Reverse flipping means moving a startup’s holding company from abroad (often Delaware or Singapore) back to India, so that the Indian company becomes the top company. The main statutory route is an inbound cross-border merger of the foreign holdco into its Indian subsidiary. Since 17 September 2024, where the Indian company is wholly owned, that merger can use the fast-track procedure, with prior RBI approval (rule 25A(5), CAA Rules).

“CAA Rules” means the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. “FEMA CBM Regulations” means the Foreign Exchange Management (Cross Border Merger) Regulations, 2018, as amended up to 5 June 2026.

Table of Contents

What reverse flipping is

In a flipped structure, founders and investors hold shares in a foreign holdco, which owns the Indian operating company. The Economic Survey 2022-23 said a flip “effectively transforms an Indian company into a 100 per cent subsidiary of a foreign entity”, and that companies “are also exploring ‘Reverse Flipping’” (Ch. 9).

When a reverse flip is done by merger, the holdco’s shareholders end up holding shares directly in the Indian company, and the holdco ceases to exist. The Ministry of Corporate Affairs has adopted the term. Its release of 11 September 2025 described the merger of a foreign holding company into its Indian wholly owned subsidiary as “(reverse flipping)”, which “has also been allowed through fast track merger procedure” (PIB, MCA).

Other techniques, such as a swap of holdco shares for Indian shares, are used in practice. The official sources reviewed here deal with the merger route, so that is the focus.

Reverse flipping by inbound merger: the legal basis

Section 234 of the Companies Act, 2013 applies Chapter XV (compromises, arrangements and amalgamations) “mutatis mutandis” to mergers with companies incorporated in jurisdictions notified by the Central Government (s. 234(1)). It provides that “a foreign company, may with the prior approval of the Reserve Bank of India, merge into a company registered under this Act” (s. 234(2)). Under FEMA, an “inbound merger” is “a cross border merger where the resultant company is an Indian company” (reg. 2(v), FEMA CBM Regulations).

There are two procedural tracks.

	Standard route	Fast-track route
When it applies	An inbound merger under s. 234	Foreign holding company into its Indian wholly owned subsidiary
Approving authority	The Tribunal, under the Chapter XV procedure applied by s. 234(1)	Central Government, on a s. 233 application by the Indian company (rule 25A(5)(iii))
RBI	Prior approval (s. 234(2))	Prior approval of both companies (rule 25A(5)(i))
Members’ approval	As under the Tribunal procedure	Members holding at least 90% of the total number of shares (s. 233(1)(b))

The fast track is for a “wholly owned subsidiary”. Rule 25A(5) does not define the term, and its text does not address nominee holdings. Where anyone other than the holdco holds shares in the Indian company, whether the company is still wholly owned is a point to settle before relying on the fast track.

The fast-track route under rule 25A(5)

G.S.R. 555(E) of 9 September 2024 inserted rule 25A(5), in force from 17 September 2024. It applies where “the transferor foreign company incorporated outside India being a holding company and the transferee Indian company being a wholly owned subsidiary company incorporated in India, enter into merger or amalgamation”. The conditions are (rule 25A(5)):

“both the companies shall obtain the prior approval of the Reserve Bank of India”;
“the transferee Indian company shall comply with the provisions of section 233”;
the Indian company applies to the Central Government under s. 233, and rule 25 applies;
“the declaration referred to in sub-rule (4)” is made at the application stage.

The sub-rule (4) declaration is Form CAA-16. It was introduced for schemes with a body corporate from a country sharing a land border with India (rule 25A(4), G.S.R. 401(E), 30 May 2022). Rule 25A(5)(iv) does not say whether it applies only in land-border cases, so the declaration may be needed in every rule 25A(5) application.

On 4 September 2025, G.S.R. 603(E) widened the fast-track classes in rule 25(1A). New clause (vi) covers the foreign holding company merger “referred to in sub-rule (5) of rule 25A”. PIB linked the amendment to para 101 of the Budget Speech 2025-26, which said “the scope for fast-track mergers will also be widened”. Rule 25A(5), including RBI approval, still governs.

What section 233 requires

Notice of the scheme to the Registrar, the Official Liquidator and affected persons, inviting objections within 30 days (s. 233(1)(a)).
Approval by members “holding at least ninety per cent. of the total number of shares” (s. 233(1)(b)).
A declaration of solvency filed with the Registrar (s. 233(1)(c)).
Approval by “nine-tenths in value of the creditors” (s. 233(1)(d)).
Filing with the Central Government, Registrar and Official Liquidator (s. 233(2)). Objections may come within 30 days; the Central Government may refer the scheme to the Tribunal within 60 days (s. 233(4)–(5)).

