MCA Merger Rules for Foreign Holding Companies and Indian Subsidiaries
On 9th September 2024, the Ministry of Corporate Affairs (MCA) notified the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2024 to amend the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (‘Principal Rules’). Effective from 17th September 2024, the new MCA merger rules aim to improve procedural clarity and compliance in mergers and amalgamations between foreign holding companies and their wholly-owned Indian subsidiaries.
MCA Amendment Rules 2024: Key Notification
The MCA amendment rules 2024 insert Sub-rule (5) to Rule 25A of the Principal Rules. It outlines the following compliance requirements for mergers between a foreign holding company and its wholly-owned Indian subsidiary:
RBI Approval for Cross-Border Mergers:
The foreign holding company and the Indian subsidiary must secure prior approval from the Reserve Bank of India (‘RBI’) to ensure adherence to India’s foreign exchange regulations and to oversee cross-border financial transactions.
Section 233 Companies Act Merger Compliance:
The Indian subsidiary is required to comply with Section 233 of the Companies Act, which facilitates a simplified fast-track merger process for eligible companies, such as holding and subsidiary firms, thereby minimizing lengthy legal procedures.
Application to Central Government:
The Indian subsidiary must apply to the Central Government under Section 233, following the procedural guidelines set out in Rule 25 of the original rules;
Declaration Requirement:
A declaration, as outlined in Sub-rule (4) of Rule 25A, must be provided to demonstrate compliance with the Companies Act and other regulatory obligations during the merger process.
Other Cross-Border Merger Compliance Requirements
These updated provisions strengthen cross-border merger compliance by aligning company law requirements with RBI’s oversight and the simplified fast-track merger system under the Companies Act.
Source:
Ministry of Corporate Affairs, Notification dated 9th September 2024. The official notification can be accessed here: