Scheme of Arrangement Under Companies Act 2013: NCLT Process for Mergers, Demergers

Scheme of Arrangement Under explained: this guide covers what Scheme of Arrangement Under means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

A Scheme of Arrangement under Sections 230-232 of the Companies Act 2013 is the court-approved mechanism for mergers, demergers, amalgamations, compromises, and corporate restructuring. It requires NCLT approval and is binding on all shareholders and creditors once sanctioned.

Types of Schemes

• Amalgamation (merger) — Transferor merges into Transferee company
• Demerger — Business unit transferred to new/existing company
• Compromise with creditors — restructuring of debt
• Buy-back of shares through scheme
• Capital reduction

Step-by-Step NCLT Process

1. Board Approval: Both companies pass board resolution approving the scheme
2. First Motion (CA-1): Companies file petition before NCLT seeking directions to convene shareholder/creditor meetings
3. Meetings: NCLT orders separate meetings of different classes of shareholders and creditors
4. Approval: Scheme approved by majority in number representing 3/4th in value of shares/debt at meetings
5. No-objection: Companies obtain NOCs from Income Tax, Stock Exchange, SEBI (for listed), RBI
6. Second Motion (CA-2): File petition before NCLT for sanction of scheme
7. NCLT Sanction: NCLT passes order approving scheme
8. Filing with RoC: Certified copy of NCLT order filed with RoC — effective date of merger

Timeline

Total time: Typically 9-18 months for unlisted companies; up to 24 months for listed companies with SEBI/CCI approvals.

Fast-Track Merger — Section 233

Applicable to: holding-subsidiary mergers, small company mergers, and startups (2024 amendment). No NCLT approval required — just Central Government (RoC) approval. Timeline: 60-90 days. Conditions: No objections from creditors holding 90%+ value + Regional Director approval.

Listed Company Additional Requirements

• SEBI's No-Objection Letter (for schemes involving listed companies)
• Fairness opinion from SEBI-registered merchant banker on share swap ratio
• Disclosure to stock exchanges at each stage
• CCI approval if combination thresholds met