MCA Notifies Amendment to Rule 25 of Companies (CAA) Rules, 2016/

Background

On 4th September 2025, the Ministry of Corporate Affairs (MCA) notified¹ the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025. These rules amend Rule 25 of the Companies (CAA) Rules, 2016, which deals with fast-track mergers and arrangements under Section 233 of the Companies Act, 2013.

The amendment will be effective from 8 September 2025. The objective is to widen the scope of companies eligible for fast-track mergers/demergers, thereby reducing reliance on the National Company Law Tribunal (NCLT) and enabling quicker corporate restructuring.

This move is aligned with the government’s ongoing efforts to improve the ease of doing business in India by streamlining corporate laws and procedures.

Earlier Framework under Rule 25

Prior to this amendment, the fast-track merger route (FTM) under Section 233 was available only to a narrow set of companies. Specifically, it applied to:

1. Two or more small companies
2. A holding company and its wholly owned subsidiary (WOS)
3. Start-ups, or a combination of a start-up with a small company

While this was useful for smaller entities, the scope was restrictive. Larger unlisted companies and subsidiaries outside of wholly owned structures had no option but to undergo the lengthier NCLT approval route. Moreover, demergers or division of undertakings were not expressly covered under the fast-track provisions, leaving a significant gap.

Key Amendments in Rule 25

The 2025 Amendment has considerably broadened the ambit of Rule 25. The following categories of companies can now avail the fast-track merger/demerger route:

1. Two or more unlisted companies (other than Section 8 companies), provided they fulfil the following conditions:

• Aggregate of outstanding loans, debentures or deposits does not exceed INR 200 crore; and
• Company has not defaulted in repayment of loans, debentures or deposits referred above.

Both the above conditions are required to be met on:

• A day not before thirty days from the notice inviting suggestions/objections is filed with Registrar of Companies (ROC), Official Liquidator (OL) and sector regulators; and
• The date of filing scheme with Regional Director (RD), ROC and OL.

Statutory auditor of the company to provide a certificate [in Form No. CAA-10A] that company fulfils above both conditions on each of the above dates.

2. A holding company and a subsidiary company, provided that the transferor company or companies is not listed.
3. 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.
4. Transferor foreign holding company incorporated outside India with its Indian WOS (previously covered in Rule 25A(5), now explicitly included under Rule 25).

The amendment further clarifies that Rule 25 applies mutatis mutandis to a scheme of division or transfer of undertaking of a company under Section 232(1)(b), thereby bringing demergers within the fast-track regime.

Compliance and Procedural Updates

In addition to expanding eligibility, the amendment introduces several compliance refinements:

• Mandatory Notices to Sectoral Regulators: Notices of the proposed scheme (Form CAA-9) must also be served on relevant sectoral regulators (RBI, SEBI, IRDAI, PFRDA) and, in case of listed companies, the stock exchange(s).
• Relaxation in Timeline for filing Form CAA-11: The timeline for filing Form CAA-11 with the Regional Director has been extended from 7 days to 15 days after the conclusion of members’ or creditors’ meetings.
• Mandatory Submission of Valuation Report: The transferee company must now file the registered valuer’s report in Form CAA-11, as an attachment to Form RD-1, within 15 days of the conclusion of member or creditor meetings.
• Form CAA-10 (Declaration of Solvency): Must now be filed as an attachment to Form GNL-1.
• Revised Forms: Forms CAA-9 to CAA-12 have been updated, and Form CAA-10A has been newly introduced.

Conclusion

The amendment to Rule 25 marks a significant step in simplifying corporate restructuring in India. By widening the scope to include unlisted companies, subsidiaries, and even demergers, the provision creates new opportunities for consolidation and business reorganization. This change can be regarded as a positive reform that is expected to streamline corporate restructuring process while ensuring adequate protection to shareholders’ interest.

1. Notification Number G.S.R. 603(E) dated 4th September, 2025 ↩︎