Beyond NCLT: How RBI’s 2026 FEMA Amendment Reshapes Cross-Border M&A Approvals

Beyond NCLT: How RBI’s 2026 FEMA Amendment Quietly Rewires Architecture of Cross-Border M&A Approvals

Executive Summary

On May 29, 2026, the Reserve Bank of India quietly notified the Foreign Exchange Management (Cross Border Merger) (Amendment) Regulations, 2026 (Notification No. FEMA.389(1)/2026-RB), gazetted on June 2, 2026. On its face, the amendment is modest – a handful of textual substitutions spread across nine sub-clauses of a regulation that most practitioners treat as machinery rather than headline law. Look closer, however, and the change touches the conceptual spine of the Foreign Exchange Management (Cross Border Merger) Regulations, 2018: the identity of the body whose sanction triggers FEMA’s automatic-approval route for inbound and outbound mergers.

The 2018 Regulations were drafted at a time when the National Company Law Tribunal (“NCLT”) was, for all practical purposes, the only body capable of sanctioning a scheme of merger, amalgamation or arrangement under Sections 230–234 of the Companies Act, 2013. The 2026 amendment deletes that fixed reference and replaces it with a deliberately elastic term – “Competent Authority” – defined as any authority empowered under the Companies Act, 2013, or any rules or subordinate legislation made thereunder, to approve a scheme of merger or amalgamation. In one stroke, the RBI has decoupled its foreign exchange compliance framework from a single named tribunal and tethered it instead to whatever institutional architecture the Ministry of Corporate Affairs (“MCA”) chooses to deploy for merger approvals – now, or at any point in the future.

This article deconstructs the amendment clause-by-clause, situates it within the broader Companies Act framework on “Competent Authority,” and assesses what it means – practically and strategically – for general counsel, M&A bankers, and foreign investors structuring inbound or outbound restructurings involving Indian entities.

1. The Amendment at a Glance

Before drilling into the legal text, it is useful to set the 2018 framework and the 2026 amendment side by side.

Read in isolation, this looks like housekeeping – the kind of consequential amendment that follows almost mechanically whenever a primary statute or its rules are revised. But the choice of language is telling. The RBI did not substitute “NCLT” with a named alternative tribunal (say, the Regional Director, or a successor body). It substituted a proper noun with a functional category – and that drafting choice is the crux of this amendment’s significance, as the next section explores.

2. The Core Regulatory Shift: Deconstructing “Competent Authority”

2.1 The exact textual change

The amending notification effects the change through a precisely worded substitution to Regulation 2 of the Principal Regulations. As reported in the notification text:

“(i) the clause (vii) shall be omitted; (ii) after the clause (ii), the following clause shall be inserted, namely – ‘(iia) “Competent Authority” means any authority empowered under the Companies Act, 2013 or any subordinate legislation made thereunder to approve a scheme of merger or amalgamation;’.”

Two things are happening here, and they should not be conflated.

• Deletion of clause (vii): The earlier definitional clause, which tied the entire regulatory framework to the NCLT as defined under the Companies Act, 2013, has been removed in its entirety. There is no longer a standalone, named definition of “NCLT” anchoring the 2018 Regulations.
• Insertion of clause (iia): A new definition is inserted immediately after clause (ii) – note the careful sequencing, placing the new term early in the definitional hierarchy rather than as an afterthought – introducing “Competent Authority” as a cross-reference to the Companies Act, 2013 and “any subordinate legislation made thereunder.”

The drafting technique is a classic example of legislation by cross-reference: rather than enumerate everybody that might conceivably sanction a merger – NCLT benches, Regional Directors, the Central Government, or any future tribunal Parliament or the MCA might create – the RBI has outsourced that determination entirely to corporate law. Whatever the Companies Act, 2013 (or its rules) recognises as competent to approve a scheme of merger or amalgamation automatically becomes the “Competent Authority” for FEMA purposes, without any further amendment to the Cross Border Merger Regulations being required.

2.2 “Competent Authority” under the Companies Act, 2013 – what it actually covers

To appreciate the practical reach of this change, it helps to recall that approval authority for mergers and amalgamations under Sections 230–234 of the Companies Act, 2013 is not, and has never been, monolithically vested in the NCLT alone:

• NCLT under Sections 230–232: The default and most commonly invoked route. A company (or companies) seeking to merge applies to the jurisdictional NCLT bench, which convenes meetings of shareholders and creditors, considers objections from regulators (including the RBI, SEBI, Income Tax authorities and the Registrar of Companies), and ultimately sanctions the scheme by order.
• Central Government / Regional Director under Section 233 (“fast-track” mergers): For mergers between two or more small companies, between a holding company and its wholly-owned subsidiary, or between such other classes of companies as may be prescribed, the Companies Act provides a simplified, NCLT-free route. Approval here vests with the Central Government, exercised in practice through the Regional Director (Ministry of Corporate Affairs) – explicitly contemplated as falling outside NCLT’s docket.
• Tribunal-equivalent or successor bodies under subordinate legislation: The phrase “any subordinate legislation made thereunder” is forward-looking. Should the MCA, by rule or notification, expand the categories of companies eligible for the Section 233 fast-track route – a policy direction the Ministry has signalled interest in for several years as part of its NCLT decongestion agenda – those expanded categories would, without any further FEMA amendment, automatically fall within “Competent Authority” for cross-border merger purposes.

