FEMA Cross‑Border Merger Amendment 2026: NCLT Replaced by “Competent Authority”

The Reserve Bank of India has quietly — but significantly — updated the cross-border merger rulebook. Through Notification No. FEMA 389(1)/2026-RB dated May 29, 2026, which comes into force from the date of its publication in the Official Gazette (June 05, 2026), the RBI amended the Foreign Exchange Management (Cross Border Merger) Regulations, 2018 to replace every reference to the "National Company Law Tribunal (NCLT)" with the broader term "Competent Authority". This single definitional change — deceptively small in drafting length — has wide-ranging practical consequences for inbound mergers, outbound mergers, foreign currency accounts, SNRR accounts, ECB compliance timelines, and the deemed approval mechanism under FEMA.

This amendment directly complements the Corporate Laws (Amendment) Bill, 2026, which proposed that merger scheme applications be filed before the NCLT having jurisdiction over the transferee company, and also enables the fast-track merger route (Section 233) — where the Regional Director (not NCLT) is the sanctioning authority — to be fully FEMA-compliant for the first time. The alignment is seamless, deliberate, and long overdue.

📜 Background — The 2018 Regulations & Their Gap

The Foreign Exchange Management (Cross Border Merger) Regulations, 2018 (Notification No. FEMA.389/2018-RB, dated March 20, 2018) created the foundational FEMA framework for cross-border mergers — transactions where an Indian company and a foreign company merge, with either an Indian entity (inbound merger) or a foreign entity (outbound merger) as the resultant company. These regulations govern how foreign securities are issued, how ECB/trade credit liabilities are handled, the timelines for disposing of impermissible assets, and how the deemed RBI approval mechanism works under Rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

A key construct of the original 2018 Regulations was the National Company Law Tribunal (NCLT). The NCLT was defined in Regulation 2(vii) and every operative provision — relating to the 2-year timeline for ECB compliance, the sale of impermissible overseas assets, the SNRR account, the temporary foreign currency account, compensation to security-holders, and the compliance certificate requirement — was anchored to the date of sanction by the NCLT, or the application being made to the NCLT.

This created a structural mismatch: as India's corporate law evolved to allow fast-track mergers approved by the Regional Director (RD) — not NCLT — those mergers technically fell into a grey zone under FEMA. On 13 April 2024, the MCA issued notification S.O. 1764(E) amending Rule 25A to allow cross-border mergers through the fast-track Section 233 route, with the Regional Director as the approving authority for small companies and holding-subsidiary pairs — but FEMA's own regulations still only mentioned "NCLT". The June 2026 amendment finally closes this gap comprehensively.

🔍 Section 2 — Exact Changes Made: Regulation by Regulation

2.1 — Amendment to Regulation 2 (Definitions)

2.2 — Amendment to Regulations 4, 5, 7 and 9

In Regulations 4, 5, 7, and 9, wherever the word "NCLT" appeared, it has been substituted with "Competent Authority". The affected provisions and their practical meaning are set out below:

🏛️ Section 3 — Who Is the "Competent Authority" Now?

The new definition is deliberately broad and future-proof: "any authority empowered under the Companies Act, 2013 or any subordinate legislation made thereunder to approve a scheme of merger or amalgamation."

This definition broadens the scope of approval beyond the National Company Law Tribunal (NCLT), allowing other legally authorized bodies to sanction cross-border mergers and thereby simplifying the regulatory process. The RBI has confirmed that the changes are intended to align FEMA regulations with the broader corporate restructuring ecosystem.

⚡ Section 4 — Why This Matters: Fast-Track Cross-Border Mergers

The most immediate business impact of this amendment is the full FEMA legitimisation of the fast-track cross-border merger route. Small companies and holding-subsidiary pairs can now complete cross-border mergers through the Regional Director in 2 to 3 months at roughly half the cost of the NCLT route. Here is how the two routes now compare:

🔄 Section 5 — Impact on Inbound & Outbound Mergers

5.1 — Inbound Mergers (Foreign Co. → Indian Resultant Co.)

