In India, cross-border mergers and acquisitions (“M&A”) facilitates international growth, however it encounters substantial legal obstacles due to multiple overlapping regulatory regimes. These difficulties, which frequently lengthen deal timelines and increase the costs, are caused by regulatory overlaps, foreign exchange controls, and tax structure complexities.
Regulatory Framework Overview
The cross-border mergers both inbound and outbound are permitted under Section 234 of the Companies Act, 2013 and are implemented through the framework under Sections 230–232, which typically requires approval of the National Company Law Tribunal (“NCLT”). Such transactions may also require prior or concurrent approvals from the Reserve Bank of India (“RBI”), Competition Commission of India (“CCI”), and the Securities and Exchange Board of India (“SEBI”), where applicable. Pricing, share swaps, and capital flows are governed by FEMA regulations, while sectoral FDI caps may impose additional limitations
Key Regulatory Hurdles
Because RBI, CCI, SEBI, and NCLT often operate in parallel but without complete harmonisation, multiple approvals lead to inadequacies. In order to avoid anti-competitive effects, CCI’s mandatory regime, including the Deal Value Threshold (INR 20 billion) where the target has substantial business operations in India, triggers notification requirements and a suspensory approval regime.
Outbound mergers by Indian companies are permitted only with foreign companies incorporated in jurisdictions notified by the Central Government. Such jurisdictions must be compliant with international standards, including those prescribed by the Financial Action Task Force (FATF). While there is no express prohibition based on land-border considerations under the merger framework, transactions involving entities from such jurisdictions may be subject to additional regulatory approvals under India’s foreign investment regime.
FEMA and Exchange Control Issues
Where RBI approval is required, timelines may extend over several months depending on the nature of the transaction, and FEMA enforces stringent regulations on valuation, repatriation, and inbound/outbound structures. Share swaps must comply with prescribed valuation norms, which may differ from commercial or globally negotiated valuations and complicate inbound transactions where foreign companies buy Indian companies must adhere to FEMA pricing guidelines. Penalties for non-compliance may extend up to three times the sum involved.
Taxation and Other Challenges
Capital gains, GST, transfer pricing, double taxation, and the absence of complete neutrality for outbound mergers are examples of tax uncertainties. The absence of a comprehensive cross-border insolvency framework in India creates enforcement uncertainties, while the cultural integration, intellectual property transfers, and the enforcement of foreign judgements add layers to the challenges. While M&A activity remained strong in 2025, the investors continue to adopt a relatively cautious and selective approach compared to jurisdictions such as Singapore or the UK.
Despite ongoing reforms, tax incentives, single-window clearances, and greater regulatory harmonisation could further enhance India’s attractiveness. Navigating this complex terrain still requires strategic planning.
At Centrik, we assist clients in navigating regulatory complexity to enable efficient and compliant cross-border transactions. please feel free to reach out at legal@centrik.in
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