CROSS-BORDER MERGERS AND ACQUISITIONS IN INDIA: NAVIGATING LEGAL COMPLEXITIES AND REGULATORY SHIFTS

ABSTRACT

Cross-border mergers and acquisitions represent critical strategic instruments for international expansion, yet they present complex legal challenges requiring comprehensive due diligence. This paper examines the evolving regulatory landscape, focusing on India’s 2024 fast-track merger framework that streamlines inbound cross-border reverse mergers through Regional Director approval rather than NCLT processes. The study analyzes eight key components of legal due diligence including corporate governance, FDI regulations, competition law compliance, taxation structures, and intellectual property assessment. Recent Supreme Court rulings in Independent Sugar Corporation Ltd vs Girish Sriram Juneja have significantly altered Competition Commission of India approval timelines, mandating earlier CCI engagement and potentially extending review processes. The research demonstrates that successful cross-border transactions require systematic risk mitigation, regulatory compliance verification, and strategic adaptation to evolving legal frameworks across multiple jurisdictions.

INTRODUCTION

Cross-border mergers and acquisitions serve as vital strategic instruments for companies pursuing international growth, market expansion, and operational efficiencies. While these transactions provide substantial competitive advantages, they present complex legal challenges stemming from varying national laws, regulatory frameworks, intellectual property protections, employment regulations, and tax codes across different jurisdictions. Companies must execute comprehensive due diligence processes to identify and address potential legal risks and compliance obligations before finalizing any cross-border deal. This thorough legal assessment ensures acquiring firms understand the complete regulatory environment and associated liabilities. Without proper attention to these diverse legal considerations, organizations risk encountering unexpected complications that could undermine the transaction’s success and legal validity^[1].

UNDERSTANDING CROSS-BORDER MERGERS AND ACQUISITIONS?

Cross-border mergers and acquisitions are strategic deals between companies in different countries, aimed at expanding markets, accessing technology, reducing costs, and diversifying risks.^[2].

Cross-border M&A transactions fall into several categories: Inbound transactions occur when foreign companies acquire domestic entities, while outbound transactions involve domestic companies acquiring foreign targets. Based on business relationships, these deals include horizontal mergers between industry competitors to strengthen market position, vertical mergers combining companies across supply chain stages for operational efficiency, and conglomerate mergers uniting unrelated businesses for diversification benefits^[3].

RECENT REGULATORY DEVELOPMENTS: INDIAN FAST-TRACK MERGER FRAMEWORK

In a significant development supporting the evolving landscape of cross-border transactions, the Indian Ministry of Corporate Affairs issued the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2024, in September 2024. This amendment introduces a streamlined fast-track route for inbound cross-border reverse mergers, addressing the growing trend of “reverse flipping” where foreign holding companies merge with their Indian subsidiaries.

Evolution of India’s Cross-Border Merger Framework

The regulatory framework for cross-border mergers in India has evolved significantly^[4]:

• 2016 – Fast-Track Domestic Mergers: Section 233 ^[5]of the Companies Act, 2013 introduced a fast-track merger process for domestic mergers involving holding companies, wholly-owned subsidiaries, small companies, and startups, allowing approval by Regional Directors instead of the NCLT.
• 2017 – Cross-Border Merger Introduction: Section 234^[6] was introduced, enabling cross-border mergers between Indian and foreign companies, though these required NCLT approval and RBI clearance under the Foreign Exchange Management (Cross Border Merger) Regulations, 2018.
• 2024 – Fast-Track Extension: The latest amendment extends fast-track approval to inbound cross-border reverse mergers, allowing foreign holding companies to merge with their Indian wholly-owned subsidiaries through the simplified Regional Director approval process^[7].

