MCA Expands Fast Track Merger Framework To Enable More Startup Reverse Flips

About a year after announcing after allowing startups to reverse flip without seeking approval from the National Company Law Tribunal (NCLT), the Ministry of Corporate Affairs (MCA) has broadened the scope of the exemptions. 

Now, the following types of mergers and amalgamations (M&As) would not require the NCLT nod: 

• Two or more unlisted companies (other than section 8 companies), where every company involved doesn’t have loans, debentures or deposits exceeding INR 200 Cr. 
• Merger of a foreign company which is the holding company with its wholly owned subsidiary in India. 
• One or more subsidiary companies of a holding company with one or more other subsidiary companies of the same holding company where the transferor company or companies are not listed.

In September 2024, the MCA amended the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2024, mandating only Reserve Bank of India’s (RBI) approval for such M&As, bypassing the NCLT.

However, only a narrow set of companies such as startups, small companies, and wholly owned subsidiaries could use the fast track merger route. The revised framework widens this significantly. 

“In a particularly forward-looking move, the rules now explicitly accommodate the merger of a foreign holding company into its Indian wholly-owned subsidiary under the fast track framework. This provides a streamlined pathway for Indian-origin startups and businesses that had externalised their holding structures to re-domicile in India. This measure is poised to strengthen the domestic corporate ecosystem,” Harmeet Grover, counsel, Aayati Legal said. 

Since introduction of this feature, several Indian unicorns that had set up holding structures abroad have begun shifting back to India for public listings. For instance, startups like Flipkart, Razorpay, Dream11 have used the newly established mechanism to flip back to India.  

Meanwhile, the markets regulator SEBI also approved a slew of amendments to boost Indian startup listings and promote reverse flipping back in June. Back then, the market regulator’s board gave its nod to a proposal allowing startup founders to retain their stock options (issued a year prior to the IPO) even after their companies are listed, with certain caveats.

These regulatory changes collectively mark a significant shift in India’s corporate and startup policy framework. By removing procedural bottlenecks and widening the eligibility for fast-track mergers, the MCA has created a more practical route for companies—especially startups and foreign-registered entities—to re-domicile in India.