Registration takes effect as “dissolution of the transferor company without process of winding-up” (s. 233(8)), and property and liabilities pass to the Indian company (s. 233(9)). Shares the transferee would hold in itself are cancelled (s. 233(10)). So the holdco’s stake in the Indian company is cancelled, and the Indian company issues new shares to the holdco’s shareholders under the scheme.

The three approvals are separate. The 90% member approval (s. 233(1)(b)), the nine-tenths creditor approval (s. 233(1)(d)) and the three-fourths-by-value test for tax (s. 2(6)(c)) each have their own measure. Meeting one does not meet the others.

Indian law is only one side. The holdco’s home law must also permit a merger into a foreign company. Delaware’s General Corporation Law, s. 252, contemplates a Delaware corporation merging into a foreign corporation, and the Delaware Division of Corporations has a certificate of merger form for it. Singapore’s position must be checked under its Companies Act; it is not described here.

FEMA: the inbound merger conditions

Regulation 4 of the FEMA CBM Regulations governs inbound mergers. For wider context, see GIFT City: FEMA.

Item	Rule	Regulation
Shares issued to non-residents	Pricing guidelines, entry routes, sectoral caps and reporting for foreign investment apply, as does any land-border-country restriction on the investor or its beneficial owner (rule 25A(4))	Reg. 4(1)
Overseas borrowings and guarantees	Must conform to ECB, trade credit or other foreign borrowing norms “within a period of two years”; no repayment from India in that period; end-use conditions do not apply	Reg. 4(3)
Overseas assets	Assets an Indian company may not hold must be sold within two years of sanction, with proceeds repatriated immediately	Reg. 4(4)–(5)
Foreign currency account	Allowed abroad for merger-related transactions, for up to two years from sanction	Reg. 4(6)
Valuation	In accordance with rule 25A of the CAA Rules	Reg. 6(1)
Past contraventions	Regulatory actions for earlier non-compliance or contraventions must be completed	Reg. 7(2)
Reporting	As prescribed by RBI	Reg. 8(1)

Regulation 4(1) still names the 2017 foreign investment regulations, since replaced by the Non-Debt Instruments Rules, 2019; the published text has not been updated.

Deemed approval. Any transaction on account of a cross-border merger “undertaken in accordance with these Regulations shall be deemed to have prior approval of the Reserve Bank as required under Rule 25A” (reg. 9(1)). A compliance certificate from the Managing Director or Whole Time Director and the Company Secretary, if any, goes with the application (reg. 9(2)). On its wording, reg. 9 covers sub-rule (5). No RBI statement confirming that it covers the fast track was found. Until that is confirmed, express prior RBI approval under rule 25A(5)(i) is best treated as required. A structure outside the regulations needs specific RBI approval.

The 2026 amendment. Notification FEMA 389(1)/2026-RB of 29 May 2026, effective 5 June 2026, defined “Competent Authority” as “any authority empowered under the Companies Act, 2013 or any subordinate legislation made thereunder to approve a scheme of merger or amalgamation” (reg. 2(iia)). It replaced “NCLT” with “Competent Authority” throughout. That points towards reg. 9 applying to the fast track, where the Central Government approves. It is not an RBI clarification.

Tax on a reverse flip under the Income-tax Act 2025

The Income-tax Act, 2025 applies from 1 April 2026. For the wider IFSC regime, see GIFT City: tax.

Company level. Capital gains under s. 67 do not apply to a transfer “in a scheme of amalgamation, of a capital asset by the amalgamating company to the amalgamated company, if the amalgamated company is an Indian company” (s. 70(1)(e)). The holdco’s main asset is usually its stake in the Indian company.

Shareholder level. Nor do they apply to a shareholder’s transfer of shares in the amalgamating company in consideration of shares in the amalgamated company, if the amalgamated company is Indian (s. 70(1)(f)). The clause does not distinguish resident from non-resident shareholders.

The amalgamation test. Both exemptions need an “amalgamation” under s. 2(6). A foreign body corporate is a “company” (s. 2(28)(b)). The definition requires that all property and all liabilities of the amalgamating company pass to the amalgamated company, and that shareholders holding “not less than three-fourths in value of the shares” become its shareholders (s. 2(6)(a)–(c)). The test is by value. Cashing out a large investor can put the exemption at risk.

Stamp duty, foreign tax and other items. Section 70(1)(e) and (f) deal with capital gains only. Stamp duty, tax in the foreign country, withholding, cash or other non-share consideration and any settlement of debt are separate questions.

