Merger of Companies under Section 232: Step-by-Step Procedure

A merger or amalgamation under Section 232 of the Companies Act, 2013 is a scheme by which one or more companies (the transferor companies) transfer their entire business, assets and liabilities to another company (the transferee company) and are dissolved without winding up. The scheme needs approval of the boards, a three-fourths majority in value of the members and creditors who vote at Tribunal-convened meetings (unless dispensed with), and a sanction order of the National Company Law Tribunal (NCLT). The certified copy of the order must be filed with the Registrar of Companies in Form INC-28 within 30 days of receiving it.

For founders and family businesses, a merger is the usual way to collapse a group of companies into one, fold a subsidiary into its parent, bring two businesses under common ownership, or clean up a structure before fundraising or an IPO. Done well, it moves every asset, contract, licence and employee in one go, without separate transfers.

The route is long and document-heavy, though. Each stage has its own forms, notices and time limits, and a miss at one stage can send the scheme back to the Tribunal. This guide sets out the procedure for unlisted companies, with the extra steps for listed companies noted where they apply.

Applicability

Section 232 applies to any merger or amalgamation of two or more companies registered in India, private or public, listed or unlisted, and also to demergers (transfer of an undertaking to another company). It works together with Section 230, which governs the meetings and Tribunal process for every compromise or arrangement.

There are two common forms:

• Merger by absorption: one company absorbs the other, and the transferor is dissolved.

• Amalgamation by formation of a new company: two or more companies merge into a newly formed company.

Note: since September 2025, many intra-group and smaller mergers can use the simpler fast-track route under Section 233 instead of going to the NCLT. The Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025 (G.S.R. 603(E), 4 September 2025) widened that route to include unlisted companies whose outstanding loans, debentures and deposits do not exceed ₹200 crore and that have no repayment default, holding companies with their unlisted subsidiaries, and fellow subsidiaries of the same holding company. If your scheme qualifies, compare both routes before you start. Section 232 remains the route for listed transferors, larger companies and any scheme that does not fit Section 233.

Legal framework

Provision	Purpose
Section 230, Companies Act, 2013	Application to the NCLT, meetings, notices to authorities, approval majority
Section 232, Companies Act, 2013	Documents for the meetings, sanction of the merger, filing of the order, appointed date, annual compliance statement, penalties
Section 233, Companies Act, 2013	Fast-track merger for eligible classes of companies, without the NCLT
Companies (Compromises, Arrangements and Amalgamations) Rules, 2016	Forms CAA-1 to CAA-8, notice periods, chairperson's report, petition, hearing and order
National Company Law Tribunal Rules, 2016	Forms NCLT-1, NCLT-2, NCLT-3A and NCLT-6 and Tribunal practice
Regulation 37, SEBI (LODR) Regulations, 2015 and SEBI master circular on schemes	Stock exchange observation letter and SEBI requirements (listed companies only)
Section 133, Companies Act, 2013 and the applicable accounting standard	Accounting treatment in the scheme, certified by the auditor

Step-by-step procedure

The five stages of a Section 232 merger for unlisted companies, with key time limits

Step	What to do	Form / document	Timeline
1	Check that the memorandum and articles of each company permit the merger, choose the appointed date, and appoint a registered valuer, advocates and other professionals	Valuation report, draft scheme	Before the board meeting
2	Board meetings of each company approve the scheme, the share exchange ratio, the valuation report and the authorised signatories; obtain the auditor's certificate on accounting treatment	Board resolution, auditor's certificate	Same meeting; public companies file MGT-14 within 30 days
3	Listed companies only: file the draft scheme with the stock exchanges and obtain the observation letter before approaching the NCLT	Regulation 37 filings, fairness opinion, audit committee and independent directors' reports	Before the first motion
4	File the first-motion application before the NCLT bench having jurisdiction over the registered office, seeking directions to call (or dispense with) meetings	NCLT-1, NCLT-2, NCLT-6 affidavit, CAA-1 where creditors are involved, consent affidavits, CA certificate on creditors	After board approval
5	Obtain the first-motion order fixing meetings, chairperson, scrutiniser and quorum, or dispensing with meetings	Tribunal order	As fixed by the NCLT
6	Send individual notices of meetings to members and creditors with the explanatory statement and Section 232(2) documents; advertise and place on the website	CAA-2 notice and advertisement	At least one month before the meeting; advertisement at least 30 days before
7	Send notice of the scheme to the Central Government (Regional Director), Registrar, income-tax authorities, Official Liquidator and, where relevant, RBI, SEBI, CCI, stock exchanges and sectoral regulators	CAA-3	Immediately after notices to members and creditors; they have 30 days to respond
8	Hold the meetings; the chairperson files the result with the NCLT	CAA-4 chairperson's report	Within the time fixed by the NCLT, or three days after the meeting
9	File the second-motion petition for sanction of the scheme	CAA-5 petition	Within seven days of the chairperson's report
10	Advertise the hearing, reply to observations of the Regional Director and Official Liquidator, and attend the hearing	NCLT-3A advertisement, replies, affidavits	Advertisement at least 10 days before the hearing
11	NCLT sanctions the scheme	Order in CAA-7	On final hearing
12	File the certified copy of the order with the Registrar of each company; allot shares to the transferor's shareholders and file the allotment return; pay stamp duty	INC-28, PAS-3, share certificates or demat credit	INC-28 within 30 days of receiving the certified copy
13	File an annual statement confirming compliance with the order until the scheme is fully implemented	CAA-8, certified by a CA, CMA or CS in practice	Within 210 days from the end of each financial year

