Reverse Flipping Made Easy for Startups? MCA Expands Fast Track Merger Rules

For years, India’s startup ecosystem has wrestled with the question of domicile—should ambitious young companies incorporate in India, or set up holding structures abroad for easier access to global capital and potential listings? Many chose the latter, parking their parent companies in Singapore, the US, or the Netherlands. But with changing market realities and India’s growing investor appetite, a wave of “reverse flipping”—where startups shift their holding company back to India—has slowly gained momentum.

Now, the Ministry of Corporate Affairs (MCA) has just given that trend a major boost.

A Big Regulatory Push

About a year after it first allowed startups to reverse flip without mandatory approval from the National Company Law Tribunal (NCLT), the MCA has gone a step further. It has significantly widened the scope of companies eligible for fast-track mergers, eliminating one of the biggest procedural bottlenecks that startups and businesses faced while shifting their base back to India.

Under the expanded framework, the following types of mergers and amalgamations (M&As) can now skip the NCLT approval route:

• Two or more unlisted companies (excluding Section 8 not-for-profits), as long as none of them has loans, debentures, or deposits exceeding ₹200 crore.

• Merger of a foreign holding company with its wholly owned subsidiary in India.

• Merger of one or more subsidiaries of the same parent company, provided none of the transferor entities are listed.

This change builds on the MCA’s September 2024 amendment to the Companies (Compromises, Arrangements and Amalgamations) Rules, which had already allowed certain mergers to bypass NCLT approval if they had Reserve Bank of India (RBI) clearance. At that stage, however, the fast-track route was open only to startups, small companies, and wholly owned subsidiaries. The new rules broaden the doors significantly.

Why This Matters For Startups

The move is being seen as a game-changer for reverse flips—a process that many Indian unicorns have already been exploring.

“In a notably progressive step, the updated rules now clearly allow a foreign holding company to merge with its wholly owned subsidiary in India through the fast-track route. This creates a simplified process for Indian-origin startups and businesses that had shifted their holding structures abroad to move back and re-domicile in India. Such a reform is expected to significantly reinforce the domestic corporate ecosystem,” said a legal expert.

For founders, the implications are clear: less red tape, faster execution, and fewer costs when bringing their companies “home.”

The Flipkart & Razorpay Effect

Over the last few years, several Indian unicorns that had once incorporated abroad to chase global investors have started moving back. Companies like Flipkart, Razorpay, and Dream11 have already used this mechanism to realign with India.

This is not just symbolic—it’s deeply practical. With India’s capital markets maturing and the appetite for startup IPOs growing, being domiciled in India makes listing on domestic exchanges much simpler. It also reduces regulatory complexity for founders and investors.

SEBI’s Role In Boosting Reverse Flips

Interestingly, the MCA’s move comes just months after the Securities and Exchange Board of India (SEBI) rolled out complementary reforms to encourage startup listings.

In June, SEBI’s board approved a proposal allowing startup founders to retain their employee stock options (ESOPs)—issued a year before an IPO—even after listing, subject to some conditions. This was a big relief for founders and employees alike, making the path to IPO smoother and more rewarding.

Together, these changes reflect a strategic shift in India’s corporate policy framework. Where once companies were incentivized to set up shop abroad, the regulatory environment is now actively nudging them back to India.

Building A Stronger Startup Base In India

Behind this regulatory push lies a broader ambition: to make India the default hub for its own startups.

By removing procedural roadblocks, widening eligibility for fast-track mergers, and aligning startup incentives with market realities, the government is sending a clear message—India wants its unicorns and soonicorns to build, grow, and list from home soil.

For founders, this could mark the start of a new era of easier re-domiciling, where shifting operations back to India doesn’t involve endless approvals and delays. For investors, it promises a more transparent and efficient corporate structure, reducing risks tied to foreign jurisdictions.

While the latest reforms are being welcomed by industry insiders, experts also caution that execution will matter as much as intent. Approvals from the RBI, cross-border tax considerations, and clarity on shareholder rights will continue to play a big role in how smooth these reverse flips turn out in practice.

Still, for a startup ecosystem that has long been caught between global ambitions and local constraints, the MCA’s new rules feel like a strong tailwind. They not only open the door wider for reverse flips but also reinforce India’s positioning as a serious global startup hub