The provisions of the Competition Act, 2002 (“Act”) relating to regulation of combinations and the Competition Commission of India (Procedure in regard to the transaction of business relating to combination) Regulation, 2011 (“Combination Regulations”) have been in force with effect from 1st June, 2011. The Competition Commission of India, after gaining experience of implementation of the Combination Regulations for almost nine months, has amended the Regulations with a view to provide relief to the corporate entities from making filings for combinations which are unlikely to raise adverse competition concerns, reduce their compliance requirements, make filings simpler and to move towards certainty in the application of the Act and the Regulations.
The highlights of the major changes in the Combination Regulations are as under:
- The Regulations now do not require a notice to be filed for acquisitions that are less than 25% of the shares or voting rights of a company on cumulative basis, as compared to the earlier position of only 15% of the shares or voting rights on a cumulative basis.
- To reduce the compliance burden to the companies that are looking for intra-group restructuring, the Regulations have now dispensed with the requirement of filing a notice in respect of intra-group mergers or amalgamations involving enterprises wholly owned by the group companies.
- In another relief to the companies, acquisitions of shares or voting rights pursuant to buy backs and acquisition of shares or voting rights pursuant to subscription of rights issue (without the restriction of their ‘entitled proportion’), not leading to acquisition of control, are now included in the list of transactions in Schedule I, that normally would not require a filing with the Commission.
- The Company Secretary of the company, duly authorised by the Board, has been authorised to sign the Form I or Form II, in addition to those persons specified under the general regulations (i.e. the Managing Director or the Director authorized by the Board).
- Form I remains the default form, wherein some simplifications have been introduced.
- In Form I, the distinction for filling up Part I for certain types of transactions and Part II for the remaining transactions has been removed, leading to clarity and uniformity.
- To make it more relevant, Form I has been amended and a provision has been introduced for parties to provide details of value of the assets and turnovers for the purpose of Section 5 and to provide a copy of the agreement, board resolution etc. as mentioned in Section 6(2).
- Parties retain the option of filing Form II, especially in those cases where there may be significant horizontal overlap (>15%) and/or significant vertical relationship (>25%) between the parties.
- In order to provide certainty about transactions involving asset transfers and calculation of value of assets and turnover for the purposes of Section 5 of the Act, a new provision has been introduced for attribution of value of assets and turnover of a transferor company to the transferee company where assets are transferred to the transferee company for the purpose of effecting a combination.
- Since Form III has to be filed within a relatively short time period of seven days, a provision has been made for admission of belated filing of Form III in respect of transactions covered under Section 6(5). Further, Form III would now be filed along with a copy of the loan or investment agreement.
- Considering the resources deployed in the assessment of the notice, and keeping in view the fees charged by other regulatory authorities in India and abroad, it was decided to bring the filing fees to a more realistic level, by increasing the fee from INR 50,000 to INR 10,00,000 in respect of Form I and from INR 10,00,000 to INR 40,00,000 in respect of Form II. It is expected that the number of filings will be reduced substantially after the amendments that have removed the requirement for companies to file a notice in several instances that are not likely to adversely affect competition.
- In order to facilitate a quick and efficient review of the notice, the parties are required to file a brief summary of the combination, when filing the notice.