Government officials are considering a proposal that would allow listed companies to bypass the National Company Law Tribunal (NCLT) process if their mergers or demergers receive approval from financial sector regulators. This initiative could significantly alter the mergers and acquisitions (M&A) landscape in the country and alleviate the workload on NCLT benches, thereby expediting these crucial corporate processes, according to insights from corporate lawyers and M&A experts.
The Centre is contemplating the removal of the mandatory requirement for NCLT approval in the mergers and demergers of local listed firms, following a similar allowance made over eight years ago for specific types of companies. “Various ministries are exploring methods to accelerate amalgamations, especially for listed entities, and are evaluating whether to include NCLT approval in this framework,” stated one source familiar with the discussions, who requested anonymity.
In her recent budget address, Finance Minister Nirmala Sitharaman emphasized the government’s commitment to streamlining India’s M&A processes to enhance efficiency and speed. An inquiry sent to the Ministry of Corporate Affairs has yet to receive a response.
In December 2016, the government permitted fast-track mergers involving a holding company and its wholly owned subsidiaries, as well as mergers between two or more small companies or startups, allowing these transactions to proceed with approvals from the Centre and the regional director of the Ministry of Corporate Affairs, unless public interest or creditor concerns were at stake. Previously, all mergers required NCLT approval.
Currently, several large listed companies are pursuing demergers. For instance, on January 22, Hindustan Unilever Ltd approved the separation of its ice cream business into a distinct listed entity, Kwality Wall’s (India) Ltd.
