The Ministry of Corporate Affairs (MCA) has amended the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, by inserting a new sub-rule (5) to rule 25A, which governs cross-border mergers. The key aspects of the amendment are as follows:

  • Applicability: This new sub-rule applies to mergers or amalgamations where a foreign holding company merges with its wholly owned subsidiary in India (“Indian Subsidiary”).
  • Conditions for Merger/ Amalgamation:
    • RBI Approval: The foreign holding company and the Indian Subsidiary, need to obtain prior approval from the Reserve Bank of India.
    • Ease of Compliance: The Indian Subsidiary will now be required to comply with the provisions of Section 233 (read with Rule 25) of the Companies Act, 2013 (CA 2013), which provides for fast-track mergers through relatively simpler process. Earlier, the requirement was to comply with the provisions of Section 230-232 of CA 2013, entailing clearance from the National Company Law Tribunal (NCLT).
    • Application: The Indian Subsidiary needs to make an application to the Central Government (power delegated to Regional Director), under Section 233 (read with Rule 25) of CA 2013.
    • Declaration: In case where foreign company shares land border with India, a declaration (in form CAA 16) must be furnished when applying under Section 233 of CA 2013.

 

Effective Date: The amended rule is effective from September 17, 2024.

Authors & Contributors

Partner(s):

Vaibhav Kakkar

Snigdhaneel Satpathy

 

Associate:

Anuj Jain