an actual transaction.