Merger, Amalgamation and Restructuring
Schemes Under Sections 230 to 232

A scheme of arrangement is the most powerful restructuring instrument in Indian company law. Once sanctioned by the Tribunal, it transfers assets and liabilities by operation of law, binds every creditor and shareholder including those who voted against it, and takes effect without individual conveyances, novations or consents. Nothing else in the Companies Act does that.

The power comes at the price of process. Two rounds of applications, meetings of every class of member and creditor, notice to eight or more authorities each with a window to object, valuation evidence, auditor certification of accounting treatment, and a sanction hearing. Twelve to eighteen months is normal — which is exactly why the first question on any restructuring should be whether the objective can be achieved another way.

N D Savla & Associates advises groups across Mumbai, Navi Mumbai, Thane and Goa on mergers, amalgamations, demergers and other schemes. We structure the transaction, test whether the fast track route is available, prepare the valuation and share exchange ratio, draft the scheme, run the meetings and regulatory notices, and take the petition through to sanction and implementation.

A scheme under Sections 230 to 232 of the Companies Act, 2013 is a court-sanctioned arrangement between a company and its creditors or members, or any class of them. Once sanctioned by the National Company Law Tribunal and filed with the Registrar, it binds all of them. Section 230 provides the general power to propose a compromise or arrangement. Section 231 gives the Tribunal power to supervise implementation and to modify the scheme where necessary. Section 232 deals specifically with schemes involving a merger or amalgamation, and requires additional material — the valuation report, the report of the directors explaining the effect on each class, and a supplementary accounting statement where the last accounts are more than six months old.

The forms a scheme can take

• Amalgamation, where one or more companies merge into another and the transferor companies dissolve without winding up
• Demerger, where an identified undertaking is transferred out to a resulting company, with shares issued to the shareholders of the demerged company
• Reverse merger, where a larger or profitable company merges into a smaller or loss-making one, usually for tax or listing reasons
• Reconstruction, restructuring of share capital, or conversion of debt into equity as part of a wider arrangement
• Compromise with creditors, involving rescheduling or reduction of claims
• Cross-border merger under Section 234, involving an Indian company and a foreign company in a permitted jurisdiction

The mechanism has been remarkably stable for seventy years. What changed is who decides, how long it takes, and how many regulators get a say.

The Companies Act, 1956 provided for schemes through Sections 391 to 394, and jurisdiction lay with the High Courts. The structure was inherited from English company law: creditor and member meetings, statutory majorities, and court sanction giving the scheme binding effect. It worked, but slowly, and placed complex valuation and accounting questions before judges carrying general civil lists.

Through the licence era the substantive constraint lay elsewhere — industrial licensing, the Monopolies and Restrictive Trade Practices Act, 1969 and the Foreign Exchange Regulation Act, 1973 all limited what corporate combinations were permissible in the first place. Liberalisation in 1991 removed most of those constraints and merger activity rose sharply. The Monopolies and Restrictive Trade Practices Act was eventually replaced by the Competition Act, 2002, introducing a modern combination review regime under the Competition Commission of India, while foreign exchange regulation was liberalised through FEMA, 1999.

The Companies Act, 2013 re-enacted the scheme provisions as Sections 230 to 234 and made three substantive changes: jurisdiction moved from the High Courts to the NCLT (December 2016); the list of authorities entitled to notice was expanded and put on a statutory footing in Section 230(5); and two new routes were created — the fast track merger under Section 233, and cross-border merger under Section 234.

The most recent shift has been towards taking work away from the Tribunal. The Union Budget for 2025-26 committed to widening the fast track route, and the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025, notified September 2025, substantially expanded the categories eligible to bypass the Tribunal — unlisted companies with borrowings below two hundred crore rupees, listed holding companies merging with unlisted subsidiaries, and fellow subsidiaries of a common holding company, while extending the route to demergers.