Merger and Demerger Under the Companies Act: NCLT and Fast-track Routes

Mergers and demergers of Indian companies are carried out through schemes of arrangement. There are two main routes: a scheme approved by the National Company Law Tribunal (NCLT), and a fast-track route approved by the Regional Director for eligible companies. This guide explains both.

The NCLT Route (Sections 230–232)

1. The boards approve the scheme, with a registered valuer's report on the share exchange ratio and an auditor's certificate on accounting treatment.
2. The companies apply to the NCLT, which directs meetings of shareholders and creditors (or dispenses with them where consents are obtained).
3. Notices go to regulators — the Central Government through the Regional Director, the ROC, the income tax department, and others such as RBI or SEBI where relevant.
4. Shareholders and creditors approve the scheme by the required majorities: a majority in number representing three-fourths in value of those voting.
5. The NCLT hears the petition, considers objections, and sanctions the scheme.
6. The order is filed with the ROC, and the scheme becomes effective.

The Fast-track Route (Section 233)

The fast-track route is available for mergers between small companies, between a holding company and its wholly owned subsidiary, involving startups, and some other classes added by rule amendments in 2025. It needs:

• Approval by members holding at least 90% of total shares.
• Approval by creditors representing nine-tenths in value.
• Filing with the Regional Director, ROC and Official Liquidator for objections.
• A confirmation order from the Regional Director, who can refer the scheme to the NCLT if not satisfied.

Timelines

NCLT schemes commonly take six to twelve months or more, depending on the bench's workload and objections. Fast-track mergers are usually faster.

Demergers

Demergers follow the NCLT route and are structured to meet tax conditions, so the transfer of the undertaking and the issue of shares are tax-neutral.

Getting Help

Think Filing structures mergers and demergers and manages the approval process.