Groups with companies in India and abroad sometimes need to combine them: a foreign parent merging into its Indian subsidiary to simplify the structure, an Indian company absorbing an overseas acquisition, or a start-up that moved its holding company abroad bringing it back to India, often called a "reverse flip". Since 2017, the Companies Act has allowed such cross-border mergers under Section 234, read with Rule 25A of the merger rules and the RBI's Foreign Exchange Management (Cross Border Merger) Regulations, 2018.
Cross-border mergers combine Indian company law, foreign exchange rules, tax law and the corporate law of the foreign country. Most go through the NCLT under Sections 230 to 232. Since the rules were amended in 2024 and 2025, a merger of a foreign holding company into its wholly owned Indian subsidiary can also use the fast-track route under Section 233, subject to conditions. This page gives an overview.
हिंदी में सारांश
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Is this your situation?
- Your group has a foreign holding company and an Indian operating company that should become one
- A start-up wants to move its holding company back to India
- An Indian company wants to absorb a foreign subsidiary or acquisition
- An Indian company wants to merge into a foreign company
- You need to know whether the foreign country is a permitted jurisdiction
- You are concerned about tax and FEMA consequences for shareholders
Types of cross-border merger
Inbound merger
A foreign company merges into an Indian company, which survives. The Indian company may issue shares to the foreign company's shareholders, and acquires its overseas assets and liabilities.
Outbound merger
An Indian company merges into a foreign company, which survives. This is allowed only where the foreign company is incorporated in a jurisdiction notified in the rules, broadly countries meeting standards of securities regulation, central banking and anti-money-laundering cooperation.
Reverse flip
A start-up whose holding company is abroad merges that foreign holding company into its Indian subsidiary, bringing ownership back to India. This is an inbound merger and has become common.
Fast track for foreign holding companies
A foreign holding company merging into its wholly owned Indian subsidiary may use the fast-track route under Section 233, subject to the rules, including prior RBI approval where required.
RBI's deemed approval
A cross-border merger that complies with the FEMA regulations is deemed to have RBI approval. Where it does not, specific RBI approval is needed.
Foreign law
The foreign company must also follow the merger laws of its own country, which may require court or regulatory approval there.
How a cross-border merger proceeds
Structure and jurisdiction check
We confirm whether the merger is inbound or outbound, whether the foreign jurisdiction is permitted, and whether the fast track is available. Tax advisers in both countries are brought in early.
FEMA compliance review
The FEMA regulations set conditions on issue of securities, overseas assets and liabilities, borrowings and guarantees, and timelines for winding up non-compliant positions. We map each condition to the scheme.
Valuation
The valuation must be done by a valuer who is a member of a recognised professional body in the jurisdiction of the transferee company, in accordance with internationally accepted principles.
Scheme and approvals
The scheme is drafted and approved by both boards. In India, the NCLT process under Sections 230 to 232 follows (or the fast track where eligible), with notices to regulators and meetings or dispensation.
Foreign process
The foreign company completes the approvals required under its own law in parallel, so that the effective dates align.
Sanction and post-merger filings
After sanction, the order is filed with the ROC and the FEMA reporting requirements are completed, including any adjustment of overseas assets or borrowings within the time allowed.
Points to plan for
Overseas assets and borrowings
In an inbound merger, the Indian company may acquire foreign assets or borrowings it could not otherwise hold under FEMA. The regulations give a period to bring them into compliance.
Securities to non-residents
Issuing shares of an Indian company to non-resident shareholders must comply with FDI rules, including sectoral caps and pricing.
Taxes in both countries
Tax neutrality depends on the laws of both countries. India's new Income-tax Act, in force from 1 April 2026, needs to be checked for the exact conditions.
Employees and ESOPs
Employee stock options in a foreign holding company need to be replaced or converted in a reverse flip.
Timelines
Cross-border mergers often take longer because two legal systems must align. Build in time for RBI queries and foreign approvals.
Stamp duty and registrations
Indian stamp duty on the order and transfers of assets in India must be planned.
