Fast track merger if not wholly owned subsidiary

Hi Kamal,

Regarding your query on Fast Track Merger (FTM) under Section 233 of the Companies Act, 2013, here’s a clear response:

Key Points from Section 233 (Fast Track Merger)

• Fast Track Merger is allowed only if:

  1. Both companies are small companies (now micro, small, or medium as per definitions, but the Act specifically mentions small companies).

  2. In case of a merger involving a holding company and its subsidiary, the subsidiary company must be wholly owned by the holding company.

Your Situation:

• Company A holds 87% shares in Company B → Not a wholly owned subsidiary.

• Both companies are micro-scale.

• No public interest, no debt, no creditors.

Can You Opt for Fast Track Merger?

• Unfortunately, since Company B is not a wholly owned subsidiary, the condition for fast track merger under Section 233 is not fulfilled.

• The provision requires 100% shareholding for a holding-subsidiary fast track merger.

• Micro or small scale status of companies is not enough to override this condition.

Alternative Options:

• You may pursue a normal merger under sections 230-232 of Companies Act, following the standard process with NCLT approval.

• Or consider other restructuring options depending on your business needs.

Summary: