This article delves into the recent amendment made in rules regarding of Fast-Track Mergers (FTM) Regulations in India. Without a prescribed timeline for regulatory authorities to complete the process causes unnecessary delay and to remove it Ministry of corporate affairs with its new amendment has prescribed a timeline for approvals and rejections from regulatory authorities. This article analyses the process of Fast-Track mergers in India in the light of the changes made through new amendment.

The author tries to compare the Fast-Track merger Laws in India with other countries and through the comparison drawn recommend the steps needed to be taken to reduce the unsettled flaw in the FTM regulations in India to further expedite and ease the process.

Introduction
Mergers are essential to the growth and expansion of businesses. They enable businesses to pool resources, increase efficiency, and realize economies of scale. The merger process, which involves several legal and regulatory procedures, may, nevertheless, sometimes be drawn-out and difficult. The Companies Act of 2013 created the idea of a Fast Track Merger Under Section 233[1] in order to solve this problem and encourage a more streamlined method.

Recently ministry of corporate affairs has released a notification regarding amendment of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (the Merger Rules) through the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2023[2].The Amendment Rules modify clauses (5) and (6) of Rule 25 of the Merger to set out specific time frames for the activities connected to those taken by relevant regulatory agencies.

Companies may suffer from increased expenses and protracted uncertainty if the merger process is delayed. The new announcement requiring a 60-day deadline for fast-track merger applications to be completed demonstrates a clear intention to avoid irrational delays and set concrete deadlines for the merger process.

The government wants to speed up the merger process and encourage efficiency, therefore it has set these rigid deadlines. This action fits nicely with the government's overarching goal of encouraging ease of doing business in India's corporate environment. If the fast-track merger application isn't finished within the required 60 days, it will be assumed that there are no objections to the proposal.

Process Of Fast-Track Mergers
Section 233 of CAA 2013 describes process of fast-track merger between:

• Two or more small companies
• A holding company and its wholly owned subsidiary
• Two or more start-up companies; or
• One or more start-up company with one or more small company.
• Any other class of company as may be prescribed

With boom of start-ups in 21st century in India, the mergers or amalgamations between start-ups has also rose tremendously. Therefore to ease the process the Ministry Of Corporate Affairs vide-its notification G.S.R. 93(E) dated 1st February, 2021 also added start-up company in the bracket of section 233 of The Companies Act, 2013. As per section 233[3] of The Company Act 2013 the transferor company or companies and the transferee company issues notice of the proposed scheme to Registrar and Official Liquidators where registered office of the respective companies inviting objections or suggestion.

Any objection or suggestion has to send within 30 days. After considering the objection or suggestions so received the scheme gets approved in respective general meeting which comprises of respective member or class of members holding at least 90% of the total shares.

The company also has to get the approval of majority representing nine-tenths in value of the creditors by organising a meeting of creditors or obtaining written approvals by giving a notice of 21 days along with scheme to all its creditors. The companies involved in merger has to file a declaration of solvency before the registrar office where the company is located.

The transferee company shall, within seven days after the conclusion of the meeting of members or class of members or creditors or class of creditors, file a copy of the scheme as agreed to by the members and creditors, along with a report of the result of each of the meeting with the Central Government, Registrar and the Official Liquidator where the registered office of the company is situated.

On the receipt of the scheme, if the Registrar or the Official Liquidator has no objections or suggestions to the scheme, the Central Government shall register the same and issue a confirmation thereof to the companies. If the Registrar or Official Liquidator has any objections or suggestions, he may communicate the same in writing to the Central Government within a period of thirty days. If no such communication is made, it shall be presumed that he has no objection to the scheme.

If objection or suggestion of Registrar and Official Liquidator is deemed to be not sustainable by Centra Government and it is of the opinion that the scheme is in the public interest or in the interest of creditors, the Central Government shall issue a confirmation order of such scheme of merger or amalgamation. If the Central Government does not have any objection to the scheme or it does not file any application before the Tribunal, it shall be deemed that it has no objection to the scheme.

However if central government is of the opinion that scheme is not in public interest or in the interest of the creditors, it may file an application before the Tribunal within a period of sixty days of the receipt of the scheme stating its objections and requesting that the Tribunal may consider the scheme under section 232.

If the Tribunal is of the opinion that the scheme should be considered as per the procedure laid down in section 232[4], the Tribunal may direct accordingly or it may confirm the scheme by passing such order as it deems fit.

If the tribunal confirms the scheme the order of the tribunal shall be communicated to the registrar having jurisdiction over the transferee company and the Registrar will register the scheme and issue a confirmation thereof to the companies.

The confirmation order of the scheme issued by the Central Government or Tribunal under sub-section (7) of section 233 of the Act, shall be filed, within thirty days of the receipt of the order of confirmation.

After the registration of the scheme all properties or liabilities of the transferor company shall be transferred to the transferee company . All the charges on the property of the transferor company shall shifted to the transferee company. Any legal proceedings by or against the transferor company pending before any court of law shall be continued by or against the transferee company

Post 2023 Amendment Changes:
In accordance with clauses(5) and (6) of Rule 25[5] of the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2023 when the Objection Period ends, the CG must adhere to the schedules listed below for the relevant events:

S.No.	Event	Timeline And prescribed
Where the scheme is in the public interest
	if Registrar or OL has issued no objection or suggestion to CG and the Central Government is of the opinion that the scheme is in the public interest or in the interest of creditors	CG within a period of fifteen days after the expiry of thirty days from the receipt of scheme, issue a confirmation order.
	if the Registrar or OL has any objection or suggestion and the Central Government is of the opinion that the scheme is in the public interest or in the interest of creditors	CG may within a period of thirty days after expiry of thirty days from the receipt of Scheme issue a confirmation order
Where the scheme is not in public interest
	If the  central government is of the opinion that scheme is not in public interest or in the interest of the creditors	CG may within sixty days of the receipt of the scheme file an application before the Tribunal.
NO confirmation issued by CG
	If the CG didn't issue any confirmation of the scheme or didn't file any application to the tribunal within a period of sixty days of the receipt	The scheme shall be deemed to be approved.

Unsettled Flaws

1. Creditors' Approval:
   A meeting of creditors must be called or written approval must be obtained based on notices sent to the creditors, if meeting is not held, in order to obtain the approval of a significant majority of the creditors (by value) under the FTM process in India. However getting the approval of creditors involved many challenges.
   
   Firstly the concerned entity has to get mandatory approval from majority of creditors representing 9/10 by value. If any of them fails to attend the meeting the process becomes futile. Even if the concerned entity instead of organising meeting send 21 days to all its creditors for written approval, then also the process would be time consuming and cumbersome if the number of creditors involved are large in number.
   
   The written notice has to send through speed post to every creditor and thereafter approval needs to be obtained and recorded from the requisite majority within the prescribed timelines. The process may cause increased costs and potential delays and the concerned company might have to re-start the FTM process or opt for the NCLT approved merger process, thereby defeating the purpose of the FTM.
    
2. Shareholder's approval:
   As per section 233 the company Act 2013 for the merger or amalgamation between concerned entities , the scheme of merger is required to be approved by shareholder holding at least 90% of the total shares of the concerned entity. The threshold of approval by persons holding ninety per cent of total share capital has been considered onerous by stakeholders since the section requires approval by the persons holding ninety per cent of the company's total share capital and not ninety per cent of shareholders present and voting in the meeting[6].
   
   It is particularly difficult for public and listed companies to reach this threshold because they usually have a large number of shareholders. Consequently, the consent threshold significantly impedes the approval process, undermining the primary objective of the section, which is to expedite the process of mergers. Further, such a threshold requirement also means that if the shareholders present at the meeting hold at least ninety per cent of the share capital, irrespective of the majority by number voting against the scheme, it would still be approved[7]. As a result, this framework also does not sufficiently safeguard the interests of minority shareholders.
   
   To make the fast-track merger approval process under Section 233 more robust and simultaneously continue to protect minority shareholder interests, the Company Law Committee Report dated March 21, 2022[8] ("CLR 2022") had recommended a modified twin test requiring approval by (i) majority of persons present and voting at the meeting accounting for seventy-five per cent, in value, of the shareholding of persons present and voting; and (ii) representing more than fifty percent, in value, of the total number of shares of the company. Unfortunately, as of right now, no comparable amendment to Section 233 of the Act has been proposed.
    
3. No clarity on what constitutes as public interest:
   There is no clear definition of what comes under the ambit of public interest and what is not. The Tribunals' and the CG's interpretations of its definition might differ. This ambiguity might cause unnecessary delay and impede the process of fast-track mergers which ultimately frustrate the objective of section 233.
   
