The government has relaxed the norms for companies to seek approval of the Competition Commission of India in case of merger and acquisition deals.
The government had last year exempted combination deals where the target company had assets of Rs 350 crore or turnover of up to Rs 1,000 crore from seeking CCI approval. These limits were increased from the earlier Rs 250 crore of assets and turnover of Rs 750 crore.
However, the exemption applied only to acquisition deals, and not mergers and cases where a company was to acquire control of another firm. Also, the assets or turnover of the entire target company were taken into account to decide the applicability of these exemption limits.
Now, the government has clarified that the exemptions will apply to mergers as well as cases where a company acquires control of a target firm.
Also, only the relevant assets or turnover of the target unit or business segment that is to be merged or acquired will now be taken into account, the corporate affairs ministry said in a 27 March notification.
In a separate statement, the government said the reform is part of efforts to make it easier to do business and is likely to make India a more attractive destination for foreign direct investment.
Lawyers say the government has brought a seminal change in the M&A norms.
“The changes are in line with the best practices followed by foreign competition authorities and the government’s objective of promoting ease of doing business in India,” said Vaibhav Choukse, principal associate at law firm J. Sagar Associates. “This will significantly reduce the burden on companies to comply with merger filing requirements and consequently ease the CCI’s burden as well.”
The notification also clarified that the same norms will be applicable to M&A deals involving Indian subsidiaries of two foreign companies.
“The distinction previously drawn between mergers and amalgamations has now been done away with, making both forms of restructuring equally viable from a CCI process perspective,” said Pooja Patel, associate partner for M&A practice at law firm Khaitan & Co. “This will also bring relief to global M&A transactions involving direct or indirect acquisitions of Indian entities or their businesses,” she said.
The CCI has, in the past, created hurdles for mergers among foreign companies. Last week, the CCI had said the proposed merger between Dow Chemical and duPont was likely to hurt competition.
Two years ago, the CCI had given its consent to the Indian leg of the $44 billion merger between France’s Lafarge SA and Swiss peer Holcim but with a rider that Lafarge sold some local assets.
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