New rules for M&A in startups and MSMEs

In order to enhance efficiency and speed up the approval process for mergers and acquisitions (M&A) in the startup and MSME sectors, India has implemented new regulations. Startups and MSMEs engaged in M&A activities can now secure approval within 15 to 60 days.

Image Credit: Pixabay

India has introduced new regulations to streamline and expedite the approval process for mergers and acquisitions (M&A) in the startup sector. M&A activities in startups and MSMEs can now obtain approval within 15 to 60 days. This regulatory update is expected to provide a significant impetus to the startup ecosystem, which has witnessed increased corporate restructuring in recent times, according to a notification from the corporate affairs ministry (MCA).

There is now a maximum time limit of 60 days for either granting approval to a merger or amalgamation or presenting objections to the adjudicating authority. If the MCA fails to take action within this timeframe, it will be considered an automatic approval. This revision ensures a streamlined and time-bound process for mergers and acquisitions in the startup sector.

Based on the notification, if the Registrar of Companies (RoC) and official liquidators do not raise any objections within 30 days and if it is deemed beneficial for the public or creditors of the companies involved, the Ministry of Corporate Affairs (MCA) can approve a merger or amalgamation within 15 days. The revised Companies (Compromises, Arrangements and Amalgamations) Rules, which will be effective from June 15, introduce these changes.

Currently, there is no defined timeline for the approval process by the RoC or official liquidators. This update aims to streamline and expedite the process of approving mergers and amalgamations in the interest of all stakeholders.