Merger procedures may soon become easier for India Inc. The Government is planning to come up with an ordinance to do away with the process of sanction by the Competition Commission of India (CCI) for small-ticket mergers and acquisitions. The ordinance will also ensure that the CCI takes a decision on an M&A application within 180 days, significantly down from the current 210 days.
Under the proposed ordinance, the merging entities will not need to take the CCI’s permission if the turnover of the smaller company is less than Rs 750 crore or its net worth is under Rs 250 crore.
Combined turnover
At present, if the combined turnover of the merged entity exceeds Rs 3,000 crore or the net worth is more than Rs 1,000 crore, prior sanction of the CCI is mandatory.
This means that if a company with a turnover of Rs 2,999 crore merges with another with a turnover of Rs 2 crore, the CCI permission is needed as the combined turnover crosses the Rs 3,000-crore threshold. However, under the new provisions, the companies need not seek CCI’s nod.
This would mean that the acquisition of a small entity by a large company, even if the latter’s turnover exceeds the Rs 3,000-crore ceiling, will no longer necessarily come under the CCI’s purview.
The ordinance, awaiting the Cabinet’s approval, is expected to be passed next month, a senior official with the Ministry of Corporate Affairs, said.
The changes are being brought about to prevent unnecessary hassle for companies engaging in M&A activities, he said.
“It is our intention to cause minimum hardship to companies and these changes are being brought about to remove cumbersome procedures and help companies during M&As,” he said.
Other provisions
The other provisions of the Competition Act relating to anti-competitive agreements and abuse of dominant position were notified on May 20, 2009.
The legislation was enacted to prevent practices that have an adverse effect on competition. The law is also meant to help promote and sustain competition, protect the interests of consumers, and ensure freedom of trade carried on by other participants in the market, according to the Ministry.
