India Proposes Changes to Make Fast-Track Mergers Faster and More Practical

India’s fast-track merger regime was designed to provide certain companies with a simpler alternative to the conventional merger process. However, a recent decision has highlighted how the existing shareholder approval requirements can make the supposedly expedited procedure difficult to use in practice.

Proposed amendments under the Corporate Laws (Amendment) Bill, 2026 could significantly change this by reducing the shareholder approval threshold and focusing on shareholders who actually participate in the decision.

If enacted, the changes could make fast-track mergers considerably more practical, particularly for corporate reorganisations and intra-group transactions.

How Does the Current Fast-Track Merger Process Work?

Section 233 of India’s Companies Act, 2013 provides an expedited merger procedure for specified categories of companies.

These include mergers between small companies, between a holding company and its wholly-owned subsidiary, and between other prescribed classes of companies.

Unlike conventional schemes under Sections 230 to 232 of the Act, the fast-track procedure is largely administered by the Central Government through the relevant Regional Director. This allows qualifying transactions to avoid much of the more extensive National Company Law Tribunal (NCLT) process, unless the scheme is subsequently referred to the NCLT.

There is, however, a significant shareholder approval requirement.

Under the existing Section 233(1)(b), members holding at least 90% of the company’s total shares must approve the proposed scheme.

A recent case demonstrates why this can create difficulties.

The Mallcom Decision

The issue arose in Regional Director, Eastern Region, Ministry of Corporate Affairs v. Mallcom (India) Limited and Anr.

The proposed arrangement involved Mallcom (India) Limited and its wholly-owned subsidiary, Mallcom VSFT Gloves Private Limited.

Shareholder support for the scheme among those who voted was overwhelming: 99.98% of votes cast supported the merger.

However, those votes represented only 82.19% of Mallcom’s paid-up share capital.

Consequently, despite almost unanimous support among participating shareholders, the statutory 90% threshold was not satisfied.

The Regional Director objected and referred the matter to the NCLT.

Mallcom argued that the reference in Section 233 to the “total number of shares” should relate to shares held by members present and voting rather than the company’s entire issued and paid-up share capital.

The NCLT rejected that interpretation.

It held that the requirement referred to the company’s entire issued and paid-up share capital.

The NCLT also declined to consider the merger under the conventional Section 232 procedure in these proceedings. It concluded that a referral under Sections 233(5) and (6) presupposed a scheme that had first been duly approved under Section 233(1). As the necessary shareholder approval had not been obtained, that statutory precondition had not been met.

The proceedings relating to the scheme were therefore quashed.

Why Does the Decision Matter?

The decision exposes a practical difficulty with the current fast-track merger regime.

A shareholder does not necessarily need to vote against a proposed merger to prevent the company from satisfying the statutory threshold.

Simply not voting can have the same practical effect because the existing test is calculated by reference to the company’s total share capital rather than only the shares represented at the meeting.

This can be particularly problematic for companies with dispersed shareholder bases, including listed companies.

A transaction can therefore have overwhelming support from shareholders who engage with the process and still fail to qualify for the fast-track procedure.

What Would the Proposed Amendments Change?

The Corporate Laws (Amendment) Bill, 2026 proposes a substantially different shareholder approval test.

Under the proposed regime, approval would instead be required from shareholders present and voting who hold at least 75% in value of the shares represented at the meeting.

This would introduce two important changes.

First, the approval threshold would effectively move from 90% to 75%.

Second, the calculation would focus on participating shareholders rather than the company’s entire paid-up share capital.

The proposed approach would therefore place greater emphasis on the decision actually made by shareholders participating in the meeting.

The Joint Committee considering the Bill supported the proposal in its report presented to the Lok Sabha on 3 August 2026. It also recommended introducing a statutory exit right for dissenting shareholders in specified circumstances.

What Could This Mean for Corporate Transactions?

If enacted in its current form, the amendment could make India’s fast-track merger procedure significantly easier to use.

It could be particularly relevant to intra-group mergers, holding company and subsidiary reorganisations and transactions that do not materially change ultimate ownership or control.

The change could also be important for listed companies, where achieving affirmative votes representing 90% of total paid-up share capital may be difficult even when shareholders participating in the vote strongly support the transaction.

Reducing the influence of shareholder non-participation could therefore bring the practical operation of Section 233 closer to its original purpose: providing qualifying businesses with a genuinely expedited restructuring process.

Preparation Will Still Be Essential

A lower shareholder approval threshold would not remove the need for careful transaction planning.

Companies considering a fast-track merger will still need to assess matters including shareholder composition and likely participation, creditor exposure, valuation, disclosure requirements, potential regulatory objections and any sector-specific approvals.

They will also need to consider how best to engage with dissenting and non-voting shareholders, particularly if additional statutory protections are introduced when the Bill is enacted.

The proposed reforms should therefore be viewed as simplifying one significant procedural hurdle rather than removing the broader legal and regulatory considerations surrounding corporate reorganisations.

For businesses considering restructuring or consolidation in India, the progress and final wording of the Corporate Laws (Amendment) Bill, 2026 will be important to monitor.