The structural evolution of the Indian corporate ecosystem has entered a period of systemic transformation, moving away from reactive regulation toward a proactive, value-oriented framework. This shift is characterized by legislative amendments and regulatory updates that synchronize domestic protocols with global standards while addressing the unique demands of a digital-first economy.
The recent overhaul of the Competition Act, 2002 the expansion of fast-track merger rules, and fiscal recalibrations in the Finance Bill, 2026, signal a move toward greater transparency and administrative efficiency. As M&A volumes in India defy global trends of subdued deal flow, the legal apparatus has been refined to provide objective triggers for intervention and streamlined pathways for internal reorganizations.
Regulatory Expansion of the Merger Control Framework under the Competition Act
The Competition (Amendment) Act, 2023, and The Competition Commission of India (Combinations) Regulations, 2024 represent the most significant update to India’s antitrust regime in decades. Central to this reform is the Deal Value Threshold (DVT) as a jurisdictional trigger. Previously, the Competition Commission of India (CCI) derived jurisdiction solely from asset or turnover values under Section 5 of the Competition Act, 2002.
This model often missed high-value acquisitions in digital and pharmaceutical sectors where emerging firms possess strategic value despite minimal revenue. Under the new Section 5(d), transactions exceeding INR 2,000 crore must be notified if the target has substantial business operations in India.
Substantial business operations in India (SBOI) are determined by specific objective criteria. For digital services, an enterprise has SBOI if 10% or more of its global business or end users are in India. For other sectors, the test is met if the target’s India-specific gross merchandise value (GMV) or turnover exceeds INR 500 crore and constitutes 10% or more of its global totals.
This approach ensures the regulator can scrutinize transactions impacting the Indian market regardless of the target’s current monetization stage. The “value of transaction” is expansive, including direct and indirect consideration, deferred payments, non-compete fees, and inter-connected transactions within two years.
The standard of “control” has moved from “decisive influence” to “material influence,” the lowest degree of control, focusing on an acquirer’s ability to influence management or strategic affairs. Revised CCI guidance distinguishes between control-conferring rights, such as vetoes over budgets or business plans, and standard investor protection rights like anti-dilution clauses.
This shift requires minority investors and private equity funds to be vigilant in negotiating governance rights. The regulator now conducts a factual analysis of the consolidated bundle of rights to determine if material influence exists, regardless of how control is documented in transaction papers.
Procedural efficiency is a major focus, with the time limit for the CCI to form a preliminary opinion reduced from 30 working days to 30 calendar days. The overall limit for final orders in Phase II investigations has been compressed from 210 days to 150 days. While this provides faster deal certainty, it places a burden on transacting parties to ensure complete filings.
Heightened gun-jumping scrutiny in 2025 resulted in penalties for failing to notify acquisitions of convertible debentures or for modifying deal structures without fresh notification. Penalties for providing false information have increased to INR 50 million, reflecting the regulator’s commitment to procedural sanctity.
Liberalization of Fast-Track Mergers and Internal Corporate Restructuring
The Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025 significantly expanded the scope of fast-track mergers under Section 233 of The Companies Act, 2013. Originally limited to small companies and wholly owned subsidiaries, the route now includes unlisted companies with aggregate borrowings under INR 200 crore, holding-subsidiary combinations that are not wholly owned, and fellow subsidiaries. This expansion responds to NCLT backlogs, offering a lower-cost, expedited alternative for routine consolidations.
Under the amended Rule 25, two or more unlisted companies can use the fast-track route if their aggregate loans, debentures, or deposits do not exceed INR 200 crore and they have no subsisting defaults. This financial status must be certified by an auditor in Form CAA-10A. Mergers between holding companies and unlisted subsidiaries are permitted even without 100% ownership, provided the transferor is not listed. The rules also explicitly extend the mechanism to demergers and business transfers, previously restricted to time-consuming NCLT-led processes.
A critical change for startups is the formalization of “reverse flipping” within the fast-track framework. Rule 25 now permits the merger of a foreign holding company into its Indian wholly owned subsidiary, facilitating re-domiciliation for potential domestic listings. Despite these relaxations, the process maintains high approval thresholds, requiring consent from shareholders holding 90% of share capital and creditors representing 90% in value. While the route eliminates tribunal hearings, the Regional Director maintains supervisory authority and must refer schemes found prejudicial to public interest to the NCLT.
Fiscal Shifts in the Finance Bill 2026: Taxation of Buybacks and Leverage
The Finance Bill, 2026, overhauls the taxation of share buybacks, returning to a framework where consideration, net of acquisition cost, is taxed as capital gains in the hands of shareholders rather than as corporate dividends under Section 115QA. This is generally advantageous for non-promoter shareholders due to the deduction of acquisition costs and access to preferential long-term capital gains rates of 12.5% for shares held beyond 24 months.
