The rules, which come into effect from September 17, mandate RBI’s approval for such mergers or amalgamations, besides the government’s approval
The MCA notification now effectively clears the air around regulatory structures and compliance mandates for reverse flipping to India
This comes at a time when Pine Labs, Flipkart, Zepto, and Eruditus have underlined plans to reverse flip back to the country with an eye on their respective IPOs
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With an eye on fast tracking the reverse flipping process, the union government has now reportedly exempted overseas incorporated startups looking to merge into their wholly-owned Indian subsidiaries from seeking clearance from the National Company Law Tribunal (NCLT).
As per Economic Times, the exemption was part of a notification issued by the Ministry of Corporate Affairs (MCA). The new rules effectively clear the air around regulatory structures and compliance mandates for reverse flipping to India.
The MCA has now amended the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2024, which now mandates Reserve Bank of India’s (RBI) approval for such mergers or amalgamations. The applicants will also have to seek the government’s approval for such India-bound mergers.
The new rules will come into effect starting September 17.
The new directives are expected to clarify the compliance requirements necessary for reverse flipping to India and ensure union government’s oversight for such transactions. Additionally, the biggest takeaway from the rules is that it allows companies to bypass lengthy NCLT approvals owing to multiple cases pending before the tribunal.
The move comes at a time when more and more Indian startups have been urging the Centre to streamline reverse flipping rules and ease the journey back to India. Redomiciling back to India is fraught with many challenges, including a cumbersome tax regime and long tax bills.
Despite the long list of challenges, multiple unicorns are actively looking at moving back to India with an eye on listing on the Indian stock exchanges.
In recent years, the likes of fintech unicorns PhonePe and Groww have shifted their headquarters to India. Reports also surfaced recently that Razorpay was working with consulting firm Deloitte on a restructuring exercise as part of its exercise to move to India.
Last month, Pine Labs received the initial set of approvals from the National Company Law Tribunal (NCLT) to merge its Singapore entity with its Indian subsidiary. Then, there are other big players such as Flipkart, Zepto, and Eruditus that too plan to reverse flip back.
On the policy front, commerce secretary Sunil Barthwal in June said that the strong growth of the Indian economy is stirring up the trend of reverse flipping in startups.
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