Government of India

Ministry of Corporate Affairs

CL-1 Section

File No.:2/31/CAA/2013CL-VPART

New Delhi, 04th April, 2025

Public Notice

Section 233 of the Companies Act 2013 (CA-13) provides for merger or amalgamation
of certain companies (Fast Track Merger) through approval of Central Government [Delegated
to Regional Director (RDs)].

Budget announcement (2025-2026), Para 101, inter alia, states that the scope for fast-
track mergers will also be widened and the process made simpler. Accordingly, a notification
proposing amendments to the Companies (Compromises, Arrangements and Amalgamations)
Rules, 2016 proposing inclusion of more classes of companies under section 233 of Companies
Act 2013 has been drafted and is available, along with an Explanatory note, on the online portal
of the Ministry, www.mca.gov.in.

It has been decided to invite suggestions/comments on such draft amendment from

stakeholders. Comments/suggestions on the draft rules along with justifications in brief may
be sent latest by 05th May, 2025 through e-Consultation Module on the website of Ministry of
Corporate Affairs. The Explanatory Note on the matter is enclosed.
 Explanatory Note

Sub.: Amendment in Companies (Compromises, Arrangements and

Amalgamations) Rules, 2016 [CAA Rules]

1. Section 233(1) of Companies Act 2013 (CA-13) provides that notwithstanding the
provisions of section 230 and section 232, a scheme of merger or amalgamation may be entered
into between two or more small companies or between a holding company and its wholly-
owned subsidiary company or such other class or classes of companies as may be prescribed,
in accordance with the provisions of section 233 and rules made thereunder.

2. Pursuant to amendment made in February, 2021, scope of section 233 was widened
through inclusion of new sub-rule (1A) in rule 25 of Companies (Compromises, Arrangements
and Amalgamations) Rules, 2016 (CAA Rules) which reads as under:-

(1A) A scheme of merger or amalgamation under section 233 of the Act may be entered into
between any of the following class of companies, namely:-

(i) two or more start-up companies; or

(ii) one or more start-up company with one or more small company.

3. Pursuant to the Budget Speech (2025-26) (para 101), it has been proposed to widen the
scope of Section 233 by prescribing more classes of companies under rule 25 of CAA Rules,
2016. The suggestions received on this budget para during discussions held on 4 th March, 2025
in the Post-Budget Seminar have also been taken into account while proposing widening of
scope of rule 25 of CAA Rules 2016.

Proposed Rule Amendment:

4. Following additional classes of Companies are being proposed to be covered under

section 233 of Companies Act 2013:-

(i) one or more unlisted company (other than section 8 company) with one or more unlisted
company (other than section 8 company) where every company involved in the merger meets
the following criteria as on a day, not more than 30 days before the date of notice referred to in
clause (a) of sub-section (1) of section 233:-

(a) the borrowing of the company from banks or financial institutions or any other body
corporate is less than fifty crore rupees and

(b) such a company has no default in repayment of such borrowings; or

Provided that a certificate from the auditor of the company that the company meets the
conditions referred to in this clause shall be attached alongwith the application under sub-
section (2) of section 233;

The above new class will be of those unlisted companies which have reasonable debt
exposure and have no default in repayment thereto. It is proposed that section 8
companies would not be covered under this category.

(ii) a holding company (listed or unlisted) and its one or more unlisted subsidiary company or
companies; or

Presently, merger of only wholly owned subsidiary with its holding company is covered
under section 233. It is proposed that a subsidiary other than wholly owned subsidiary
may also be allowed to be merged with its holding company under section 233 with the
condition that such subsidiary should not be a listed company. The CLC in its 2022 report
had made a recommendation in this regard.

(iii) one or more subsidiary company of a holding company with one or more other subsidiary
company of the same holding company where the transferor company or companies are not
listed;

Presently, merger between fellow subsidiary companies belonging to the same group (i.e.
having same holding company) is not covered under section 233. It is proposed that such
mergers may also be included in section 233 since these would be similar to mergers
between holding company and unlisted subsidiary companies. It is proposed to cover
only unlisted fellow subsidiaries under this category.

4.2 It is also proposed that merger provided in rule 25A (5) (i.e. merger of the transferor
foreign company incorporated outside India being a holding company with the transferee
Indian company being its wholly owned subsidiary company incorporated in India) may be
included in rule 25 also to make rule 25 self-contained.

5. The draft notification proposing changes in rule 25 of CAA Rules has been placed on
the website of the Ministry of Corporate Affairs under the heading e-Consultation Module.

*****
[To be published in the Gazette of India, Extraordinary, Part, II, Section 3, Sub-section
(i)]
Ministry of Corporate Affairs
NOTIFICATION

New Delhi, the ……………., 2025

G.S.R. …..(E).— In exercise of the powers conferred by sub-sections (1) and (2) of
section 469 read with section 233 of the Companies Act, 2013 (18 of 2013), the Central
Government hereby makes the following rules further to amend the Companies
(Compromises, Arrangements and Amalgamations) Rules, 2016 namely :-
1. Short title and commencement.‐ (1) These rules may be called the Companies
(Compromises, Arrangements and Amalgamations) Amendment Rules, 2025.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, in
Rule 25, in sub-rule (1A), in clause (ii) for the words “small company”, the following
shall be substituted, namely:-

“small company, or
(iii) one or more unlisted company (other than a section 8 company) with one or more
unlisted company (other than a section 8 company) where every company involved in
the merger meets the following criteria as on a day, not more than 30 days before the
date of notice referred to in clause (a) of sub-section (1) of section 233:-
(a) the borrowing of the company from banks or financial institutions or any other
body corporate is less than fifty crore rupees and
(b) such a company has no default in repayment of such borrowings; or
Provided that a certificate from the auditor of the company that the company meets the
conditions referred to in this clause shall be attached alongwith the application under
sub-section (2) of section 233;
(iv) a holding company (listed or unlisted) and its one or more unlisted subsidiary
company or companies; or
(v) one or more subsidiary company of a holding company with one or more other
subsidiary company of the same holding company where the transferor company or
companies are not listed;
(vi) merger of the transferor foreign company incorporated outside India being a
holding company with the transferee Indian company being its wholly owned subsidiary
company incorporated in India referred to in sub-rule (5) of rule 25A;

[F. No. 2/31/CAA/2013 – CL.V Part]

(Balamurugan D.)
Joint Secretary to the Government of India

Note:- The principal rules were published in the Gazette of India, Extraordinary, Part II,
Section 3, Sub-section (i) vide number G.S.R 1134(E), dated the 14th December, 2016
and subsequently amended vide the following notifications: -
Serial Notification Number Notification Date
Number
1 G.S.R 368(E) 13th April, 2017
2 G.S.R. 79(E) 3rd February, 2020
3 G.S.R. 773(E) 17th December, 2020
4 G.S.R. 93(E) 1st February, 2021
5 G.S.R. 401(E) 30th May, 2022
6 G.S.R.367(E) 15th May, 2023.
7 G.S.R. 555(E) 9th September, 2024