Corporate Restructuring, Valuation and Insolvency · Cross Border Mergers

Section 234 of the Companies Act, 2013: Merger with Foreign Company

Updated 11 October 2026 · Fact-checked

Section 234 of the Companies Act, 2013 covers mergers between Indian and foreign companies. Sub-section (1) extends the Chapter to schemes with companies in notified jurisdictions. Sub-section (2) separately allows a foreign company to merge into an Indian company, or the reverse, with the RBI's prior approval, subject to other laws. Consideration may be cash, Depository Receipts, or both.

Understand Section 234 of Companies Act, 2013

Sections 230 to 232 deal with schemes between Indian companies. Section 234 extends that scheme route across borders. It is short, but it carries two separate provisions: sub-section (1) on schemes with companies in notified jurisdictions, and sub-section (2) on mergers with a foreign company, which need the RBI's prior approval.

Sub-section (1) says the provisions of the Chapter (Chapter XV) apply mutatis mutandis, that is, with necessary changes, to schemes of merger and amalgamation between a company registered under the Act and a company incorporated in the jurisdictions of such countries as the Central Government notifies from time to time. So the Central Government decides which countries are covered by this sub-section. It may also make rules for these mergers, in consultation with the RBI.

Sub-section (2) is a separate provision. It says that, subject to any other law in force, a foreign company may, with the prior approval of the Reserve Bank of India, merge into a company registered under the Act, or the other way round. The text of sub-section (2) does not mention notified jurisdictions. The scheme may provide for payment to the shareholders of the merging company in cash, in Depository Receipts, or partly in cash and partly in Depository Receipts.

The Explanation defines foreign company widely: any company or body corporate incorporated outside India, whether or not it has a place of business in India.

So section 234 is not a stand-alone procedure. The scheme still follows the section 230 to 232 process (Tribunal-directed meetings, notices, voting by three-fourths in value, sanction and filing of the order), adapted as the rules provide. Section 234 adds the foreign element: notified jurisdictions, RBI approval and the form of consideration. Read it together with Rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules and the FEMA regulations on cross border mergers, which are covered as separate topics.

Key rules to remember

Scope of sub-section (1): Chapter provisions apply mutatis mutandis to schemes between an Indian company and a company in a notified jurisdiction; The Central Government notifies the countries for this sub-section. Sub-section (2) is a separate provision and does not use the notified-country wording.
Rule-making power: Central Government may make rules in consultation with the RBI; This is the proviso to sub-section (1). It is the basis of Rule 25A.
Approval condition under sub-section (2): Foreign company merges into Indian company, or vice versa, only with prior approval of the RBI, subject to other laws in force; Prior means before the merger is effected. The approval is of the RBI, not of the Central Government.
Permitted consideration: Cash, or Depository Receipts, or partly cash and partly Depository Receipts; This is paid to shareholders of the merging company, as the scheme provides.
Meaning of foreign company: Any company or body corporate incorporated outside India, whether or not it has a place of business in India; A body corporate is included, not only a company.
Direction of merger: Foreign into Indian, or Indian into foreign; Sub-section (2) covers both directions: merge into a company registered under the Act or vice versa.
Voting majority borrowed from section 230(6): Majority of persons representing three-fourths in value of creditors or members voting; This applies because the Chapter applies mutatis mutandis. State it when you describe the procedure.

How to solve Section 234 of Companies Act, 2013 questions

Use this order for any question on a merger between an Indian and a foreign company. Provision first, then the facts, then the conclusion.

1Identify the direction: foreign company into Indian company, or Indian company into foreign. Section 234(2) covers both.
2Check the foreign company. Confirm it is incorporated outside India (the Explanation). Then note whether its country is a notified jurisdiction under section 234(1). If it is, sub-section (1) extends the Chapter to the scheme. Sub-section (2) is a separate provision and does not itself depend on notification.
3State the rule on approval: prior approval of the Reserve Bank of India is required under section 234(2), subject to other laws in force. Do not name the Central Government as the approving authority.
4Check the consideration in the facts. Cash, Depository Receipts, or a mix are the options the section names. Say whether the proposed payment fits.
5Link to sections 230 to 232: the Tribunal-directed meetings, notices, three-fourths in value, sanction and filing of the order apply with the adaptations in the rules. Mention Rule 25A and the FEMA regulations.
6Apply the facts, then write a clear conclusion: whether the scheme can proceed, what is missing, and what the company should do next.

Quickest way: Four-point check for section 234

When to use it: Use it when a short question asks whether a cross border merger is valid or what is required.

Who: foreign body corporate and Indian company, with direction noted.
Where: is the foreign company incorporated outside India (the Explanation)? Note whether its country is notified under sub-section (1), which extends the Chapter. Sub-section (2) is a separate permission.
Approval: has the RBI given prior approval, and are other laws in force met?
How paid: cash, Depository Receipts or both, and the section 230 to 232 procedure followed.
Conclude in one line: the scheme is permitted, or state what is missing, for example the RBI's prior approval.