In an inbound merger, the resultant entity is an Indian company. Under the amended regulations, the following timelines and account permissions now run from the sanction by the Competent Authority (which may be NCLT or Regional Director):

5.2 — Outbound Mergers (Indian Co. → Foreign Resultant Co.)

🟢 Section 6 — Deemed RBI Approval Mechanism — How It Works Now

One of the most valuable features of the 2018 Regulations is the deemed approval mechanism under Regulation 9. Any cross-border merger transaction that fully complies with these FEMA regulations is deemed to have the prior approval of the Reserve Bank — no separate RBI application is required. This mechanism is triggered by a compliance certificate from the MD/WTD and Company Secretary filed with the merger application.

🔗 Official Sources & Further Reading

📊 Section 7 — Impact Analysis: Who Benefits & How

🔒 Section 8 — What Remains Unchanged

The amendment is surgical — only the NCLT/Competent Authority terminology is updated. All substantive requirements of the 2018 Regulations remain fully in force:

• Reg. 3: No person resident in India shall acquire/transfer security, debt, or asset outside India on account of cross-border merger without RBI general/special permission or compliance with regulations
• Reg. 4(1): Inbound — securities issued/transferred to persons resident outside India must comply with FDI pricing, entry routes, sectoral caps, and reporting
• Reg. 4(2): Offices of the foreign company become branch offices of the resultant Indian company under FEMA
• Reg. 4(3): ECB/Trade Credit 2-year compliance window — unchanged in substance
• Reg. 4(4): Resultant Indian company may hold overseas assets permissible under FEMA
• Reg. 5(1)–5(2): Outbound — residents/resident individuals can acquire resultant company securities per ODI/LRS norms
• Reg. 5(3): Indian offices become branch offices of foreign resultant company
• Reg. 5(5): Foreign resultant company may hold Indian assets permissible under FEMA
• Reg. 6: Valuation under Rule 25A of Companies Rules — unchanged
• Reg. 7(2): Prior regulatory issues (non-compliance/contraventions) must be resolved before merger
• Reg. 8: Post-merger RBI reporting requirements — unchanged
• Reg. 9(1): Deemed RBI approval mechanism — continues, now triggered by Competent Authority sanction

❓ Section 9 — Frequently Asked Questions

✅ Section 10 — Compliance Action Checklist

• ✅ Update legal opinions and compliance checklists — all references to "NCLT" in internal merger compliance matrices should now read "Competent Authority (NCLT or Regional Director as applicable)"
• ✅ Assess fast-track eligibility — if your cross-border merger involves a small company or holding-WOS pair, evaluate the Section 233 fast-track route (Regional Director, 2–3 months) vs the NCLT route (6–12 months) now that both are fully FEMA-compliant
• ✅ Compliance certificate (Reg. 9(2)) — ensure the MD/WTD + Company Secretary certificate is prepared specifically for the Competent Authority (NCLT or RD) — update the certificate template accordingly
• ✅ Clear prior FEMA non-compliance — Regulation 7(2) continues to require that all prior regulatory actions (contraventions/violations under FEMA) are addressed before the merger is sanctioned by the Competent Authority
• ✅ ECB / Trade Credit timeline management — for inbound mergers, commence ECB compliance planning immediately post-Competent Authority sanction — the 2-year window starts then and no remittances for repayment are allowed during this period
• ✅ SNRR / Forex account planning — for outbound mergers, plan the SNRR account opening and closure within 2 years of Competent Authority sanction; for inbound mergers, plan the temporary overseas foreign currency account similarly
• ✅ Asset disposal planning — identify any impermissible overseas assets (inbound) or impermissible Indian assets (outbound) early and build a disposal plan to meet the 2-year timeline from Competent Authority sanction
• ✅ Post-merger RBI reporting (Reg. 8) — submit all prescribed reports to RBI post-merger as required. The reporting obligation under Regulation 8 is unchanged
• ✅ Watch for CLAA 2026 commencement — the Corporate Laws (Amendment) Bill, 2026 proposes single-bench NCLT jurisdiction for all merger schemes and fast-track threshold changes; once commenced, cross-border merger FEMA compliance must also be reviewed in that context