Group & Holding Structure Reorganisation: The Process, Start to Finish
The mechanics of Group & Holding Structure Reorganisation are what clients ask about once they have decided to proceed. The questions below are the ones raised most often in practice; the full scope of the service is on the Group & Holding Structure Reorganisation page.
What exactly does 'group and holding structure reorganisation' mean in practice?
It is the redesign of how the companies in your group relate to each other — who owns whom, how businesses are divided across entities, and how control and cash flow between them. In practice this is executed through one or more corporate mechanisms: a merger/amalgamation of two or more companies into one, a demerger that splits a business division into a separate company, a slump sale that transfers an entire business undertaking for a lump sum, or a share swap that consolidates existing companies under a new or existing holding company. The right mechanism depends entirely on your objective and the specifics of your group.
In practice: Most clients arrive describing the symptom — 'our structure is a mess' or 'investors are confused by our entities' — rather than the mechanism they need. Our first job is translating the business objective into the correct legal and tax mechanism, not the reverse.
What is a Scheme of Arrangement under the Companies Act, and when is NCLT sanction required?
A Scheme of Arrangement under Sections 230-232 of the Companies Act 2013 is a court-driven (NCLT-sanctioned) mechanism for restructuring — mergers, demergers, and compromises with creditors or shareholders. NCLT sanction is required for most mergers and demergers between companies, except where the simplified Section 233 fast-track route applies (these schemes are approved by the Regional Director instead; since September 2025 the route covers more categories, described below). The NCLT process involves filing an application, potential creditor/shareholder meetings, RoC and Official Liquidator reports, and a final hearing before sanction.
In practice: Clients are sometimes surprised that even a straightforward internal reorganisation between group companies needs a full NCLT process. We check eligibility for the fast-track Section 233 route early — it can save time where the eligibility conditions are met.
What is Section 72A and why does it matter for group restructuring?
Section 72A of the Income-tax Act 1961 allows carried-forward business losses and unabsorbed depreciation of an amalgamating company to be carried forward and set off by the amalgamated company, subject to specified conditions — the amalgamation must satisfy Sec 2(1B), certain conditions on retention of fixed assets and continuation of business for a minimum period must be met, and specific eligibility criteria around the nature of the companies involved apply. Where these conditions are not met, the accumulated losses of the transferor company lapse on amalgamation rather than transferring to the amalgamated entity. Section 72A (and the GAAR chapter below) are 1961-Act provisions, which govern income up to FY 2025-26; from tax year 2026-27 the Income-tax Act 2025 applies with renumbered sections and forms — confirm the equivalent provision.
In practice: A group can discover, only during a tax assessment years after a merger, that Section 72A conditions were breached because the resulting entity did not continue the specific business for the minimum required period. This is a monitoring obligation, not a one-time filing — we track it annually for clients with 72A claims.
What is GAAR and could it apply to our group restructuring?
The General Anti-Avoidance Rule (GAAR) under Chapter X-A of the Income-tax Act 1961 (renumbered in the Income-tax Act 2025) empowers tax authorities to disregard or recharacterise an arrangement if its main purpose is to obtain a tax benefit and it lacks commercial substance or is not carried out for bona fide business purposes. A group reorganisation with a genuine business rationale — investor-readiness, succession, ring-fencing risk, operational consolidation — is not the target of GAAR. A restructuring undertaken primarily or solely to obtain a tax advantage, with no real business purpose, is squarely within GAAR's scope and carries real risk of the tax benefit being denied on assessment.
In practice: We document the commercial rationale for every reorganisation explicitly in the board minutes and scheme papers — not as a formality, but because a well-documented business purpose is the primary defence against a GAAR challenge years later.
Do we need CCI (Competition Commission of India) approval for our group restructuring?
CCI approval is required for a 'combination' under the Competition Act 2002 if the parties involved cross specified asset or turnover thresholds notified by the government from time to time — these thresholds are assessed jointly across the parties and, in some cases, their group. Purely internal group reorganisations (where the ultimate beneficial ownership does not change) can in some circumstances qualify for an exemption from CCI filing, but this exemption has specific conditions and is not automatic — it needs to be verified for each transaction rather than assumed.
In practice: We assess CCI applicability at the structuring diagnostic stage, not after the scheme is drafted — a combination that should have been notified to CCI but wasn't creates a standalone regulatory risk independent of whether the NCLT sanctions the scheme.
