Govt fast-tracks approval process for overseas-headquartered startups' mergers into Indian arms

In a big boost to the so-called "reverse flipping", India has decided to fast-track the approval process for the merger of a start-up incorporated outside the country into its wholly-owned Indian arm by doing away with the time-consuming clearance from the National Company Law Tribunal (NCLT).

As per a notification by the Ministry of Corporate Affairs (MCA) published on Tuesday, any such merger or amalgamation will now require the Reserve Bank of India’s (RBI’s) approval, in addition to the government nod. It will come into effect from September 17.

Experts said the move will mainly benefit startups set up by Indians, which are headquartered overseas but now want to move back to India through such amalgamations to better tap the country’s robust growth prospects. Reverse flipping typically refers to such homecomings.


The ministry has now introduced a new sub-rule (5) to Rule 25A of the Companies (Compromises, Arrangements, and Amalgamations) Amendment Rules, 2024, under which both the foreign transferor holding company and its wholly owned Indian arm would have to obtain the RBI approval for mergers or amalgamations.

At the same time, the Indian transferee company will have to file an application with the government under Section 233 of the Companies Act, 2013, and Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, for seeking approval on such India-inbound mergers.

The requirement for the Indian subsidiaries to seek the NCLT approval used to delay the mergers, as the tribunal is burdened with a huge number of cases, experts said.

The notification will help the “trend of reverse flipping”, which has been the “norm for many of new-age startups in the recent times, driven by more favourable valuations in the Indian capital markets, robust government support, simplified regulatory frameworks, and easier access to capital”, said Sandeep Jhunjhunwala, partner at Nangia Andersen LLP.