Requirements for Fast-Track Inbound Mergers

Under the new framework, inbound cross-border reverse mergers can utilize the fast-track route subject to:

1. RBI Approval: RBI approval is required for both the foreign holding company (transferor) and the Indian subsidiary (transferee) before the merger.
2. Compliance Standards: The Indian subsidiary must meet all fast-track merger requirements under Section 233
3. Application Process: Filing with the Regional Director under the fast-track merger provisions
4. Border Country Declaration: Additional documentation required when the foreign company is situated in a country sharing a land border with India^[8]

THE CRITICAL IMPORTANCE OF DUE DILIGENCE

Due diligence encompasses the comprehensive investigation and verification process organizations undertake before entering business relationships or transactions. Merriam-Webster defines it as “research and analysis of a company or organization done in preparation for a business transaction (such as a corporate merger or purchase of securities).”^[9]

In practical terms, due diligence represents the systematic steps an organization takes to thoroughly examine and verify potential partners, vendors, clients, or acquisition targets before formalizing business arrangements. This proactive approach involves careful evaluation of legal, financial, operational, and compliance factors that could impact the proposed relationship or transaction. Rather than reacting to problems after they arise, due diligence enables companies to identify and address potential risks beforehand, ensuring informed decision-making and protecting organizational interests^[10].

Due diligence is essential in cross-border transactions, serving six critical functions:

1. Regulatory Compliance verifies target companies meet local laws, corporate regulations, competition requirements, and foreign investment rules.
2. Risk Mitigation uncovers hidden liabilities including litigation, environmental issues, employment disputes, and tax penalties that could harm the acquirer.
3. Valuation Accuracy assesses financial health to ensure fair pricing.
4. Contractual Review examines key agreements for enforceability and transaction impact.
5. Legal and Cultural Compatibility evaluation identifies challenges from differing legal frameworks, business practices, and labour laws between jurisdictions.
6. Intellectual Property Protection confirms ownership and validity of patents, trademarks, copyrights, and trade secrets, preventing infringement claims and securing proprietary assets. This comprehensive approach enables informed decision-making while minimizing risks and protecting transaction value^[11].

KEY COMPONENTS OF LEGAL DUE DILIGENCE IN CROSS-BORDER M&A

Legal due diligence in cross-border transactions requires examination of eight critical areas:

1. Corporate Structure and Governance involves verifying incorporation documents, bylaws, and shareholder agreements while ensuring board structures and voting rights comply with local laws. Any foreign ownership restrictions or change of control limitations must be identified.
2. Foreign Direct Investment (FDI) Regulations determine whether investments qualify for automatic routes (100% FDI allowed) or require government approval for restricted sectors like telecom and defence. The FDI Policy under FEMA and DPIIT notifications establish sectoral caps, with special approval required for investments from neighbouring countries under Press Note 3 (2020).
3. Competition Law Compliance Mandates Competition Commission of India (CCI) approval for transactions exceeding financial thresholds. The CCI evaluates adverse competition effects, and non-compliance results in significant penalties.
4. Taxation and Structuring analysis optimize tax efficiency through examination of capital gains tax, withholding taxes, transfer pricing, and GST implications. Tax treaties, DTAAs, GAAR, and POEM provisions must be considered to prevent disputes.
5. Companies Act, 2013 Requirements include mandatory board and shareholder approvals, NCLT sanction for cross-border mergers, and post-merger filings with ROC and SEBI compliance for listed entities.
6. Intellectual Property Assessment verifies patents, trademarks, copyrights, and trade secrets under relevant IP laws while reviewing licensing agreements and technology transfers under FEMA guidelines.
7. Employment and Labor Law Review analyzes workforce liabilities under Industrial Disputes Act, EPF Act, and Gratuity Act, including employee contracts and non-compete agreements to prevent labour disputes.
8. Litigation and Dispute Resolution examination covers pending litigations, regulatory investigations, and arbitration proceedings, with focus on international arbitration capabilities and cross-border enforcement under applicable laws^[12].

RECENT REGULATORY DEVELOPMENTS: THE COMPETITION COMMISSION OF INDIA  APPROVAL TIMELINE

The regulatory landscape for cross-border M&A has been significantly impacted by the Supreme Court’s recent ruling in Independent Sugar Corporation Ltd vs Girish Sriram Juneja^[13]. This decision has fundamentally altered the intersection between competition law and insolvency proceedings, while signaling broader changes to merger control practices.

Key Changes in Insolvency Cases

The Court mandated that CCI approval must be secured before Committee of Creditors (CoC) can consider resolution plans under the Insolvency and Bankruptcy Code. This reverses the common practice where creditor committees approved plans first, then sought competition clearance. To comply with this timeline, bidders can now file CCI applications as early as submitting their expression of interest, though this will likely increase the number of applications per case and extend resolution timelines^[14].

