Merger Routes in India: NCLT Scheme vs Fast-Track

India gives companies two different legal routes to merge: a scheme of arrangement that goes through the National Company Law Tribunal, and a fast-track route that bypasses the Tribunal entirely for a narrower set of companies. Picking the wrong one costs months.

This guide compares who is eligible for each route, the approvals and steps each one needs, and the timelines founders and finance teams can realistically expect.

The NCLT scheme route: sections 230 to 232

Sections 230 to 232 of the Companies Act, 2013 set out the general route for a merger, amalgamation, demerger or other compromise or arrangement, available to any company regardless of size. The National Company Law Tribunal convenes and supervises the process, and its order sanctioning the scheme is what makes the merger legally effective.

Because the Tribunal's own process is involved, this route accommodates mergers between unrelated companies, cross-holding structures, demergers, and schemes that need to bind dissenting minority shareholders or creditors, none of which the fast-track route is built for.

A listed company pursuing this route has one more step before the Tribunal stage: the stock exchanges review the scheme and issue their observations, which SEBI's listing regulations require before the scheme is filed with the NCLT, so the exchanges' own review happens in addition to, not instead of, the Tribunal's.

Steps and approvals under the scheme route

The scheme route broadly follows this sequence:

• Each company's board approves the draft scheme and the share exchange ratio
• A registered valuer's report supports the share exchange ratio and the assets involved
• The companies apply to the NCLT for an order convening meetings of shareholders and creditors
• Notice of the scheme goes to the Registrar of Companies, the Regional Director, the official liquidator, and sectoral regulators where relevant, each of whom may raise objections
• Shareholders and creditors vote at the convened meetings; the scheme needs approval by a majority in number representing three-fourths in value of those voting
• The NCLT hears any objections and, if satisfied, passes an order sanctioning the scheme, which is then filed with the Registrar of Companies

The fast-track route: section 233

Section 233 of the Companies Act, 2013 lets a narrower set of mergers skip the Tribunal altogether: a merger between two small companies, a merger between a holding company and its wholly-owned subsidiary, and, since a 2021 amendment widened the category, certain mergers involving startups. Eligibility for the small-company category turns on paid-up capital and turnover limits that the Companies Act defines and revises from time to time, so it needs checking against the current definition before relying on this route.

Steps and approvals under the fast-track route

Instead of a Tribunal order, the fast-track route runs through the Regional Director. The companies file the scheme with the Registrar of Companies and the official liquidator, who are given a window of 30 days to raise objections, and the companies' boards file declarations of solvency. If no substantial objection is received, the Regional Director approves the scheme directly. If an objection raises a serious concern, the Regional Director can refer the matter to the NCLT, which then runs the full scheme-route process instead.

Typical timelines

The NCLT scheme route commonly takes six months to over a year from the first board approval to the final order, depending on how quickly regulators respond and whether any objection is contested. The fast-track route, when no objection is raised, often completes in a few months, since it removes the Tribunal hearing stage entirely; a referral back to the NCLT erases most of that time advantage.

Multiple sectoral regulators, a large number of creditors to notice, or a single contested objection at the Tribunal each tend to push the scheme route toward the longer end of that range, so a realistic plan allows for the slower outcome rather than the fastest one seen in an unusually smooth filing.

Which route actually fits

The fast-track route is worth checking first wherever the companies involved plausibly fit its categories, since the time saved is real. Where the merger involves unrelated companies, a demerger, or shareholders who are likely to object, the scheme route is usually the only one available, and planning around a realistic Tribunal timeline is safer than assuming the shorter route will apply.

A preliminary eligibility check against the small-company, subsidiary and startup categories, done before the first board meeting, is usually enough to settle which route applies; discovering the wrong assumption midway through drafting the scheme is what actually causes most of the delay founders blame on the process itself.

Frequently asked questions

Can a merger between two large private companies use the fast-track route?

Only if both qualify as a small company under the Companies Act's own definition, or if one is a holding company and the other its wholly-owned subsidiary, or the merger falls within the startup category added in 2021. Two large companies that do not fit any of these categories must use the NCLT scheme route under sections 230 to 232.

Does a fast-track merger still need a valuation?

Generally yes, in substance, since the share exchange ratio and the solvency declarations need to be supportable, even though section 233 does not run through the same Tribunal-supervised valuer's report step as the scheme route.

Can the Regional Director reject a fast-track merger?

The Regional Director can refer the scheme to the NCLT if an objection raises a concern that cannot be resolved at that level, at which point the merger effectively moves into the scheme-route process and timeline.

Which route is cheaper?

The fast-track route generally involves fewer professional and filing steps, which tends to make it less costly when it is available, but eligibility, not cost, should drive the choice; a merger forced into the wrong route over a missed eligibility condition costs far more to unwind later.

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