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An Analysis Of The Development Of Section 233 Of The Companies Act, 2013

Introduction To Section 233
Section 233 of the Companies Act, 2013[1] provides for a procedure known as Fast-Track Merger. It is an alternative method to the normal proceedings as mentioned under Sections 230 to 232 of the same Act which allows restructuring of companies in a swifter manner.

This provision allows only certain companies to follow the proceedings as laid down, which include small companies, start-up companies, etc. Section 233 allows companies to merge or acquire another entity within a specific period. It enables a cost-effective solution for companies to merger with one another, within a specified timeline of 60 days. This provision gives the Central Government the power to decide whether a combination or arrangement is of public interest or in the interest of the creditors of the companies in question.

If the Central Government is of the opinion that such an arrangement does not fulfil the criteria of Section 233, then it may file for its arrangement under sections 230 to 232. The procedure laid down in Section 233 essentially binds all the parties to specific deadlines to disable any sort of delay to the process. This procedure also reduces the strain of the Company Law Tribunals that have the strenuous job of deciding numerous cases that aren't bound to any timelines.

History And Surrounding Circumstances Of The Law

This section was not present in the Companies Act, 1956, it is a new addition in the 2013 Act. The provisions of the 1956 Act made it such that the entire proceedings of mergers and acquisitions were lengthy and very costly. With changing times, the Parliament sought the need to include a provision that would not only be time affective and cost effective, but it would consequentially also take away the burden from the tribunals to intervene.

Fast-track mergers are a relatively new concept in India; however the concept is well established in China and Brazil. With the increase in businesses and economic growth in India, it was necessary for the Ministry of Corporate Affairs (MCA) to introduce this provision. The objective behind this was to promote the ease of doing business and to ensure that corporate entities have a chance to reorganise their assets in such a way that there was no space for loss generation or for liquidation of companies. India has been on the path of enhancing its economy and such a provision only made the transition smoother.

Ministry Of Corporate Affairs Vide Notification

The Ministry of Corporate Affairs made certain amendments to the Fast-Track merger provisions in Rule 25[2] of the Companies (Compromise, Arrangements and Amalgamation) Rules, 2016 in relation to Section 233 of the Companies Act, 2013. The Amendment reduced the timeline within which the Central Government must confirm the scheme of amalgamation. Before such an Amendment, there was a specified timeline for the process of the merger however, the 30 day period binds parties like the Government, Liquidator and Registrar of Companies.

The Amendment vide the Notification[3] also brought the concept of deemed approval wherein, if the Liquidator or Registrar of Companies fail to provide objections to the scheme in a timely manner as specified, it shall be deemed to be approved by the Central Government. Such an Amendment by the Ministry of Corporate Affairs was done on May 2023 and was to be effective from June 2023, to facilitate the true objective of Section 233.

Company Law Committee Report

To enhance the effectiveness of the Fast-track merger approval process outlined in Section 233 and concurrently safeguard the interests of minority shareholders, the Company Law Committee proposed a revised twin test. This involves obtaining approval from (i) a majority of individuals present and voting at the meeting, constituting seventy-five per cent in value of the shares represented by those present and voting; and (ii) an endorsement from entities representing more than fifty per cent in value of the overall shares of the company.

Additionally, the Committee recommended amending Section 233 of the Companies Act, 2013 to allow fast-track mergers between a holding company and its subsidiary company or companies (excluding wholly-owned subsidiaries) under specified conditions, particularly if such companies are unlisted.

The Company Law Committee suggested amending Section 233(12) to provide leeway for the Central Government to specify the procedure for invoking Section 233 in relation to the specified class or classes of companies mentioned in sub-section (1), particularly concerning compromises or arrangements under Section 230(1) and Section 232(1)(b). This amendment would grant the Central Government the authority to establish rules for this specific purpose.[4]

J.J. Irani Committee Report

The J.J. Irani Committee Report of 2005 emphasised on the importance mergers as a tool for growth and business strategy. However, it also stated that one of the biggest drawback of this procedure is that it is lengthy, court driven, consists of too many delays and thus long drawn. Recommendations put forward by the committee in this regard were to include proceedings that were shorter and would promote the ease of doing business. With this, Section 233 of the Act and Rule 25 of the Rules 2016 were added.

Even though the report did not directly recommend the incorporation of fast-track mergers as a provision, it was evident to the law makers that such a change was required as per the report. India being such a booming country in areas of business, it was apparent that the courts or tribunals would be overburdened by the number of cases admitted. Thus, the addition of a faster and more cost-efficient method was beneficial for everyone. [5]

In a world where companies require fresh strategies to keep up with the ever-changing corporate setting, Fast-track mergers makes way for combinations in a strategic yet time-saving manner. It is very important for such vital procedures to be regulated to ensure that smaller businesses and start-ups have an option to merge through a method that is not cumbersome and lengthy.

  1. Companies Act, 2013, � 233.
  2. Companies (Compromise, Arrangements and Amalgamation) Rules, 2016, Rule 25.
  3. Notification No: � G.S.R 367(E), MCA header - ministry of corporate affairs. Available at: (Accessed: 21 January 2024).
  4. Report of the Company Law Committee - Ministry of Corporate Affairs. Available at: (Accessed: 21 January 2024).
  5. Report of Expert Committee on Company Law. Available at:,%20J.%20J.%20Irani%20Report%20of%20the%20Expert%20Committee%20on%20Company%20Law.pdf (Accessed: 21 January 2024).

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