Section 234 explained: this guide covers what it 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.
Section 234 is the provision that allows a company registered in India to merge with a foreign company, and a foreign company to merge into an Indian company. It works by extending the merger chapter (Chapter XV) to companies in notified foreign jurisdictions and by requiring the prior approval of the Reserve Bank of India.
Under sub-section (1), the provisions of Chapter XV apply, with necessary changes, to mergers and amalgamations between Indian companies and companies incorporated in such countries as the Central Government notifies, unless another law provides otherwise. Under sub-section (2), a foreign company may merge into an Indian company, or the other way round, with the prior approval of the Reserve Bank of India, and the scheme may pay the shareholders of the merging company in cash, in Depository Receipts, or partly in each. Central Government rules, made in consultation with the RBI, fill in the procedure.
Sub-section (1): extending Chapter XV to notified countries
The first sub-section says that, "unless otherwise provided under any other law for the time being in force", the provisions of Chapter XV "shall apply mutatis mutandis to schemes of mergers and amalgamations between companies registered under this Act and companies incorporated in the jurisdictions of such countries as may be notified from time to time by the Central Government". In plain terms:
- Chapter XV (sections 230 to 240) is the domestic merger code. It provides for Tribunal-sanctioned schemes with meetings of creditors and members (see section 230 and section 232).
- Section 234(1) lets that code apply to a cross-border case, but only where the foreign company is incorporated in a country the Central Government has notified.
- The phrase "unless otherwise provided under any other law" matters. Other laws, such as foreign exchange law, tax law and competition law, keep their own application.
The proviso to sub-section (1) allows the Central Government to make rules, in consultation with the Reserve Bank of India, "in connection with mergers and amalgamations provided under this section".
Rule 25A and the notified jurisdictions
From our understanding, the rules made under this proviso are in the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, in Rule 25A, and they deal with which jurisdictions qualify and the conditions for a cross-border scheme. We do not reproduce the rule here because it is not part of the source text used for this article and its wording has been amended from time to time. Please confirm the current text of Rule 25A, and the current list of eligible jurisdictions, before you plan any transaction.
Sub-section (2): foreign company merging with an Indian company, or the reverse
Sub-section (2) says that "subject to the provisions of any other law for the time being in force, a foreign company, may with the prior approval of the Reserve Bank of India, merge into a company registered under this Act or vice versa". The terms of the scheme may provide, "among other things", for the payment of consideration to the shareholders of the merging company:
| Form of consideration | Allowed by the text |
|---|---|
| Cash | Yes |
| Depository Receipts | Yes |
| Partly cash and partly Depository Receipts | Yes |
The Explanation defines "foreign company" for sub-section (2) as "any company or body corporate incorporated outside India whether having a place of business in India or not". So, unlike the definition used for the foreign-company chapter, the merger provision is not limited to foreign companies that have a place of business in India.
The direction of the merger is open. "Merge into a company registered under this Act or vice versa" covers both an inbound merger (foreign company merges into an Indian company) and an outbound merger (Indian company merges into a foreign company).
If you are planning a merger that crosses borders, a legal consultation at the planning stage can help you line up the approvals, because the Companies Act is only one of several laws that apply.
How the steps fit together
The text of section 234 is short. Real transactions combine it with other rules:
| Layer | What it governs | Where to look |
|---|---|---|
| Section 234 | Permission in principle for cross-border schemes and RBI approval | This article |
| Chapter XV, sections 230-232 | Tribunal scheme, meetings, notices, sanction | Our articles on section 230 and section 232 |
| Rules made under section 234 | Eligible jurisdictions and procedure | Confirm current Rule 25A of the CAA Rules, 2016 |
| Foreign exchange law | Treatment of the merger under FEMA and its regulations | See cross-border mergers under Regulation 9 and deemed RBI approval |
| Other laws | Tax, competition, sector approvals | See CCI approval for mergers and acquisitions |
Section 234(2) states RBI approval as a requirement. How that approval operates under the foreign exchange regulations, including any deemed approval, is a question for those regulations, not for section 234. Our linked article on Regulation 9 covers that point; please check the current regulations as they change.
What section 234 does not do
- It does not list the countries. The Central Government notifies them, and the rule-makers set conditions.
- It does not deal with tax. Whether a cross-border merger is tax-neutral is decided under the Income-tax law.
- It does not displace the Tribunal's role for the Indian company. The Indian company still goes through the Chapter XV process, as applied.
- It does not itself fix valuation or disclosure norms. Those come from the rules.
Proposed change
We checked the Corporate Laws (Amendment) Bill, 2026 for an amendment to section 234 and found none. Clause 67 of the Bill, which proposes a proviso on which Tribunal hears applications under sections 230 to 233, is about those sections and does not name section 234. The Bill is pending and is not law as on 30 September 2026.
Practical examples
Example 1: inbound merger. A foreign parent holds a subsidiary company in India and wants a single Indian entity. The foreign company merges into the Indian company. Section 234(2) allows this with prior RBI approval, subject to the jurisdiction being eligible and other laws being met.
Example 2: outbound merger. An Indian company wants to merge into its overseas holding company. Sub-section (2) says "vice versa", so the route exists, again with the RBI approval and the other requirements.
Example 3: paying with depository receipts. The scheme offers shareholders of the merging company part cash and part Depository Receipts. Sub-section (2) allows this mix, as the scheme provides.
Need help planning a cross-border merger?
A merger with a foreign company touches company law, foreign exchange, tax and sometimes competition law, and the order in which approvals are sought matters. We can help you map the steps and the documents for each. Begin with a legal consultation.
Key takeaways
- Section 234 extends the merger chapter to schemes between Indian companies and companies in countries notified by the Central Government.
- A foreign company may merge into an Indian company, or vice versa, with the prior approval of the RBI.
- Consideration may be in cash, Depository Receipts, or partly each.
- For sub-section (2), "foreign company" means any company or body corporate incorporated outside India, whether or not it has a place of business in India.
- Rules are made by the Central Government in consultation with the RBI; confirm the current text of Rule 25A of the CAA Rules, 2016.
- Other laws continue to apply. The Bill, 2026 has no clause amending section 234.
Read next
- Section 231: Tribunal power to enforce a compromise
- Section 236: Purchase of minority shareholding
- Cross-border mergers: rules for Indian and foreign companies
- Inbound merger under FEMA: five compliance heads and two-year limits
Disclaimer: Based on the Companies Act, 2013 as amended up to 1 April 2021 (official consolidated text), read with later developments noted in the article; proposals in the Corporate Laws (Amendment) Bill, 2026 are pending and not law as on 30 September 2026. Verify current notifications and rules before acting.