Broader Implications for Merger Control

Beyond insolvency matters, the Court’s observations threaten to disrupt established merger control practices. The ruling suggests that all parties to a transaction, including target companies, must receive direct communications from the CCI, moving away from current practices of communicating primarily through acquiring parties. More significantly, the Court indicated that deals with potential competition issues should undergo public consultation, conflicting with existing modification frameworks that allow parties to address concerns directly with the regulator^[15].

Impact on Cross-Border Transactions

These procedural changes could significantly complicate cross-border M&A activity. While the insolvency timeline clarification provides legal certainty, the broader implications for merger control may lead to prolonged review processes, increased costs, and potentially reduced foreign investment. Companies engaged in cross-border transactions must now factor in earlier CCI engagement, more comprehensive documentation requirements, and potentially extended approval timelines^[16].

CONCLUSION

The landscape of cross-border mergers and acquisitions continues to evolve rapidly, driven by regulatory reforms and judicial interpretations that reshape transaction dynamics. India’s introduction of fast-track approval mechanisms for inbound reverse mergers in 2024 represents a significant advancement in facilitating foreign investment while maintaining regulatory oversight. However, the Supreme Court’s recent ruling on CCI approval requirements introduces new complexities that may extend transaction timelines and increase compliance burdens.

The critical importance of comprehensive legal due diligence cannot be overstated in this evolving environment. Organizations must systematically evaluate corporate structures, regulatory compliance, competition law implications, taxation frameworks, and intellectual property protections across multiple jurisdictions. The eight-component due diligence framework outlined provides a structured approach to identifying and mitigating potential risks while ensuring transaction success.

As regulatory frameworks continue to adapt to global economic realities, companies engaging in cross-border transactions must remain agile and proactive. Early engagement with regulatory authorities, comprehensive documentation, and expert legal guidance are essential for navigating the complex intersection of domestic and international laws. The success of cross-border M&A ultimately depends on thorough preparation, regulatory compliance, and strategic adaptation to the dynamic legal landscape governing international business transactions.

REFERENCES

^[1] Maheshwari & Co. , “Due Diligence In Cross-Border Mergers And Acquisitions” ( Lexology, March 7 2025) < https://www.lexology.com/library/detail.aspx?g=c389c20b-14dc-4e91-b03c-d0cea615e1d5 > accessed 17 July 2025

^[2] Ibid

^[3] Ibid

^[4] Nishith Desai Associates , “Fast Track Merger: Unlocking New Pathway for Inbound Cross-Border Merger”, (Lexology, October 9 2024) < https://www.lexology.com/library/detail.aspx?g=38a23b2a-f460-4630-a6cf-75b9846082d4 > accessed 18 July 2025

^[5] The Companies Act, 2013, § 233

^[6] The Companies Act, 2013, § 234

^[7] Nishith Desai Associates , “Fast Track Merger: Unlocking New Pathway for Inbound Cross-Border Merger”, (Lexology, October 9 2024) < https://www.lexology.com/library/detail.aspx?g=38a23b2a-f460-4630-a6cf-75b9846082d4 > accessed 18 July 2025

^[8] Ibid

^[9] Jessica Donohue, “Due diligence: Definition, types and examples” ( Diligent, May 29, 2025) < https://www.diligent.com/resources/blog/what-is-due-diligence > accessed 17 July 2025

^[10] Maheshwari & Co. , “Due Diligence In Cross-Border Mergers And Acquisitions” ( Lexology, March 7 2025) < https://www.lexology.com/library/detail.aspx?g=c389c20b-14dc-4e91-b03c-d0cea615e1d5 > accessed 17 July 2025

^[11] Ibid

^[12] Ibid

^[13] Independent Sugar Corporation Ltd vs Girish Sriram Juneja (CIVIL APPEAL NO. 6071/2023)

^[14] Trilegal , “Decoding the Supreme Court’s decision: Implications for India’s merger control regime” (Lexology, July 10 2025)  < https://www.lexology.com/library/detail.aspx?g=d23fed5a-cce9-4603-9dbf-88ecd580c806 > accessed 18 July 2025

^[15] Ibid

^[16] Ibid