   The primary goal of the fast-track provision is not only to approve public interest projects but also to promote corporate industry development and expansion in a variety of industries[9]. Therefore needs to be additional guidelines under Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 regarding clarity and scope of subjects under public interests.
    
4. No definition of wholly-owned subsidiary:
   The Section 233 of the Company Act 2013 does not expressly address whether step-down subsidiaries are eligible for fast-track mergers. Section 233 addresses "Merger or amalgamation of certain types of companies." There is ambiguity and confusion because the concept of a wholly owned subsidiary is not clearly defined and is instead interpreted in accordance with other laws and court decisions.
   
   The Committee also expressed that Section 233 of CA-13 should be amended to also permit fast track mergers between a holding company and its subsidiary company or companies (other than WOSs) if such companies are not listed and meet such other conditions as may be prescribed.
    
5. Limited applicability:
   The section 233 of CAA2013 is limited only to startups or small businesses and initiatives that are clearly in the public interest. This narrow focus might leave out additional businesses or industries that might gain from the expedited procedure but don't meet the specified requirements[10].

Regulatory Approvals In M&A Leading Countries
Singapore:
Singapore is the undeniable titan of Southeast Asia's deal market. The city-state counted 214 deals in the first three quarters of year 2023 (35.8 percent of all transactions in the region) valued at a combined US$34.7 billion (a 56.7 percent share)[11]. Singapore's bustling tech and fintech sectors continue to deliver steady flows of M&A activity in Southeast Asia, with the technology, media and telecommunications (TMT) industry providing more deal volume and value than any other sector in the country in the past five years.

In Singapore section 215(D)(E)&(F) of the Singapore Companies Act, 1967 deals with short form mergers between company and one or more of its wholly owned subsidiaries or between two or more wholly owned subsidiary of same corporation. For the registration and issuance of the certificate of amalgamation, the board of each amalgamating company has to convene a general meeting of its members for the approval of the amalgamation proposal.

To secure the interests of the creditors, the directors of each amalgamating company must, not less than 21 days before the general meeting, send written notice of the proposed amalgamation to every secured creditor of the amalgamating company[12] and produce a solvency statement in the form of a statutory declaration, which provides that:

1. the resulting amalgamated company will be able to pay its debts as they fall due during the period of 12 months immediately after the effective date of the amalgamation;
2. the value of the amalgamated company's assets will not be less than the value of its liabilities.

Every director who votes in favour the making solvency statement must sign a declaration stating that, in his/her opinion, the solvency tests have been satisfied and the grounds for that opinion[13]. For the registration of the approved amalgamation, each amalgamating company has to file the relevant documents as per section 215 E[14]. Upon the receipt of the relevant documents and fees, the Registrar issues a notice of amalgamation.

The Registrar as soon as practicable after the effective date of an amalgamation, remove the amalgamating companies, from the register and upon the application of the amalgamated company and payment of the prescribed fee, the Registrar issues to the amalgamated company a certificate of confirmation of amalgamation.

Delaware
A parent company and a subsidiary (formerly the target firm) that is not always fully owned by the parent company combine to form a short form merger, also referred to as a parent-subsidiary merger. Statutes in most states require that the parent company owns 90% or more of the subsidiary before a short form merger can be implemented.

This course of action typically occurs after a tender offer is accepted and a takeover is completed without requiring an additional shareholder vote. A buyer can usually use a short-form merger to acquire the remaining minority interests in a target company if it purchases less than 100% (but usually at least 90%) of the outstanding stock.

Through the merger, the buyer can successfully complete the takeover by acquiring those interests without the need for a vote from stockholders and buying all of the target company's stock.

In Delaware, US, no such approval/ intimation from/ to the creditors in case of short form merger between a holding company and its Wholly Owned Subsidiary[15]. As per section Section 253(a)[16] of the Delaware General Corporation Law, 1899 the parent company may either merger the subsidiary corporation or corporations into itself or merge itself and one or more of such other subsidiary corporations, into 1 of the subsidiary corporation.

The approval from shareholders is not required altogether for a merger between parent corporations and subsidiary corporation where the parent corporation is the surviving corporation. Whereas if the parent corporation be not the surviving corporation proposed merger has to be approved by a majority of the outstanding stock owners ,entitled to votes, of the parent corporation at a meeting duly called and held after 20 days of 'notice of the purpose of the meeting' given to each such stockholder[17].

