The article elucidates that for government companies, approval for demergers must be obtained from the Central Government, not the NCLT, following the 2017 MCA notification.
Government Company Demerger Approval: NCLT vs Central Government
The question of jurisdiction regarding the approval of demergers for government companies has been clarified, establishing that the Central Government holds the authority for approvals under Sections 230–232 of the Companies Act. This stands effective following a 2017 notification from the Ministry of Corporate Affairs (MCA) that redesignated the procedural landscape for such entities.
The ruling indicates a significant shift in the regulatory framework, requiring government companies to comply directly with the Central Government rather than seeking approval from the National Company Law Tribunal (NCLT). This adjustment aims to streamline the process and enforce governmental oversight.
Legal experts and practitioners should take note of the implications of this structured approach to governmental oversight of demergers. It creates reliance on formal governmental processes, which may lengthen the approval timeline and require a robust compliance strategy.
Citations
- Approval Process (2026) Central Government
