India is looking to recast provisions relating to mergers and acquisitions (M&As) that require ratification by the Competition Commission of India (CCI). Currently, under the Competition Act, any M&A that results in combined revenue above certain thresholds must first be cleared by CCI, a unit of the ministry of corporate affairs (MCA). The ministry also must first notify regulations regarding M&As before referring them to CCI.
The thresholds are a combined turnover of Rs3,000 crore for a domestic firm, Rs6,000 crore for domestic firms with overseas presence and Rs24,000 crore for a conglomerate with local domestic presence. However, firms and conglomerates will have to approach CCI for approval if the combined revenues of the Indian operations of the acquirer and the acquired are at least Rs1,500 crore, with the smaller operation having at least Rs600 crore in revenue.
The new provisions will be industry friendly, CCI chairman Dhanendra Kumar had said at a seminar on the India-US Economic Summit, organized by lobby group Federation of Indian Chambers of Commerce and Industry last week in New Delhi, PTI reported.
CCI, which will soon invite public comment on the draft regulations, is already studying a set of new proposals made by industry representatives such as J.J. Irani, director, Tata Sons Ltd; Bharat Vasani, general counsel of the Tata group; Chandrajit Banerjee, director general of industry group Confederation of Indian Industry (CII); and Lalit Bhasin, managing partner, Bhasin and Co., a New Delhi-based law firm. The proposals have been made under the aegis of CII.
Mint has reviewed a copy of the changes suggested by industry that has been sent to MCA secretary R. Bandhopadhyay.
The industry recommendations include, among other things, pre-merger consultation by industry with CCI, moving to a single-form clearing mode instead of the two sets currently required, expansion of exempted category of industries that will need CCI’s ratification, and reduction of notice fee from Rs40 lakh to Rs10 lakh.
Minister for corporate affairs Salman Khursheed had said last week that his ministry is considering the suggestions made by industry. “The idea is to have a set of norms which does not hurt the industry,” the minister said.
According to G.R. Bhatia, partner at Luthra and Luthra Law Offices, who helped prepare the draft, industry representatives have suggested about five key changes.
“Pre-merger consultation with CCI is a good step that the industry has suggested, which will clear doubts and ensure certainty in business transactions,” said Bhatia.
The CII recommendations also ask that no penalty be imposed on firms that do not inform CCI of their intention to merge and where CCI investigations show that it did not violate the Competition Act.
Industry has also asked for an expansion in the exempt categories of M&As. These include deals where acquisitions of less than 25% of shares or voting rights in unlisted companies and less than 15% in case of listed companies. The current regulation has no such bifurcation.
Industry has also suggested that acquisition of dead or dormant companies, of intangibles such as intellectual property rights, and companies primarily into exports, be exempt from CCI ratification.
It further suggested that companies in the exempt category be allowed to consult CCI with a fee of Rs25,000 if there might be a problem on the competition issues at the time of the merger and later.