Recommendations
The Amendment undoubtedly represents a positive development for applicants since it removes any potential for a delay in getting replies from jurisdictional authorities (such as the ROC and the OL). By achieving a balance between regulatory certainty and protecting the interests of the general public and creditors, it is possible to have optimism that the Amendment will help the MSME sector and start-up businesses expand inorganically.

As of now, the FTM has been restricted to startups or small enterprises, as well as initiatives that are obviously in the public interest. This narrow scope may exclude other companies or sectors that could benefit from the accelerated process but do not match the requirements. This implies that a larger spectrum of businesses must be incorporated into the plan. This expansion would balance both the advancement of the corporate sector and the general welfare of the public.

The major reasons which may cause delay even after the recent amendment are the regulatory approvals and the approvals from the shareholders and creditors. In India different category of companies are eligible for fast-track mergers which gives an edge to ease of doing business in India however the same set of applies to all these categories of companies.

For example in case a parent company (holding 90% of the shares of its subsidiary) is merging with its subsidiary company and the parent company is the resulting company, the concerned entities have to follow the same sets of rules of FTM as applied to other categories of company. They have to get the shareholder approvals ,creditors approval and even if both them approve but as per CG opinion the proposed scheme is not in public interest the matter filed before tribunal. This entire process causes unnecessary delay and vitiates the purpose of FTM.

In Singapore, for instance, companies involved both in short form merger or standard form merger have the limited obligation to intimate their respective secured creditors of such scheme at least 21 days prior to the general meeting. Whereas, in Delaware, US, no such approval/ intimation from/ to the creditors in case of short form merger between a holding company and its wholly owned subsidiary[18].These are some of the factors which the MCA needs to work upon to further expediate the FTM progress to be at par with countries leading in M&A market.

Conclusion
Undoubtedly, the Amendment will not only facilitate mergers more quickly in India, but it may also hasten company restructuring (fast track mergers are frequently the first step in a restructuring process). The Amendment's applicability to the current fast-tracks mergers, which have not yet received approval from the Central Government, the RoC, or the OL, may also need clarification.

Although the Amendment is in line with international standards, it is still a step in the right direction. What remains to be seen, however, is how "fast" our National Company Law Tribunals ("NCLTs") will permit fast-track mergers to be implemented, given that the majority of NCLTs are overloaded with cases involving insolvency and bankruptcy.

Even though there are obstacles in the way of expediting the FTM process, the 2023 Amendment appears to be a positive step that will inspire more businesses to take the FTM route and give much-needed clarity on the timelines related to this process. This will additionally allow India Inc. to carry out internal restructuring through the Fast Track Method with greater efficiency.

End-Notes:

1. The Company Act, 2013, sec. 233
2. Ministry of Corporate Affairs, Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2023 Noti. No. G.S.R. 367(E) dt. 15-5-2023
3. The Company Act, 2013, sec. 233
4. The Company Act, 2013, sec. 232
5. Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2023, rule 25(5) & (6)
6. Report of The Company Law Committee (2022)
7. A. Ramaiya, Guide to the Companies Act 59 (Lexis Nexis, 2020)
8. Report, Supra note 7
9. Centre for Business And Commercial Laws, https://cbcl.nliu.ac.in/mergers-acquisitions/fast-track-mergers-in-india-race-towards-success-or-bumpy-ride/ (Last visited 1 January 2024)
10. Centre, Supra note 10
11. White & Case, https://mergers.whitecase.com/highlights/southeast-asias-star-ready-to-rise#! (Last visited 4 January 2024)
12. The Singapore Companies Act, 1967, Sec. 215(D)(3)
13. Joyce A. Tan & Partners, https://www.joylaw.com/content/07-news/012-twofive/amalgamation-of-sg-companies-by-op-law-may-2011.pdf (Last Visited 5th January 2024)
14. The Singapore Companies Act, 1967, Sec 215(E)
15. Cyril Amarchand Mangaldas, https://corporate.cyrilamarchandblogs.com/2023/06/mergers-on-a-fast-track/#_ftn10 (Last visited 5 January 2024)
16. The Delaware General Corporation Law, 1899, Sec.253(a)
17. The Delaware General Corporation Law, 1899, Sec.253(a)(2)
18. Cyril, Supra note 16