However, the 2026 proposals introduce an additional income tax levy for promoters, now defined as any entity holding over 10% of an unlisted company. For these shareholders, the tax incidence on buybacks will mirror dividend taxation rates, potentially reaching 30% for non-corporate promoters. This creates a two-tier system where buybacks are tax-beneficial for minority investors but expensive for promoters. The structure also risks economic double taxation in multi-tiered holding setups, as proceeds may be taxed as capital gains at the corporate level and subsequently as dividends upon ultimate distribution.
The Bill also proposes the complete disallowance of interest expenditure incurred to earn dividend income, replacing the previous 20% deduction limit. These impacts leveraged buyout (LBO) structures where debt is serviced by target dividends.
The inability to offset interest costs increases the effective tax burden, potentially rendering traditional leveraged models unviable. Furthermore, MAT credit utilization for companies migrating to the new regime on or after April 1, 2026, is capped at 25% of annual tax liability, a critical factor for the valuation of targets with high accumulated credits.
Evolution of the SEBI Takeover Code and Securities Governance
The Securities and Exchange Board of India (SEBI) (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2025 formalized the role of Independent Registered Valuers under Section 247 of the Companies Act. Determination of the offer price in an open offer, once at the discretion of acquirers and merchant bankers, is now transferred to an independent valuer. This ensures fair pricing for minority shareholders, especially for infrequently traded shares. The regulations also tighten norms for indirect acquisitions, ensuring that control acquired through unlisted parents is properly disclosed and enforced.
Procedural simplifications under the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2026 amendments include the removal of the Letter of Confirmation (LOC) system. Listed entities must now directly credit securities in dematerialized form to an investor’s account within 30 days of a service request. This significantly reduces the turnaround time for corporate actions like share splits. Additionally, the Takeover Code now includes a “two-test” acceptance condition for companies with dual-class share structures, requiring majority support under both existing and post-trigger voting structures to ensure fair treatment during substantial acquisitions.
Harmonization of Insolvency Proceedings and Merger Control Timelines
The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, proposes a critical change to the timing of competition approvals in distressed M&A. Responding to the Supreme Court’s 2025 judgment in Independent Sugar Corporation Limited v. Girish Sriram Juneja, 2025 INSC 124 which mandated CCI approval before the Committee of Creditors (CoC) vote, the Bill proposes allowing CCI approval after the CoC vote but before submission to the NCLT for final sanction. While intended to expedite the process, this creates a potential legal deadlock if the CCI requires structural changes to a plan that judicial precedent deems final and unmodifiable.
The Bill also establishes fixed liquidation timelines and a “two-stage” approval mechanism. The NCLT may first approve the implementation and management of the corporate debtor to ensure its survival, followed by a second order for the distribution of proceeds within 30 days. These changes, along with the introduction of creditor-initiated insolvency processes, signal a more streamlined environment for acquiring distressed assets. However, bidders must now conduct even more rigorous antitrust assessments early in the process to avoid late-stage deal failures.
Cross-Border Transaction Dynamics and the 2026 FEMA Reforms
The 2026 FEMA reforms modernized the framework for cross-border M&A through updated borrowing and guarantee regulations. The ECB framework now includes Limited Liability Partnerships (LLPs) and firms under restructuring as eligible borrowers, with limits raised to USD 1 billion or 300% of net worth without prior RBI approval. The removal of the “all-in-cost” ceiling allows borrowing costs to align with market conditions, subject to benchmark-linked spreads for loans under three years.
The 2026 Guarantees Regulations replaced an approval-driven process with a principle-based regime anchored in the permissibility of the underlying transaction. Residents can act as sureties for cross-border guarantees if the underlying transaction is FEMA-compliant and parties are eligible to lend or borrow under existing rules. This automatic route is expected to lower default premiums and facilitate financing for joint ventures. However, the regulations introduce a stringent Late Submission Fee mechanism for delayed reporting, balancing liberalization with robust post-facto oversight.
Conclusion
The post-2024 legal landscape for Indian corporate restructuring reflects a mature approach to balancing ease of doing business with robust regulatory oversight. The expansion of the fast-track merger route under the Companies Act significantly reduces the administrative burden on mid-sized companies and internal reorganizations, marking a transformative evolution in India’s corporate restructuring landscape.
Simultaneously, the implementation of the Deal Value Threshold under the Competition Act ensures that high-impact transactions in new-age sectors are captured proactively, tailoring the law to the contemporary business landscape. While fiscal changes in the Finance Bill, 2026, introduce complexities particularly regarding the taxation of buybacks and the restriction of interest deductions the overarching trend remains focused on transparency and fairness for all stakeholders. Ultimately, success in this reformed environment will depend on disciplined risk allocation, early regulatory preparation, and a clear vision for post-completion execution.
As India’s M&A framework continues to evolve, dealmakers must also closely consider SEBI-specific requirements, discussed in our Guide to SEBI Regulations in M&A Deals in India.