Being a significant mechanism for a dynamic market in India, listed corporations alone have a market capitalisation of over USD 5.13 trillion, and company tax alone had a GDP contribution of slightly over 3% within the final monetary yr. With such excessive stakes, streamlining the company restructuring course of is crucial. A easy, environment friendly restructuring regime means corporations can adapt shortly, buyers achieve confidence, and the general enterprise local weather stays sturdy.
Not way back, company restructurings in India was court-driven and intensely drawn-out processes. The Corporations Act 2013 sought to modernise this by shifting jurisdiction from Excessive Courts to a specialised tribunal. Thus, the Nationwide Firm Legislation Tribunal (NCLT) was empowered to approve or reject schemes of association, mergers, demergers, and different company restructuring plans for each listed and unlisted corporations.
In apply, whereas NCLT did deliver some enchancment over the Excessive Courts, the beneficial properties have been restricted. Over time, NCLT’s workload expanded dramatically past simply Corporations Act schemes. Notably, with the arrival of the Insolvency and Chapter Code, 2016, NCLT grew to become the default discussion board for insolvency decision in India. The tribunal that was meant to fast-track restructuring approvals discovered itself swamped with hundreds of chapter instances, along with different firm legislation issues. The switch of jurisdiction achieved one objective, transferring issues out of the overall courts, however it additionally inadvertently concentrated an unlimited array of complicated proceedings (from mergers to insolvency to shareholder disputes) in a single establishment, resulting in bottlenecks within the restructuring approval course of as soon as once more.
The info on NCLT case pendency and throughput underscore the severity of the problem. As of March 2025, over 15,000 instances had been pending earlier than the NCLT. This congestion immediately interprets into delays. On common, corporations should wait 9 to 12 months or extra from the time of submitting a scheme of association to lastly get NCLT approval. It’s not unusual for easy mergers, even these authorised by all shareholders and regulators, to languish for a number of months awaiting a tribunal listening to and order. Such delays impose important prices: enterprise plans are placed on maintain pending authorized sanctions, synergies from mergers are deferred, and uncertainty looms over workers and buyers.
A key cause for the delay is the overlap of NCLT’s restructuring perform with its insolvency perform. Underneath the IBC, decision proceedings are time-bound (330 days outer restrict, although typically prolonged) and have a tendency to dominate tribunal schedules as a result of their urgency and the stakes concerned. In consequence, merger/demerger purposes (which have no statutory deadline) typically take a backseat.One other challenge is that the NCLT course of suffers from the delicacy of efforts. For listed corporations, earlier than approaching NCLT, a scheme should be vetted by SEBI (through inventory exchanges) for compliance with securities legal guidelines and minority shareholder safety. After SEBI and shareholders’ approval, the matter goes to NCLT, which primarily checks whether or not due course of was adopted. In impact, NCLT’s function in lots of merger instances is essentially supervisory, guaranteeing authorized compliance, slightly than evaluating the enterprise deserves of the deal. This raises the query: Is the additional layer of NCLT approval all the time essential, particularly in instances the place regulators and stakeholders are already on board?A beneficial jurisprudence is ideally one which minimises judicial intervention in routine enterprise issues. On this regard, India can draw priceless classes from world fashions which have struck a extra environment friendly regulatory steadiness. The US, as an illustration, adopts a market-led, regulatory-overseen mannequin the place company mergers usually don’t require courtroom approval until a dispute arises. Regulatory our bodies just like the SEC and the antitrust authority step in just for particular oversight, and even these processes are ruled by well-defined, time-bound frameworks. This readability and predictability cut back authorized uncertainty and permit company transactions to shut swiftly, typically in underneath three months.
An analogous precept underlies Singapore’s restructuring framework, the place administrative merger routes are customary and courts play a job solely when essential. A step forward of USA by way of regulatory feasibility, Singapore’s Corporations Act permits court-free statutory amalgamations, the place two corporations can merge just by gaining shareholder approval and notifying the regulator (ACRA), thereby additional decreasing the function of state (not to mention judiciary) in what primarily is meant to be a market pushed apply.
The United Arab Emirates additionally conducts company mergers underneath its Business Corporations Legislation, following an administrative course of, requiring no courtroom approval until objections come up from collectors or important minority shareholders. Even then, the objection interval is capped at 30 days, after which the merger proceeds by default. The UAE has additional institutionalised time-bound regulatory evaluate: its Competitors Committee, empowered underneath the 2023 Competitors Legislation, should assess giant merger notifications inside 90 days.
