On May 29, 2026, the Reserve Bank of India (RBI) notified the Foreign Exchange Management (Cross Border Merger) (Amendment) Regulations, 2026 (the “2026 Amendment”), amending the Foreign Exchange Management (Cross Border Merger) Regulations, 2018 (the “Cross-Border Merger Regulations”). The 2026 Amendment brings about a much-needed harmonization between the company law and foreign exchange management regimes, for cross-border mergers.

The erstwhile cross-border merger regime in India

Cross-border mergers for Indian entities are primarily governed by the Companies Act, 2013 (the “Companies Act”) and the Cross-Border Merger Regulations. Sections 230 to 232 of the Companies Act set out the National Company Law Tribunal (NCLT)–supervised route, under which the NCLT sanctions a scheme of compromise, arrangement or amalgamation. Section 233, read with Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (the “CAA Rules”), provides a fast-track merger route for certain specific classes of companies, including a holding company and its wholly-owned subsidiaries. Under the fast-track route, the scheme is sanctioned by the Central Government (through the Regional Director (RD)) with a streamlined process.

The Cross-Border Merger Regulations lay down the compliances for cross-border mergers, that is, mergers and amalgamations between an Indian company and a foreign company. There are two kinds of cross-border mergers, inbound mergers and outbound mergers. An inbound merger is where a foreign company merges into an Indian company, and the resultant company is an Indian company. An outbound merger, on the other hand, refers to a merger of an Indian company into a foreign company, with the resultant company being a foreign company.

Until September 2024, the CAA Rules permitted a cross-border merger (such as an inbound merger) only through the elaborate NCLT route. However, effective September 17, 2024, the Ministry of Corporate Affairs (MCA) amended Rule 25A of the CAA Rules, permitting an inbound merger to proceed through the fast-track route, subject to prior RBI approval. This was the regulatory enabler for fast-track “reverse flips,” whereby Indian-founded groups of companies re-domicile an offshore parent company by merging it into its Indian subsidiary. The MCA amendment dated and effective September 4, 2025, confirmed this by adding such mergers to the list of permitted fast-track mergers under Rule 25 of the CAA Rules.

However, despite the amendment to the CAA Rules, prior to the 2026 Amendment, the Cross-Border Merger Regulations were drafted in a manner that only referred to cross-border mergers that were approved through a scheme sanctioned by the NCLT. Therefore, while inbound mergers were explicitly permitted through the fast-track route under the CAA Rules, the Cross-Border Merger Regulations, on a literal reading, restricted certain actions associated with inbound mergers unless they were approved pursuant to a scheme sanctioned by the NCLT.  This restriction included asset and liability disposal timelines, payment of compensation by the resultant company, and deemed approval of cross-border mergers that met other conditions, each linked to NCLT–sanctioned schemes under Regulations 4, 7, and 9 of the Cross-Border Merger Regulations, respectively.

That said, it must be noted that there are certain fast-track reverse flips post-2024 that have been approved by the RD, such as those of Razorpay, Inc. and Dream Sports Inc., despite the glaring misalignment and ambiguity under the Cross-Border Merger Regulations.

The 2026 Amendment

The 2026 Amendment omits the term ‘NCLT’ and replaces it with the term ‘Competent Authority’ across the Cross-Border Merger Regulations. Such ‘Competent Authority’ is defined to mean “any authority empowered under the Companies Act, 2013 or any subordinate legislation made thereunder to approve a scheme of merger or amalgamation”. The amended regulations took effect on June 5, 2026. Hence, the Cross-Border Merger Regulations now explicitly recognize the fact that mergers and amalgamations may be approved by authorities other than NCLT, as per the Companies Act and rules thereunder.

Observations and concluding remarks

The 2026 Amendment finally harmonizes the Cross-Border Merger Regulations and CAA Rules with respect to fast-track inbound mergers. The fast-track inbound mergers which require the RD’s approval as per the CAA Rules and all ancillary actions to such merger are now explicitly recognized in the Cross-Border Merger Regulations. This includes a deemed approval of an inbound merger as long as it is a cross-border merger which is compliant with the conditions under the Companies Act, the CAA Rules, and the Cross-Border Merger Regulations. The broad, forum-neutral drafting also future-proofs the Cross-Border Merger Regulations against any further delegation of authority to sanction the schemes of mergers and amalgamations.

As a matter of statutory coherence, the 2026 Amendment is a sensible and overdue alignment, and a welcome one for companies contemplating reverse flips to India.

Please find attached a copy of the 2026 Amendment, here.

This update has been contributed by Jaidrath Zaveri (Partner) and Kieran Correia (Associate).

Argus Knowledge Centre is now on WhatsApp! Send us a message on +91 8433523504 to receive updates from our Knowledge Centre.