The inbound cross-border merger—a foreign company merging into an Indian company—was historically routed through the NCLT under Sections 230 to 232. The 2024 amendment to Rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 changed that for a specific category: a foreign holding company merging into its Indian wholly owned subsidiary. This is the reverse flip, and it now has a fast-track route.
The Eligibility
The fast-track inbound route is available where the foreign company is the holding company of the Indian company and the Indian company is its wholly owned subsidiary. The route is not available for a merger between unrelated foreign and Indian companies; it is confined to the holding-subsidiary relationship. The 2025 amendment to Rule 25 expressly includes the foreign holding company and Indian wholly owned subsidiary merger within the fast-track eligibility, confirming the policy direction.
The transaction is subject to prior RBI approval. The RBI's approval is granted under the FEMA Cross-Border Merger Regulations, and the 2026 amendment to those regulations replaced the reference to the NCLT with "Competent Authority" to accommodate the Regional Director's approval under Section 233.
The Procedure
The procedure is the Section 233 procedure. The companies must issue notices to the ROC and the Official Liquidator, file a declaration of solvency, and obtain the consent of ninety per cent of shareholders and ninety per cent in value of creditors. The Regional Director may approve the scheme directly or refer it to the NCLT.
The RBI approval is a condition precedent. The application to the RBI must disclose the scheme, the valuation, the post-merger shareholding pattern, and the compliance with the FDI policy. The RBI's approval is not a substitute for the sectoral approvals; where the Indian company operates in a regulated sector, the sectoral regulator's approval is also required.
The Strategic Significance
The reverse flip route is significant for Indian-origin start-ups that incorporated holding companies in Singapore, the United States, or Mauritius to access foreign capital. The fast-track route allows them to relocate the holding structure to India without the delay and cost of the NCLT process. The route has been used by companies such as Razorpay and Dream Sports, and it is likely to become the preferred route for inbound group consolidations.
The route is not without complexity. The valuation of the foreign holding company, the tax consequences of the merger, and the RBI's conditions must be managed carefully. A reverse flip that is structured without regard to the FEMA and tax dimensions may encounter regulatory objections that negate the speed advantage of the fast-track route.
Call to Action
Anuj Desai & Associates advises companies on the post-2024 inbound fast-track merger route—from the Rule 25A(5) eligibility analysis and the RBI approval strategy to the Section 233 procedure and the FEMA compliance. If you are planning a reverse flip, we can help you structure a transaction that meets the regulatory requirements.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
🔗 linkedin.com/in/ca-anuj-desai-122547230
Article 88