Restructuring in India: the main routes and what each involves
Restructuring covers both legal structure, such as which companies exist and who owns them, and operating structure, such as how teams and functions are organised. In India, legal restructuring is governed mainly by the Companies Act, with tax, FEMA, stamp duty and labour law shaping what is practical. This guide sets out the main routes and how we approach them.
Main restructuring routes
| Route | What it does | Main approval |
|---|---|---|
| Merger (amalgamation) | Combines two or more companies into one | NCLT under sections 230 to 232, or the fast-track route under section 233 |
| Demerger | Moves a business undertaking into another company | NCLT under sections 230 to 232 |
| Slump sale or business transfer | Sells a business as a going concern for a lump sum | Board and shareholder approvals; no NCLT |
| Capital reduction | Returns capital or cancels lost capital | NCLT under section 66 |
| Conversion | Changes a company into an LLP, or a private into a public company | Registrar |
| Closure | Ends a company that is no longer needed | Strike-off by the Registrar, or voluntary liquidation |
Fast-track mergers
Section 233 offers a quicker route without NCLT hearings for specified mergers, such as those between small companies and between a holding company and its wholly owned subsidiary. The scheme is approved by shareholders and creditors, reviewed by the Registrar and official liquidator, and confirmed by the regional director. For many group clean-ups, this can save months.
Reverse flips: bringing the holding company to India
Since September 17, 2024, the fast-track route under section 233 can be used for a merger of a foreign holding company into its wholly owned Indian subsidiary, an inbound cross-border merger. These mergers also follow FEMA's cross-border merger regulations, and they have tax consequences in both countries. US-side tax treatment of the transaction is handled by your US advisers; we handle the Indian company law, FEMA and tax work and coordinate the overall timetable.
Entity clean-up for US groups
- Merging Indian subsidiaries acquired over time into one entity, reducing audits, filings and boards
- Converting a branch or liaison office into a subsidiary when activities grow, with RBI approvals and transfer of assets and employees
- Closing dormant entities through strike-off where the company has no business and no liabilities, or voluntary liquidation where assets and liabilities must be dealt with
- Moving shareholdings between group companies, with FEMA pricing and reporting
- Aligning year ends and reporting after the restructuring
Each step needs filings with the Registrar and, for foreign-owned companies, with the RBI. Our ROC compliance and FDI filing teams handle these.
Tax and stamp duty
- Mergers and demergers can be tax-neutral if the conditions in the income-tax law are met, such as shareholders holding a required share of value continuing in the resulting company
- Brought-forward losses can be carried into the merged company only in specified cases
- A slump sale is taxed as a capital gain on the net worth of the undertaking transferred
- Transfer of a business as a going concern is generally exempt from GST
- Stamp duty on court-approved schemes and transfers depends on the state
- Transfers between related parties across borders are subject to transfer pricing, including any exit charges where functions or assets move
Tax positions should be modelled before the route is chosen. Our international tax team supports cross-border aspects.
How a court-approved scheme works
- Board approvals: each company's board approves the scheme, supported by a valuation report from a registered valuer where shares are exchanged
- Application to the NCLT: the companies apply to the tribunal, which directs meetings of shareholders and creditors or dispenses with them
- Notices to regulators: the income tax department, the Registrar, the official liquidator and, where relevant, the RBI and other regulators are notified and can make representations
- Meetings and petition: shareholders and creditors approve the scheme, and a petition is filed for sanction
- Sanction: the tribunal hears the petition and sanctions the scheme
- Filing: the order is filed with the Registrar in Form INC-28 within 30 days, and the scheme takes effect
The timeline depends on the tribunal bench and on any objections. Fast-track mergers under section 233, where available, avoid most of these steps.
People and the labour codes
Restructurings often move or reduce employees. India's labour codes, in force from November 21, 2025, govern these changes. Transfers of employees with a business usually preserve continuity of service. Lay-offs, retrenchment and closure in establishments with 300 or more workers need prior government permission, and retrenchment requires notice, compensation and, under the Industrial Relations Code, a contribution to a worker re-skilling fund. Gratuity, leave and provident fund balances must be settled or transferred correctly.
Operating model restructuring
Not every restructuring changes legal entities. Many are about how the Indian organisation works:
- Consolidating functions into a capability centre
- Redesigning spans and layers so decisions are made at the right level
- Clarifying which roles in India report to the US and which to local management
- Updating the delegation of authority and governance after changes
- Redesigning processes through business process reengineering
- Documenting new responsibilities in SOPs
Restructuring capability centres
Planning a restructuring
- Agree objectives: simplification, cost, tax, listing, sale or integration
- Map options and compare them on timing, cost, tax, approvals and risk
- Carry out due diligence on the entities involved, so hidden liabilities do not move with them
- Prepare the scheme, agreements, valuation reports and approvals
- Implement, including employee communication and system changes
- Complete post-restructuring filings, accounting and tax returns