Advertisement
X

Government to Accelerate Approval for Merging Overseas Start-ups into Indian Subsidiaries

The move will benefit start-ups set up by Indians, which are based overseas but want to move back to India, to better tap the country's robust growth prospects

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), in a significant move for "reverse flipping". This is as per the Economic Times

Advertisement

As per the experts, the move will reportedly benefit start-ups set up by Indians, which are based overseas but 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 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 reportedly said as per ET.

According to the notification from the Ministry of Corporate Affairs (MCA), published on Tuesday, which will come into effect from September 17, any such merger or amalgamation will reportedly now require the Reserve Bank of India's (RBI's) approval, including the green light from the government.

The ministry has reportedly 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.

Advertisement

The Indian transferee company, at the same time, will reportedly have to apply with the government under Section 233 of the Companies Act 2013, and Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, to seek approval on such India-inbound mergers.

The notification will reportedly be of significant boost to reverse flipping, which has been the “norm for many of new-age startups in 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 as per ET.

Show comments