RBI Amends Cross Border Merger Regulations 2026: NCLT Replaced with Competent Authority Under FEMA

What Changed: NCLT Replaced with Competent Authority

The Reserve Bank of India (RBI), through a notification dated May 29, 2026, has amended the Foreign Exchange Management (Cross Border Merger) Regulations, 2018. The key change replaces all references to the "National Company Law Tribunal" (NCLT) with the broader term "Competent Authority" across Regulations 4, 5, 7, and 9 of the cross-border merger framework.

Under the amended definition, "Competent Authority" means any authority empowered under the Companies Act, 2013, or rules and subordinate legislation framed thereunder, to approve a scheme of merger or amalgamation. This includes the NCLT but is no longer limited to it.

Why This Amendment Was Necessary

The original Cross Border Merger Regulations, 2018, issued under Section 47 of the Foreign Exchange Management Act, 1999 (FEMA), were drafted at a time when the NCLT was the sole authority approving mergers and amalgamations under Sections 230 to 232 of the Companies Act, 2013. Since then, the corporate restructuring landscape has evolved in two significant ways.

First, the Corporate Laws (Amendment) Bill, 2026 proposes to empower additional authorities to approve certain categories of mergers, particularly fast-track mergers under Section 233 where the Regional Director (RD) of the MCA already has approval powers. By limiting FEMA compliance to NCLT-sanctioned schemes only, the earlier regulations created a gap where a merger approved by the RD could not satisfy FEMA requirements for cross-border transactions.

Second, the Insolvency and Bankruptcy Code, 2016 (IBC), enables amalgamation of a corporate debtor as part of a resolution plan approved by the NCLT under Section 31. While the NCLT is technically the approving authority in IBC proceedings, the legal basis differs from Sections 230 to 232. The earlier FEMA regulations did not clearly cover IBC-driven cross-border restructurings.

Practitioners should note that the Delhi High Court in Cruz City 1 Mauritius Holdings v. Unitech Ltd. (2017) 239 DLT 649 observed that cross-border enforceability of corporate restructuring schemes depends on the approving authority's jurisdiction being recognised under applicable foreign exchange laws. The RBI's amendment addresses precisely this concern by decoupling FEMA compliance from a specific tribunal.

Practical Impact on Cross-Border M&A

The amendment has three practical consequences for deal teams working on inbound and outbound mergers.

Compliance Steps for Cross-Border Mergers

In practice, cross-border merger compliance under the amended regulations follows the same sequence as before, with the critical difference that the scheme need not be NCLT-sanctioned. The steps are:

Vodafone International Holdings B.V. v. Union of India (2012) 6 SCC 613

held that cross-border restructuring transactions must be evaluated holistically, considering both corporate law and exchange control dimensions. The RBI's amendment aligns FEMA with this principle by ensuring that any lawfully approved scheme qualifies for foreign exchange compliance.

Key Takeaways

The amendment is effective from the date of publication in the Official Gazette (May 29, 2026). Companies and advisors working on cross-border restructurings that were awaiting regulatory clarity on fast-track or IBC-driven mergers can now proceed. AD banks should update their internal compliance checklists to accept Competent Authority orders beyond NCLT orders for FEMA reporting purposes.

Sources and References

1. RBI Notification No. FEMA 389(3)/2026-RB, dated May 29, 2026 (Cross Border Merger Amendment Regulations)

2. Foreign Exchange Management (Cross Border Merger) Regulations, 2018 (original)

3. Sections 230 to 234, Companies Act, 2013

4. Section 233, Companies Act, 2013 (Fast-track mergers)

5. Section 31, Insolvency and Bankruptcy Code, 2016

6. Cruz City 1 Mauritius Holdings v. Unitech Ltd. (2017) 239 DLT 649

7. Vodafone International Holdings B.V. v. Union of India (2012) 6 SCC 613

This article is for informational purposes only and does not constitute legal advice. For specific legal guidance on cross-border mergers or FEMA compliance, consult a qualified legal professional.