Losses. Section 116(1) carries forward the amalgamating company’s losses only in listed cases: a company owning an industrial undertaking, ship or hotel; certain banks; and public sector companies. Further conditions apply under s. 116(4). A typical startup holdco is unlikely to qualify. The Indian company’s own losses are a separate question. Under s. 119(3)(a), a loss carries forward only if shares carrying at least 51% of the voting power are beneficially held by the persons who held them in the loss year. Section 119(3)(b) has a start-up rule for the first ten years, but only if all voting shareholders at the end of the loss year still hold at the end of the tax year. The s. 119(4)(b) exception covers an amalgamation of a foreign company where the amalgamated company is also foreign, so on its words it does not fit a reverse flip. Whether “beneficially held” looks through the holdco is not settled here.

What was not found. No specific relief for non-resident shareholders beyond s. 70(1)(f). No 2025 Act provision on indirect transfers or treaty provision on this swap was located. The Finance Act 2026 amended s. 70 only at clause (x) (Sovereign Gold Bonds) and made no amalgamation change. Tax in shareholders’ home countries, such as the US or Singapore, is outside this article and must be checked. It often decides viability.

Note that s. 70(1)(t) and (u) give tax-neutral “relocation” only to eligible offshore funds moving to the IFSC by 31 March 2030. They do not cover a startup holdco.

Reverse flip checklist and process

These are practical planning points, not legal requirements, except where a provision is cited.

Cap table. Each holdco holder, class and residence, and whether the Indian company is wholly owned (rule 25A(5)).
Foreign investment limits. Entry routes and sectoral caps for each non-resident (reg. 4(1)), and any holders from land-border countries (rule 25A(4)).
Three-fourths test. Whether holders of three-fourths in value will take Indian shares (s. 2(6)(c)).
ESOPs and convertibles. Holdco options, SAFEs and notes need a treatment in the scheme, commonly replacement with Indian instruments.
Investor consents. Vetoes in shareholders’ agreements, and the 90% member and nine-tenths creditor approvals (s. 233(1)).
Valuation. Both companies are valued under rule 25A (reg. 6(1)) and the pricing rules (reg. 4(1)).
RBI approval. Treat express prior RBI approval (rule 25A(5)(i)) as required unless reg. 9 deemed approval is confirmed to cover the fast track; and the reg. 9(2) certificate.
Holdco assets and debts. Assets to be sold and borrowings to be conformed within two years (reg. 4(3)–(5)).
Home-country law and tax. Whether the holdco’s jurisdiction permits the merger, and shareholder tax there.
Filing and sanction. Section 233 with the Central Government, or the Tribunal route if the fast track is unavailable.
Post-merger reporting. RBI reports (reg. 8) and the two-year windows (reg. 4(3), (5), (6)).

Later funding into the Indian company follows India’s inbound investment rules; see GIFT City: capital flows.

Where GIFT City fits after a reverse flip

No official provision allowing a foreign company to redomicile into GIFT IFSC was found. The IFSCA legal framework page has nothing on redomiciliation. The Companies Act exemptions for specified IFSC companies (notified 4 January 2017; the Gazette text was not read for this article) appear, from an unofficial copy, to concern companies licensed in the IFSC. Nothing found suggests they apply to a re-domiciling holdco or alter ss. 233 or 234.

GIFT City is not a substitute for the merger. After a flip, the Indian group may use IFSC units for fundraising, treasury or other regulated activities, and a later listing on IFSC exchanges is possible for public companies.

Direct listing. On 24 January 2024, the Government notified the FEMA (Non-debt Instruments) Amendment Rules, 2024 and the Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024, enabling “direct listing of equity shares by public Indian companies on the International Exchanges in GIFT IFSC” (IFSCA release, 23 February 2024). The Government’s FAQs say “only public Indian companies, listed or unlisted” qualify and “Private companies are not eligible” (Q3, Q5). The permitted exchanges are India International Exchange and NSE International Exchange (Q8). A reverse-flipped private company would need to become a public company first. The FAQs (Q25) state that capital gains on these shares are exempt; the provision under the Income-tax Act 2025 was not confirmed.

Listing rules. The IFSCA (Listing) Regulations, 2024 replaced the IFSCA (Issuance and Listing of Securities) Regulations, 2021 (IFSCA release, 30 August 2024). In the part reviewed, no specific start-up or SME regime was found.

Policy. IFSCA’s expert committee on “Onshoring the Indian Innovation to GIFT IFSC”, chaired by G. Padmanabhan, reported on 14 August 2023. Its focus included persuading externalised startups “to redomicile back”, and it recommended aligning IFSC tax and regulatory laws with international practice for holding company structures. No law implementing such a regime was found.