How long does a full NCLT-sanctioned scheme of arrangement actually take?
Timelines from the structuring diagnostic to the certified order being filed with the RoC depend on the NCLT bench's workload, the number of entities involved, whether creditor and shareholder meetings are dispensed with, and whether any objections are raised by the Regional Director, RoC, Official Liquidator, or a creditor/shareholder; confirm the current processing time before fixing a schedule. Fast-track Section 233 schemes for eligible companies can complete faster because they bypass the NCLT hearing process, though timing still depends on any objections from the RoC, Official Liquidator or Regional Director.
In practice: We build the timeline into the client's broader commercial calendar upfront — if a fundraise or acquisition is time-pressured, we assess honestly whether an NCLT scheme fits the timeline, or whether an interim commercial solution (like a share swap or slump sale) should run in parallel or instead.
What is the fast-track merger route under Section 233 — and are we eligible?
Section 233 of the Companies Act 2013 provides a simplified process — bypassing NCLT — for specified classes of schemes. The original categories were mergers between two or more small companies, between a holding company and its wholly-owned subsidiary, and between a start-up and a small company. The Companies (Compromises, Arrangements and Amalgamations) Amendment Rules 2025, effective 4 September 2025, extended the route to, among others, mergers of a holding company with its unlisted subsidiaries (even if not wholly owned), mergers of unlisted fellow subsidiaries, mergers of unlisted companies that meet prescribed borrowing limits with no repayment default, and certain demergers (divisions or transfers of undertakings). Listed transferor companies are not eligible; confirm the current conditions before filing. The scheme is filed with the Regional Director, along with declarations of solvency, and objections (if any) are invited from the RoC and Official Liquidator within a defined window. If no objection is received, the RD registers the scheme. This route is materially faster and less procedurally intensive than a full Section 230-232 scheme.
In practice: Eligibility depends on precise definitions — 'small company' has specific paid-up capital and turnover thresholds under the Companies Act, and the holding-subsidiary, fellow-subsidiary and unlisted-company categories carry their own conditions (for example, the transferor must not be listed, and unlisted companies must meet borrowing and no-default conditions certified by the auditor). We verify eligibility carefully before recommending this route, since an ineligible filing simply gets redirected to the full NCLT process, losing time rather than saving it.
How is the share exchange ratio determined in a merger or demerger?
The share exchange ratio — how many shares of the transferee/resulting company a shareholder of the transferor/demerged company receives — is determined based on an independent valuation of each entity, typically performed by a registered valuer or merchant banker using accepted methodologies (discounted cash flow, comparable company multiples, net asset value, or a combination). For listed entities, SEBI's valuation framework under the LODR regulations applies additional requirements including an independent fairness opinion in specified circumstances. The exchange ratio must be defensible to shareholders, the NCLT, and tax authorities.
In practice: An exchange ratio that appears reasonable to the promoters but is not independently defensible is one of the most common grounds for minority shareholder objection at the NCLT stage, and can also invite tax authority scrutiny on the fairness of the underlying transaction. We insist on an independent valuation from a credentialed valuer for every scheme, regardless of group size.
Does our GST registration and input tax credit survive a merger or demerger?
Yes, but it requires an active filing step — not an automatic transfer. Upon sanction of a scheme of arrangement (merger, demerger, or business transfer as a going concern), the transferor's unutilised input tax credit (ITC) can be transferred to the transferee by filing Form ITC-02 on the GST portal, along with a certificate from a practising Chartered Accountant or Cost Accountant certifying that the merger, demerger or transfer has been made with a specific provision for the transfer of liabilities (Rule 41 of the CGST Rules). GST registrations themselves are separately obtained or amended for the resulting/transferee entity in each state where it will operate.
In practice: ITC transfer can be missed entirely in restructurings executed without a CA on the implementation team — the credit is not automatically carried over, and ITC-02 is filed by the transferor, so it needs to be done while the transferor's GST registration is still active. We build this into the post-scheme integration checklist from the outset.
Where this sits in the wider engagement
Group & Holding Structure Reorganisation rarely arrives on its own. The statutory basis and the current requirements are set out on the Group & Holding Structure Reorganisation service page, and the related services are grouped under Conversion Closure.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On Group & Holding Structure Reorganisation we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.