The much awaited Regulations governing combinations under the
Competition Act 2002 have finally been published on the website of
the Competition Commission of India. The Regulations shall come
into force on June 1, 2011. The Regulations were released after a
series of consultative meetings the Commission held over the past
few weeks all across the country with various stakeholders and
after considering their comments and suggestions. There were a
number of concerns raised by the stakeholders relating to the
various issues including the time taken for approving a
combination, nature of transactions which require prior approval of
the Commission, maintenance of confidentiality etc. Sufficient time
was spent considering each of these and the consultative process
has finally resulted into the current regulations which have
finally been released.
The Regulations provide for certain categories of transactions
not likely to cause an appreciable adverse effect on competition in
India and a notice for the same need not normally be filed with the
Commission. These include acquisition of shares/voting rights up to
15 percent, solely as an investment or in the ordinary course of
business not leading to acquisition of control of the company whose
shares/ voting rights are being acquired; acquisition of shares or
voting rights where the acquirer already holds 50 percent or more
shares or voting rights in the enterprise being acquired except in
cases where the transaction results in transfer from joint control
to sole control; acquisitions within the same group; acquisition of
stock in trade, raw materials, stores and spares in the ordinary
course of business and acquisition of shares/ voting rights
pursuant to a bonus issue or subscription to rights issue not
leading to acquisition of control. The inclusion of the aforesaid
provision has come as a major relief.
Another major concern was whether the requirement to file a
notice with the Commission would extend to transactions already
signed but not completed. The Regulations have effectively
addressed this concern. It has been clarified that for mergers or
amalgamations the requirement to notify would be applicable to
proposals approved by the board of directors on or after June 1,
2011 and in case of acquisitions, only where binding documents are
executed on or after June 1, 2011.
The Form I used for notification of combinations has been
considerably shortened from what it used to be in the earlier
draft. The Regulations also provide that where the parties to the
combination have filed notice in Form I and the Commission requires
information in Form II to form its prima facie opinion whether the
combination is likely to cause an appreciable adverse effect on
competition, it may direct the parties to file the notice in Form
II which is much more detailed. The filing fees have been
substantially reduced from what was provided under the previous
draft regulations. It has also been clarified that combinations
taking place entirely outside India with insignificant local nexus
and effect on markets in India shall not normally be needed to be
From June 1, 2011, mergers, acquisitions, private equity
investments and other like transactions which cross the prescribed
thresholds of assets and turnover as provided under the Act will
require prior approval of the Competition Commission of India.
Recently the thresholds of assets and turnover have been enhanced
by 50 percent. It was also announced that enterprises whose shares,
assets or voting rights are being acquired, having assets or
turnover of less than Rs. 250 crores or Rs. 750 crores respectively
are exempted from the requirement of obtaining the prior approval
of the Commission.
The stage has been set. The regulations are in place. Corporates
and lawyers alike are getting geared to put in place systems to
comply with the requirements of this new law. What is required is
effective implementation of the law and a coordinated effort to
overcome the challenges that may present themselves in the coming
days, keeping in mind the common object of a sustained growth and
development of the economy.
Zerick Hosi Dastur is a Senior Associate at J. Sagar Associates,
Advocates & Solicitors. His practice covers diverse areas of
Corporate Commercial and Securities law and he is also a part of
the firm's Competition law practice.
In the wake of liberalization and privatization that was triggered in India in early nineties, a realization gathered momentum that the existing Monopolistic and Restrictive Trade Practices Act, 1969 was not equipped adequately enough to tackle the competition aspect of the Indian economy.
The Legal Metrology Act, 2009 was passed by the Indian Parliament in order to repeal and replace The Standards of Weights and Measures Act, 1976 and the Standards of Weights and Measures (Enforcement) Act, 1985.
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