Common mistakes in Section 234 of Companies Act, 2013

Writing that the Central Government gives prior approval for the merger under section 234(2).
The Central Government notifies jurisdictions and makes rules, so students mix up the roles.
Fix: Remember the split: the Central Government notifies countries and makes rules, in consultation with the RBI. The RBI gives the prior approval.
Saying a foreign company can only merge into an Indian company.
Students focus on inbound mergers, which are more common.
Fix: Sub-section (2) says merge into a company registered under the Act or vice versa. Both directions are allowed.
Treating section 234 as a complete procedure and ignoring sections 230 to 232.
The section is short and silent on meetings, notices and voting.
Fix: Say that the Chapter applies mutatis mutandis. The Tribunal process is followed with adaptations, along with the rules.
Treating the notified-country wording of sub-section (1) as a bar to every foreign merger.
Students read sub-sections (1) and (2) as one rule and carry the notified-jurisdiction wording into sub-section (2).
Fix: Keep them separate. Sub-section (1) extends the Chapter to schemes with companies in notified jurisdictions. Sub-section (2) separately allows a foreign company to merge into an Indian company, or vice versa, with the RBI's prior approval, subject to other laws. Do not say a non-notified country bars a merger under sub-section (2).
Listing shares of the Indian company as the only consideration, or forgetting Depository Receipts.
Students think of share swaps from domestic mergers.
Fix: The section names cash, Depository Receipts, or partly each. Quote these exactly.
Defining a foreign company as one with a place of business in India.
This is mixed up with the definition used in other parts of the Act.
Fix: For section 234(2), the Explanation covers any company or body corporate incorporated outside India, whether or not it has a place of business in India.

Worked examples

Example 1

Bharat Textiles Ltd, an Indian company, wants to merge with Alpha Fabrics Ltd, incorporated in a country that the Central Government has not notified under section 234(1). Can the scheme proceed under section 234?

Show the solution

Provision: section 234(1) extends the Chapter to schemes between an Indian company and a company incorporated in the jurisdictions of countries notified by the Central Government. Section 234(2) separately allows a foreign company to merge into a company registered under the Act, or vice versa, with the prior approval of the RBI, subject to any other law in force.
Facts: Alpha Fabrics is incorporated outside India, so it is a foreign company under the Explanation. Its country is not notified.
Analysis: because the country is not notified, sub-section (1) does not extend the Chapter to this scheme, and the company cannot rely on it. But sub-section (2) does not require a notified country, so non-notification does not by itself bar the merger.
Conclusion: the merger can be considered under sub-section (2) only if the RBI gives prior approval and the other laws in force, such as the FEMA regulations, are met. Bharat Textiles should confirm these before proceeding.

Answer: Non-notification of Alpha Fabrics' country does not by itself stop the scheme. Sub-section (1) cannot be relied on, but under section 234(2) the merger may proceed with the RBI's prior approval and subject to other laws in force. Bharat Textiles must obtain that approval and check the other laws first.

Example 2

Zenith Holdings Pte Ltd, incorporated outside India, proposes to merge into Kaveri Industries Ltd, an Indian company. The scheme offers Zenith's shareholders ₹40,00,000 in cash and the balance in Depository Receipts. Advise on what section 234 requires.

Show the solution

Direction: a foreign company merging into an Indian company. Section 234(2) allows this.
Foreign company: Zenith is incorporated outside India, so it fits the Explanation whether or not it has a place of business in India.
Approval: the merger needs the prior approval of the Reserve Bank of India, and the scheme is subject to other laws in force.
Consideration: section 234(2) allows payment to the shareholders of the merging company in cash, in Depository Receipts, or partly in cash and partly in Depository Receipts. Cash of ₹40,00,000 plus Depository Receipts for the balance is a permitted mix.
Procedure: the Chapter applies with necessary changes. Kaveri should follow the section 230 to 232 process: Tribunal-directed meetings, notices, approval by three-fourths in value of those voting, Tribunal sanction and filing of the order, as the rules adapt it.

Answer: The scheme is permissible in structure. It needs the RBI's prior approval, the proposed consideration of cash and Depository Receipts is allowed, and Kaveri must follow the Tribunal process under sections 230 to 232 as adapted by the rules.

Exam tips

Write the RBI as the approving authority in sub-section (2), and the Central Government as the notifying and rule-making authority. Examiners watch for this.
Quote the three forms of consideration exactly: cash, Depository Receipts, or partly cash and partly Depository Receipts.
In case questions, check the direction, the foreign company and the RBI's prior approval under sub-section (2). Note whether the country is notified under sub-section (1), but do not treat that as a bar to sub-section (2). Then conclude.
Mention mutatis mutandis and the link to sections 230 to 232 in every answer on procedure, and refer to Rule 25A and FEMA only in general terms unless you are sure of the detail.
Use the Explanation to define foreign company in one line. It is easy credit.

Practice questions from Cross Border Mergers

Section 234 of Companies Act, 2013 in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Section 234 of Companies Act, 2013: frequently asked questions

What does section 234 of the Companies Act, 2013 deal with?

It deals with merger or amalgamation between an Indian company and a foreign company. Sub-section (1) applies the Chapter to schemes with companies in notified jurisdictions. Sub-section (2) allows a foreign company to merge into an Indian company or vice versa with the prior approval of the RBI.

Who gives approval for a cross border merger under section 234?

Under section 234(2), the prior approval of the Reserve Bank of India is required. The Central Government notifies the countries under sub-section (1) and may make rules in consultation with the RBI.

How is section 234 related to sections 230 to 232?

Section 234(1) applies the provisions of the Chapter mutatis mutandis to cross border schemes. So the Tribunal process under sections 230 to 232 is followed with necessary changes, while section 234 adds the foreign element of notified jurisdictions, RBI approval and the form of consideration.

Can the shareholders of the merging company be paid in cash?

Yes. Section 234(2) says the scheme may provide for payment in cash, in Depository Receipts, or partly in cash and partly in Depository Receipts. The exact terms are set out in the scheme.

Does a foreign company need a place of business in India to be covered?

No. The Explanation to section 234(2) defines a foreign company as any company or body corporate incorporated outside India, whether or not it has a place of business in India.