Time and typical cost
Our fees are agreed in writing for each stage and do not depend on the outcome. Foreign counsel and valuers are separate.
| Stage | Usual time | What it involves |
|---|---|---|
| Structuring and FEMA review | 1 to 3 months | Legal and tax advice in both jurisdictions |
| Valuation and scheme | 1 to 2 months | Valuer, drafting, board approvals |
| NCLT process (or fast track) | 6 to 10 months (shorter on fast track) | First and second motion, notices |
| Post-merger compliance | As required | FEMA reporting, asset alignment |
Documents you will need
Both companies
- Constitutional documents and certificates of incorporation
- Audited financial statements
- Shareholding patterns and group chart
Cross-border specifics
- Confirmation of the foreign jurisdiction's status
- Valuation report by a valuer recognised in the transferee's jurisdiction
- Details of overseas assets, borrowings and guarantees
- Foreign legal opinion on approvals needed abroad
Approvals
- Board resolutions
- Creditor consents and lender NOCs
- RBI correspondence where specific approval is needed
A start-up's reverse flip
Here's a made-up example. A Bengaluru software start-up had set up a Delaware holding company at the request of early investors, with the Indian company as its wholly owned subsidiary. Ahead of a planned listing in India, the founders wanted the Indian company to become the top company.
We worked with US counsel and tax advisers on an inbound merger of the Delaware company into the Indian subsidiary. Shareholders of the Delaware company were to receive shares of the Indian company, within FDI rules. Because the merger was of a foreign holding company into its wholly owned Indian subsidiary, we assessed the fast-track route along with the RBI approval requirements, and then completed the Indian approvals while the US steps ran in parallel.
Mistakes groups make in cross-border mergers
- Assuming any country is allowed for an outbound merger: only notified jurisdictions qualify. Check before structuring.
- Ignoring FEMA timelines: overseas assets and borrowings acquired through an inbound merger must be brought into compliance within the time allowed.
- Using a valuer from the wrong jurisdiction: the valuer must be recognised in the transferee company's jurisdiction.
- Not aligning foreign approvals: the foreign process may run on a different timetable. Effective dates must match.
- Overlooking FDI rules: issuing shares to non-residents must comply with sectoral caps, entry routes and pricing.
- Leaving ESOPs to the end: employee options in the foreign entity need a conversion plan that works in both countries.
Inbound versus outbound mergers
| Point | Inbound (foreign into Indian) | Outbound (Indian into foreign) |
|---|---|---|
| Surviving company | Indian company | Foreign company |
| Jurisdiction restriction | No restriction on the foreign country beyond FEMA | Only notified jurisdictions |
| Main FEMA concerns | Overseas assets, borrowings and securities issued to non-residents | Indian assets and liabilities held by the foreign company; Indian residents holding foreign securities |
| Fast-track option | Foreign holding company into Indian wholly owned subsidiary, subject to rules | Not available |
| Common use | Reverse flips, simplifying groups | Rare in practice |
Key terms in plain words
| Term | What it means |
|---|---|
| Inbound merger | A foreign company merging into an Indian company |
| Outbound merger | An Indian company merging into a foreign company |
| Reverse flip | Bringing a foreign holding structure back to India by merger |
| Deemed approval | RBI approval treated as given where the merger complies with FEMA regulations |
| Rule 25A | The rule under the merger rules governing cross-border mergers |
Tax considerations
Cross-border mergers raise tax questions in both countries: whether the merger is tax-neutral for the companies and shareholders, how capital gains are treated, whether losses carry forward, and whether withholding obligations arise. India's new Income-tax Act, in force from 1 April 2026, must be checked for the current conditions. Foreign tax law can impose its own charges, such as exit taxes on emigration of a company or its assets. Tax advice should be taken at the structuring stage, not after the scheme is drafted.
