Companies Act 2013 Section 230: Compromise and Arrangement (2026)

Explainer · Company Law · NCLT

Updated for 2026 · Claw Editorial

Section 230 of the Companies Act, 2013 is the gateway for a company to restructure its relationship with its creditors or members through a court-approved deal. It lets a company propose a compromise or an arrangement, and lets the National Company Law Tribunal (NCLT) call the required meetings and sanction the scheme. Once the scheme is approved by the required majority and sanctioned by the NCLT, it binds the company and every affected creditor and member, even those who voted against it. This explainer sets out what Section 230 covers, how the process works, the majority needed, and where it fits in a merger. Last verified October 2026.

01What Section 230 covers

The marginal note to Section 230 is "Power to compromise or make arrangements with creditors and members". It allows a company to propose a compromise or an arrangement between itself and its creditors, or its members, or any class of them, and gives the NCLT the power to order meetings and sanction the scheme.

Section 230 is the first of a group of provisions, Sections 230 to 240, that deal with compromises, arrangements and amalgamations. The detailed procedure is set out in the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

02Compromise and arrangement explained

The two words cover different things.

• A compromise usually settles a dispute or adjusts existing rights, for example a settlement with creditors on how much and when they will be paid.
• An arrangement is wider. It includes a reorganisation of the company's share capital by consolidation of different classes of shares, or by division of shares into different classes, or both.

Because the term is wide, schemes under Section 230 are used for debt restructuring, changes to share capital, and reorganisations between a company and its stakeholders. A reduction of share capital can also be done as part of a Section 230 scheme, read with Section 66.

03Who can apply and the NCLT process

An application to the NCLT for a meeting can be made by the company, by any creditor or member of the company, or, where the company is being wound up, by the liquidator. In broad outline the process runs like this:

• the applicant files the scheme and an application before the NCLT;
• the NCLT orders meetings of the creditors or members, or classes of them, and may dispense with a meeting where a class with at least ninety per cent value agrees by affidavit;
• notice of the meeting, with the scheme and a disclosure of its effect, goes to the creditors, members and the regulators named in the section;
• the meeting is held and the vote is taken, including by postal ballot;
• if the required majority approves, the NCLT hears objections and may sanction the scheme.

Notice must also go to the Central Government, income tax authorities, the Registrar, and other sectoral regulators where relevant, who may make representations.

04The majority needed to approve

A scheme under Section 230 needs a double majority at the meeting of each class. It must be approved by a majority of persons, representing three-fourths in value of the creditors or members, or the class, present and voting in person or by proxy or by postal ballot.

An objection to the scheme can be made only by persons holding at least ten per cent of the shareholding, or by creditors whose outstanding debt is at least five per cent of the total outstanding debt as per the latest audited accounts.

05What a sanctioned scheme does

Once the NCLT sanctions the scheme, the order binds the company, its creditors, its members, and, where the company is being wound up, the liquidator and contributories. A certified copy of the order is filed with the Registrar, and the scheme then takes effect from the date set in it.

This binding effect is the whole point of Section 230. It lets a company achieve a restructuring that a few dissenting creditors or members could otherwise block, provided the strong majority and the NCLT are satisfied the scheme is fair.

06Section 230 and mergers

Section 230 is often the first step in a merger or amalgamation. Where the compromise or arrangement is part of a scheme for the merger of two or more companies, the procedure in Section 232 applies on top of Section 230. In short, Section 230 supplies the meeting and sanction machinery, and Section 232 adds the specific rules for mergers and amalgamations.

For the merger-specific provision and how transferor and transferee companies are dealt with, see Section 232 on merger and amalgamation. Where a dispute over a scheme or a related company matter reaches the Tribunal, it helps to see how similar schemes have been treated; for finding those orders, see case search across Indian courts.

07Where Claw fits

Claw is an all-in-one legaltech platform for Indian advocates, law firms, and corporate legal teams, combining AI-based case search, an AI legal assistant (Legal GPT), case management, and compliance automation across all Indian courts and tribunals.

A scheme under Section 230 lives or dies on precedent: how the NCLT and the appellate tribunal have treated class composition, the double majority, objections and the fairness of a scheme. Claw lets you search more than 30 crore judgments and orders, with Supreme Court rulings from 1950 and High Court rulings from 1990, in under 5 seconds, so you can find how similar schemes were sanctioned or refused. You can also track a live scheme petition, with its orders and hearings, by company or advocate name across 9,102 courts, benches and forums.

Claw does not use the documents you upload to train its AI models. Create a free Claw account to research Section 230 schemes and to follow a pending matter. To search the wider body of law, see case search across Indian courts.

08Sources and further reading

• Ministry of Corporate Affairs (Companies Act, 2013 and rules): mca.gov.in
• India Code (bare text of the Companies Act, 2013): indiacode.nic.in
• National Company Law Tribunal: nclt.gov.in
• Claw: clawlaw.in

This explainer is general information, not legal advice. The law changes through amendments and judgments, so check the current text and take advice from counsel before you act.

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