In short, “Competent Authority” is not a new institution. It is a recognition mechanism – a drafting device that lets FEMA’s cross-border merger framework automatically track whatever approval architecture corporate law settles on, present or future, without requiring the RBI to keep amending its own regulations every time the MCA tweaks the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

2.3 Why substitute across Regulations 4, 5, 7 and 9 specifically?

The four operative regulations affected are not arbitrary – they form the procedural backbone of the cross-border merger framework:

• Regulation 4 (Inbound merger): Governs mergers where the resultant company is an Indian company, prescribing how the foreign transferor company’s assets, liabilities, borrowings and securities are treated under FEMA. References to the sanctioning body determine the trigger point for these conditions to crystallise.
• Regulation 5 (Outbound merger): The mirror-image provision, governing mergers where the resultant company is a foreign company – addressing how Indian shareholders may hold securities of, and Indian assets may be held by, the resultant foreign entity.
• Regulation 7 (Valuation): Prescribes that valuation of the Indian and foreign companies involved in the scheme be carried out in accordance with rules framed under the Companies Act, with the valuation forming part of the scheme placed before the sanctioning body.
• Regulation 9 (Deemed approval): The operative heart of the framework – it provides that a cross-border merger complying with the conditions of the Regulations is deemed to have the approval of the Reserve Bank once sanctioned by the relevant authority. This is the provision that allows companies to avoid a separate, standalone RBI approval application.

Because Regulation 9 is the linchpin – it is the clause that actually grants the FEMA-side comfort – any ambiguity as to who must “sanction” the scheme for that deeming fiction to operate would have created real transactional risk. By substituting “Competent Authority” consistently across all four regulations, the RBI has ensured that the deemed-approval mechanism in Regulation 9 operates coherently regardless of which body – NCLT, Regional Director, or a future successor – actually sanctions the scheme under Regulations 4, 5 and 7.

3. Strategic and Legal Implications for Corporate India

3.1 Impact on inbound and outbound cross-border mergers

For most large, complex cross-border mergers – typically involving listed entities, multiple classes of securities, or significant creditor bases – the practical sanctioning forum will, for the foreseeable future, remain the NCLT. Sections 230–232 continue to be the default route for any scheme that does not qualify for the Section 233 fast-track. In that sense, the amendment does not, by itself, change which forum most large deals go through tomorrow.

Where the amendment has immediate bite is at the margins – specifically, transactions structured to qualify under Section 233’s fast-track route. Consider a foreign holding company merging its wholly-owned Indian subsidiary into itself (an outbound merger), or an Indian holding company absorbing a foreign wholly-owned subsidiary that itself qualifies as a “small company”-equivalent structure under the cross-border rules. Prior to this amendment, a literal reading of the 2018 Regulations – which spoke only of “NCLT” – arguably created an interpretive friction for such schemes: was Regulation 9’s deemed-approval benefit available at all if the scheme was sanctioned by the Regional Director rather than the NCLT? The amendment removes that ambiguity definitively. Any Section 233 sanction by the Central Government/Regional Director now squarely falls within “Competent Authority,” and the FEMA deeming fiction applies without interpretive strain.

This is, in effect, a clarificatory and confidence-building measure for fast-track cross-border restructurings – group reorganisations, subsidiary absorptions, and intra-group simplification exercises that multinational groups routinely undertake post-acquisition or as part of holding structure rationalisation.

3.2 Decentralisation, NCLT backlog, and the delegated-legislation question

The NCLT’s chronic case backlog – a subject of repeated judicial and parliamentary comment – has long been cited as a structural drag on the timeline for completing Indian mergers, cross-border or otherwise. Scheme approvals that ought to take months routinely extend well beyond a year in several benches.

The 2026 amendment does not, on its own text, create new Regional Director powers or expand the universe of companies eligible for the Section 233 fast-track – that remains squarely an MCA function, exercised through amendments to the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. What the amendment does do is remove a potential FEMA-side bottleneck to any such expansion, should the MCA choose to pursue it. Read together with the broader policy conversation around NCLT decongestion – including periodic proposals to widen the definition of “small company” and to extend Section 233-style fast-track mergers to a larger universe of corporate structures – the amendment can be characterised as preparatory: it pre-positions the FEMA framework to absorb any future devolution of merger-approval powers away from the NCLT without requiring a fresh round of RBI rule-making each time.