Globally, belief is positioned in regulatory frameworks and judicial intervention, reserved for exceptions, is just not the norm. By emulating world greatest practices, India has the chance to reimagine its company restructuring ecosystem.
Encouragingly, the Indian authorities signalled within the newest funds that it equally intends to increase and simplify such speedy merger processes for a broader set of corporations. Within the Union Funds speech in February 2025, the Finance Minister introduced that “necessities and procedures for fast approval of firm mergers can be rationalised. The scope for fast-track mergers will even be widened and the method made less complicated.” The federal government has proven intent, and thus, a well timed coverage suggestion is warranted.
The said aims of effectivity and regulatory comity with globally aligned requirements may be achieved in two methods.
For unlisted entities, a possible path to fast-track restructuring is to increase the mandate for the Regional Administrators (RDs) of the Ministry of Company Affairs (MCA), who already oversee sure company approvals. India’s authorized framework already comprises a germ of this concept within the type of “Quick Observe Mergers.” The Corporations Act, 2013, supplies a simplified route for sure small mergers (e.g. between a holding firm and its wholly-owned subsidiary, or between two small corporations) the place NCLT approval is just not required. This fast-track mechanism is slender in scope, relevant solely to small companies or intra-group restructurings. Nonetheless, it demonstrates the viability of bypassing the tribunal when issues are easy or low threat. Actually, to make fast-track mergers simpler, the federal government amended the principles in 2023 to implement strict timelines: the RD should ordinarily verify inside 45 days (if no objections) or 60 days (if minor objections) of receiving the scheme, failing which the scheme is deemed authorised.
Alternately, the federal government can create a “Company Restructuring Authority”, akin to SEBI, for approving schemes of association of unlisted corporations. Such an authority would function underneath the MCA and concentrate on company restructurings of privately held corporations with a mandated timeline crossing which the proposal shall be thought-about handed per defaltam. NCLT shall solely be resorted to in instances the place the proposed authority finds one thing amiss. Such a devoted physique would deliver a number of benefits: it will construct experience in restructuring, company valuation, accounting, and authorized compliance for merger schemes, resulting in extra constant and knowledgeable choices; it will be extra accessible; and it might keep quicker turnaround instances. In essence, unlisted corporations would get a regulator devoted to their restructuring wants, guaranteeing they don’t seem to be left behind within the push for effectivity.
For listed corporations, a compelling case may be made that the ultimate approval of merger/demerger schemes needs to be dealt with by the SEBI, with out requiring NCLT intervention. SEBI is already deeply concerned within the course of. Because the capital markets regulator, it critiques and feedback on each scheme of association involving a listed agency. No listed firm merger or demerger may even be filed at NCLT with out prior SEBI approval and a compliance certificates from the inventory trade. In different phrases, SEBI serves as a first-line gatekeeper.
SEBI has the experience and mandate to guard buyers, which is the core concern in listed-company restructurings. The NCLT’s authority in such instances is primarily to behave as a watchdog, guaranteeing the process was honest, minority shareholders and collectors weren’t short-changed, and all authorized formalities are so as. Thus, by the point a scheme has handed by means of SEBI and shareholder approvals, the function left for NCLT is sort of restricted and arguably provides redundant delay.
A helpful precedent exists in India’s banking sector. Financial institution mergers don’t go to NCLT in any respect. They’re ruled by a separate mechanism underneath the Banking Regulation Act, whereby the ultimate authority to sanction the merger lies with the RBI, not a courtroom or tribunal. This framework has labored properly to facilitate quicker consolidation within the banking business, a testomony to the efficacy of this mannequin.
SEBI might play an identical function for listed non-bank corporations, the place it might act as a nodal authority, reducing out a number of months of ready and procedural hearings, resulting in shorter timelines for deal closure, decreased authorized uncertainty, and one much less layer of regulatory price for corporations.
Delegating listed-company schemes totally to SEBI, increasing fast-track merger eligibility, and making a devoted Company Restructuring Authority underneath the Ministry of Company Affairs for unlisted companies wouldn’t solely reduce down on procedural bottlenecks but in addition align India’s enterprise panorama with the regulatory agility of main economies. This should be a well timed reform to energy the subsequent section of India’s progress story.