An Indian company can still set up its own IFSC unit for treasury, fund or other permitted activities; see Setting Up in GIFT City: Entity Types and IFSCA Licences.

Common questions

What is reverse flipping in India? Moving a startup’s holding company from abroad to India, usually by merging the foreign holdco into its Indian subsidiary. MCA uses the term for the fast-track version (PIB, 11 September 2025).

Can a Delaware holdco merge into its Indian subsidiary without NCLT? On the Indian side, usually, if the Indian company is wholly owned. Rule 25A(5) allows a s. 233 application to the Central Government, with prior RBI approval. The Central Government can still refer the scheme to the Tribunal (s. 233(5)). The holdco’s home law must also allow it: Delaware’s s. 252 contemplates mergers into foreign corporations, and Singapore must be checked under its own law.

Is RBI approval needed for a reverse flip? Yes (s. 234(2); rule 25A(5)(i)). FEMA reg. 9 deems approval for transactions complying with the Cross Border Merger Regulations. RBI has not confirmed that this covers the fast track, so express approval is best treated as required.

Is a reverse flip tax-free in India? It can be for Indian capital gains, if it is an “amalgamation” under s. 2(6), including the three-fourths-by-value test; s. 70(1)(e) and (f) then apply. Those clauses cover capital gains only. Stamp duty, foreign-country tax, withholding, cash consideration and debt settlement are separate.

Can a foreign holdco move to GIFT City instead? No official provision for redomiciling a foreign company into GIFT IFSC was found.

Sources

Companies Act, 2013 (Act 18 of 2013), ss. 233 and 234 (MCA text last updated 29 Jul 2022; no later amendment to ss. 233–234 was found). Ministry of Corporate Affairs. mca.gov.in
Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2024 (G.S.R. 555(E)), inserting rule 25A(5). Ministry of Corporate Affairs, Gazette of India Extraordinary, 9 September 2024 (in force 17 September 2024). mca.gov.in
Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2022 (G.S.R. 401(E)), inserting rule 25A(4) and Form CAA-16. Ministry of Corporate Affairs, 30 May 2022. mca.gov.in
Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2025 (G.S.R. 603(E)). Ministry of Corporate Affairs, Gazette of India Extraordinary, 4 September 2025. egazette.gov.in
“MCA Widens the scope of fast track mergers under the Companies Act, 2013” (Release ID 2165660). PIB, Ministry of Corporate Affairs, 11 September 2025. pib.gov.in
Foreign Exchange Management (Cross Border Merger) Regulations, 2018 (FEMA.389/2018-RB), as amended up to 5 June 2026, including the Amendment Regulations, 2026 (FEMA 389(1)/2026-RB, 29 May 2026). Reserve Bank of India, 20 March 2018. rbi.org.in
Income-tax Act, 2025, s. 70. Income Tax Department. incometaxindia.gov.in
Income-tax Act, 2025, s. 2 (clauses (6) and (28)). Income Tax Department. incometaxindia.gov.in
Income-tax Act, 2025, s. 116. Income Tax Department. incometaxindia.gov.in
Finance Act, 2026 (No. 4 of 2026), s. 43. Ministry of Law and Justice, Gazette of India Extraordinary, 30 March 2026. Official URL for the Act PDF not located
Budget Speech 2025-26, para 101. Ministry of Finance, 1 February 2025. indiabudget.gov.in
Economic Survey 2022-23, Chapter 9. Ministry of Finance, January 2023. indiabudget.gov.in
Press release on the Committee of Experts on “Onshoring the Indian Innovation to GIFT IFSC”. IFSCA, August 2023. ifsca.gov.in
Press release, “Constitution of a Standing Committee on Primary Markets”. IFSCA, 23 February 2024. IFSCA.gov.in
FAQs issued by the Central Government on the Direct Listing Scheme. Government of India (hosted by IFSCA), January 2024. ifsca.gov.in
Press release, “New IFSCA (Listing) Regulations, 2024 come into effect”. IFSCA, 30 August 2024. ifsca.gov.in ; Regulations (IFSCA/GN/2024/006, as amended up to 14 October 2025): ifsca.gov.in
Income-tax Act, 2025, s. 119. Income Tax Department. incometaxindia.gov.in
Certificate of Merger of Domestic Corporation into Foreign Corporation (Delaware General Corporation Law, Title 8, s. 252(c)). Delaware Division of Corporations. corpfiles.delaware.gov

Reverse Flipping to India: Merger Route, Tax and GIFT City