For corporate India, the strategic takeaway is this: the amendment itself is not a deregulation event, but it is a readiness signal. Groups currently structuring cross-border reorganisations with an eye to using Section 233 (or any future expansion of it) can now do so with materially greater certainty that the FEMA “deemed approval” benefit under Regulation 9 will be available to them – a consideration that should feature in deal-structuring memoranda and step-plans going forward.

3.3 Jurisdictional overlap: clarifications the MCA and RBI may still need to address

While the amendment is drafted to minimise friction, several practical questions are likely to surface as transactions are structured under the revised framework, and may warrant further clarificatory guidance – whether through RBI FAQs, AD bank circulars, or MCA clarifications:

• Evidentiary standard for AD banks: Authorised Dealer banks, who operationally verify compliance with Regulation 9 before processing remittances or reporting requirements, will need clear internal guidance on what documentary evidence of “Competent Authority” sanction – an NCLT order versus a Regional Director order under Section 233 – satisfies the deeming condition, and whether the two are to be treated as equivalent for reporting (e.g., Form FC-TRS, FC-GPR) purposes.
• Sequencing with sectoral and FDI policy conditions: Cross-border mergers involving sectors with FDI caps or conditionalities (defence, insurance, telecom, etc.) typically require coordination between scheme approval and sectoral regulator sign-off. Whether a Section 233 fast-track sanction – which involves a different and arguably lighter-touch objection-and-consultation process than NCLT proceedings under Section 230 – provides regulators with adequate opportunity to raise sectoral concerns is a question the MCA and sectoral regulators may need to jointly address.
• Valuation consistency under Regulation 7: Regulation 7’s cross-reference to Companies Act valuation rules now applies uniformly regardless of which Competent Authority sanctions the scheme – but valuation rigor and disclosure standards in Section 233 proceedings have historically been lighter than in full NCLT proceedings. Any divergence here could become a point of scrutiny in subsequent RBI compounding or FEMA enforcement proceedings if a scheme’s cross-border valuation is later challenged.
• Transitional treatment of pending schemes: Companies with cross-border merger applications already pending before the NCLT as of June 2, 2026 will reasonably expect that the amendment operates only prospectively in terms of categorisation, and that pending NCLT sanctions will continue to satisfy Regulation 9 without any need to “re-characterise” the sanctioning authority. While this should follow as a matter of straightforward interpretation – NCLT sanction plainly falls within “any authority empowered under the Companies Act, 2013” – a confirmatory RBI circular would remove any residual doubt for ongoing transactions.

4. Conclusion and Forward-Looking Outlook

On a plain reading, the Foreign Exchange Management (Cross Border Merger) (Amendment) Regulations, 2026 is a two-sub-clause amendment to a definitions section, mechanically replicated across four operative regulations. Its immediate, measurable effect on transaction timelines for most large cross-border mergers – which will continue to be sanctioned by the NCLT under Sections 230–232 – is limited.

Its longer-term significance lies elsewhere: in removing a structural rigidity from India’s foreign exchange law that tied FEMA compliance to a single named tribunal, at a moment when corporate law itself is moving – gradually, and through delegated legislation – toward a more layered approval architecture for mergers and amalgamations. By adopting a functional, cross-referenced definition of “Competent Authority,” the RBI has future-proofed the Cross Border Merger Regulations against the next round of MCA rule-making on fast-track mergers, without needing to revisit its own regulations each time.

For practitioners advising on inbound investment structures, outbound holding company rationalisations, and group restructurings with a cross-border dimension, the amendment merits three concrete actions: (i) updating deal-structuring checklists and FEMA compliance memoranda to reflect the “Competent Authority” terminology rather than “NCLT”; (ii) for transactions potentially eligible for Section 233 fast-track treatment, building in the now-clarified FEMA deemed-approval benefit as a structuring consideration; and (iii) monitoring forthcoming MCA notifications on the scope of fast-track mergers, since any expansion there will now flow through automatically to FEMA cross-border merger compliance without further RBI intervention.

More broadly, the amendment is best read as a small but coherent piece of a larger ease-of-doing-business mosaic – one in which India’s foreign exchange and corporate law frameworks are being incrementally re-engineered to interoperate more smoothly, reducing the number of instances in which a transaction must thread itself through inconsistent definitions across statutes administered by different regulators. Whether this translates into materially faster cross-border restructurings will depend less on this notification itself than on the MCA’s own appetite – still to be seen – for widening the fast-track merger net that this amendment has quietly made FEMA-compatible.