Checklist before structuring
- Confirm whether the merger is inbound or outbound
- Check whether the foreign jurisdiction is notified for outbound mergers
- Map overseas assets, borrowings and guarantees of the foreign company
- Confirm FDI entry route and sectoral caps for shares issued to non-residents
- Engage a valuer recognised in the transferee's jurisdiction
- Obtain foreign legal advice on the approvals needed abroad
- Take tax advice in both countries
- Plan treatment of employee stock options
Reverse flips: why start-ups are coming home
Many Indian start-ups set up holding companies in Singapore, the United States or elsewhere in their early years, often at investors' request. As Indian capital markets deepened and listing in India became attractive, a number have chosen to bring their holding structure back to India. An inbound merger of the foreign holding company into the Indian operating company is one way to do this. Others use share swaps.
Reverse flips raise particular issues: tax on the foreign shareholders, treatment of investor rights and preference shares, conversion of employee options, and compliance with FDI rules for foreign investors who will now hold shares in the Indian company. The fast-track option for a foreign holding company merging into its wholly owned Indian subsidiary can shorten the Indian process, but the foreign and tax steps still take time. See also merger and amalgamation.
An Indian company absorbs its Singapore subsidiary
Here's a made-up example. A Gurugram logistics company had set up a Singapore subsidiary to manage regional contracts. The subsidiary's business had shrunk, and the group wanted to bring its remaining contracts and cash into the Indian company.
We structured an inbound merger of the Singapore subsidiary into the Indian parent. Because the foreign company was a subsidiary rather than a holding company, the NCLT route under Sections 230 to 232 applied. The FEMA regulations allowed the Indian company to hold the subsidiary's overseas bank account for a limited period before closing it. A Singapore law firm handled the steps there, and the effective dates were aligned once NCLT Chandigarh sanctioned the scheme.
Approvals map for a cross-border merger
| Approval | India | Abroad |
|---|---|---|
| Corporate sanction | NCLT, or Regional Director on fast track | Court or registry under foreign company law |
| Shareholder and creditor approval | Meetings or consents as directed | As required by foreign law |
| Foreign exchange | FEMA cross-border merger regulations (deemed RBI approval) | Local exchange control, if any |
| Competition | CCI, if thresholds are crossed | Local competition authority |
| Tax | Indian tax advice on capital gains and losses carried forward | Local tax clearance or ruling |
| Sector regulators | RBI, SEBI, IRDAI or others where relevant | Local sector regulator |
Timing the two processes
A cross-border merger involves two legal systems, each with its own approvals. The Indian sanction and the foreign approval should be planned so that the scheme becomes effective on the same date in both countries. Schemes usually define the effective date as the date on which the last approval is received, and allow either side to extend timelines. Without this, one country may treat the merger as complete while the other does not.
Frequently Asked Questions
Can an Indian company merge with a foreign company?
Yes, under Section 234 of the Companies Act, Rule 25A and the FEMA (Cross Border Merger) Regulations, 2018.
Can an Indian company merge into any foreign company?
No. Outbound mergers are allowed only with companies in jurisdictions notified in the rules.
Is RBI approval needed?
A merger that complies with the FEMA regulations is deemed approved by the RBI. Otherwise, specific approval is required.
Can a reverse flip use the fast track?
A merger of a foreign holding company into its wholly owned Indian subsidiary can use the fast-track route under Section 233, subject to the rules and any RBI approval required.
Who can value the companies?
A valuer who is a member of a recognised professional body in the transferee company's jurisdiction, using internationally accepted principles.
What happens to overseas assets after an inbound merger?
The Indian company may hold them for a limited period and must bring them into compliance with FEMA within the time allowed.
How long does a cross-border merger take?
Usually eight to fourteen months through the NCLT; less where the fast track applies.
How are your fees decided?
By complexity and stage, agreed in writing. They do not depend on the result.
Planning a Cross-Border Merger?
Share your group structure and the countries involved. We will map the company law and FEMA steps and coordinate with your foreign advisers.
This page gives general information about the law as it stood when it was last reviewed. It is not legal advice on your case and does not promise any result. IBC rules and NCLT procedures change often, so outcomes depend on your own documents, dates and facts.
Need help with Cross-Border Mergers?
Send us the notice, the petition or the order. We will tell you where you stand, which bench hears it and the date the next step is due, in plain words.
