mahikarnam

Companies going for large mergers and acquisitions would have to notify the Competition Commission of India (CCI) within 30 days of signing the Shareholders Agreement or Asset Purchase Agreement.

However, in situations where the entities are aware of the ‘bona fide intentions’ of the proposed move, they would have the leeway of approaching the commission after inking the Letter of Intent (LoI). This in effect would help the entities going in for the acquisition to get a clear signal from the CCI on whether or not the M&A passes the commission’s muster.

“Companies that meet the prescribed threshold norms and regulations will have a floating window to notify the authority from the date of signing of the LoI to the inking of the agreement. However, the notification will have to be made by the company within 30 days from the execution of the Shareholders Agreement or else the Act stipulates penal provisions,” the CCI Director-General, Mr Amitabh Kumar, told Business Line.
Regulation filters

The 30-day period becomes effective from the date the company notifies the same to any other authority, such as the stock exchanges or the market regulator.

In the case of an acquisition or a merger, the Competition Act prescribes a threshold limit for the combined assets (of the two entities) at more than Rs 1,000 crore, or turnover exceeding Rs 3,000 crore in case of companies based in India.

For cases where firms have a worldwide exposure, the limits prescribed are over $500 million for assets and $1,500 million for turnover, of which at least Rs 500 crore, and Rs 1,500 crore of assets and turnover respectively, should be in India.

A third filter has also been stipulated in the draft regulations. It proposes that a merger and acquisition notification would be needed only in cases where acquirer and acquired each have an asset exceeding Rs 200 crore or turnover exceeding Rs 600 crore, in the country. This third filter is to ensure that not every merger or acquisitions lands up at CCI’s doorstep.

As regards acquisition of shares or voting rights, the draft regulations envisage that a rights issue, bonus issue or sub-division of shares would not have to be notified unless it involves an acquisition resulting from relinquishment of right by certain shareholders, thus leading to a possible change in management control.

Other transactions that would not come under the CCI scanner include creeping acquisition by a promoter unless such a move leads to a change in control.