Forms, fees and filings

Form	Purpose	Time limit	Fee basis
MGT-14	Board resolution approving the scheme (public companies)	30 days from the resolution	Registration fees rules, based on share capital
NCLT-1 with NCLT-2 and NCLT-6	First-motion application	No fixed limit	NCLT fee schedule
CAA-2	Notice and advertisement of meetings	One month / 30 days before the meeting	Not applicable
CAA-3	Notice to regulators and authorities	Soon after notices to members and creditors	Not applicable
CAA-4	Chairperson's report on the meeting	As fixed, or three days after the meeting	Not applicable
CAA-5	Second-motion petition	Seven days from the chairperson's report	NCLT fee schedule
INC-28	Filing of the NCLT order with the ROC	30 days from receipt of the certified copy	Registration fees rules, based on share capital
CAA-8	Annual statement of compliance with the scheme	210 days from the end of each financial year	Registration fees rules

Documents checklist

• Memorandum and articles of all merging companies

• Board resolutions approving the scheme, exchange ratio and authorisations

• Draft scheme, with the appointed date and accounting treatment

• Valuation report from a registered valuer, and a fairness opinion for listed companies

• Auditor's certificate that the accounting treatment conforms to the accounting standards

• Latest audited financial statements, and a supplementary accounting statement if those accounts are more than six months old at the first meeting

• Directors' report on the effect of the scheme on shareholders, key managerial personnel, promoters and non-promoter shareholders

• List of members and creditors certified by a chartered accountant

• Consent affidavits of members and creditors, if dispensation of meetings is sought

• Stock exchange observation letter (listed companies)

• Proof of service of notices to authorities, and newspaper advertisements

Common mistakes and practical tips

• Choosing the wrong route. Many group mergers now qualify for the Section 233 fast track. Check eligibility and the ₹200 crore debt test before drafting for the NCLT.

• Stale financials. If the last audited accounts are more than six months old at the first meeting, a supplementary accounting statement is required. Plan the meeting dates around it.

• Vague appointed date. The scheme must state a clear appointed date. Fixing it to a date unconnected with the business can draw observations from the Regional Director or income-tax department.

• Ignoring authority observations. Replies to the Regional Director, Official Liquidator and income-tax department are where most delays arise. Resolve open ROC filings, pending inquiries and unpaid statutory dues before you file.

• Missing the post-sanction filings. INC-28 for every company, the allotment return and the yearly CAA-8 are often overlooked once the order is received.

• Overlooking stamp duty, tax and FEMA. Stamp duty on the order is a state subject, the Income-tax Act has its own conditions for a tax-neutral amalgamation, and shares issued to non-resident shareholders must follow FEMA rules. Check all three while drafting, not after the order.

For a smaller exit or capital change, a merger is not always needed. See our guide on buyback of shares under the Companies Act for a route that does not need the Tribunal.

Consequences of non-compliance

Under Section 232(8), if a transferor or transferee company contravenes Section 232, the company is punishable with a fine of ₹1 lakh to ₹25 lakh. Every officer in default is punishable with imprisonment of up to one year, or a fine of ₹1 lakh to ₹3 lakh, or both. Late filing of INC-28 or CAA-8 also attracts additional fees under the Companies (Registration Offices and Fees) Rules, 2014, and a scheme that is not implemented as sanctioned can be taken back to the Tribunal under Section 231. Filing gaps of the kind covered in our AOC-4 and MGT-7 filing guide are also a common source of Registrar observations on the scheme.

FAQs

What is the difference between a merger and an amalgamation?

In practice, they mean the same process. A merger usually describes one company absorbing another, while an amalgamation can also mean two companies combining into a new one. Both follow Section 232.

How long does a merger under Section 232 take?

It usually takes several months to over a year from the board meeting. The time depends mainly on the NCLT bench's hearing schedule and on how quickly the observations of the authorities are resolved.

Can two private limited companies merge without going to the NCLT?

Yes, if they qualify for the fast-track route under Section 233. This route is now open to many unlisted companies whose outstanding loans, debentures and deposits are within ₹200 crore and that have no repayment default, as well as to holding-subsidiary and fellow-subsidiary mergers. The Regional Director, not the NCLT, confirms these schemes.

Who can object to a scheme of merger?

Only members holding at least 10% of the shareholding, or creditors whose debt is at least 5% of the total outstanding debt as per the latest audited financial statements, can object. Authorities served with notice can make representations within 30 days.

What is the appointed date in a merger?

It is the date from which the scheme takes effect and the transferor's business is treated as transferred to the transferee. It must be stated clearly in the scheme.

Which form is filed with the ROC after the NCLT approves a merger?

Form INC-28 is filed by each company with the certified copy of the order, within 30 days of receiving it. After that, Form CAA-8 is filed every year until the scheme is fully implemented.

Conclusion

A Section 232 merger is the standard route to combine companies, but it runs on a fixed sequence of board approvals, Tribunal directions, notices and filings. Testing eligibility for the fast track first, keeping financials and filings current, and planning the post-sanction steps from the outset keep the scheme on time.

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Disclaimer: This article is for general information and knowledge-sharing only and does not constitute legal advice. Provisions are as on 31 October 2026; please refer to the latest law or consult a professional before acting.