On April 4, 2013, the Competition Commission of India
("CCI") amended the CCI (Procedure in regard to
transaction of business relating to combination) Regulations, 2011
("Merger Control Regulations") easing norms for certain
M&A activity. Regulation 4 exempts certain transactions from
the radar of CCI. These transactions are listed in Schedule I of
the Merger Control Regulations and are "ordinarily not likely
to cause an appreciable adverse effect on competition in
India." The April 2013 amendment have brought more clarity to
Schedule I and will facilitate internal reorganization and
restructuring of companies and additional stake acquisition without
notifying the CCI. The major changes are:
Additional acquisition of
stake: If a company already holds
25% equity stake in an enterprise, it can acquire additional
shares/voting rights up to 5% in a financial year without notifying
CCI, provided this does not lead to acquisition of control over the
enterprise. This amendment is in line with the creeping acquisition
allowed under the SEBI Takeover Code.
Intra-group acquisition: Any
acquisition of shares/voting rights within a group is exempted and
does not require the approval of CCI. However, in such a case the
acquired enterprise shall not be jointly controlled by enterprises
which are not part of the same group. This change will ease
compliance requirements for intra-group restructuring and
consolidation of holdings.
Intra-group reorganization: A merger or
amalgamation between two enterprises, where one of them holds more
than 50% shares/voting rights in the other is now outside the ambit
of CCI- no approval required. The exemption also extends to mergers
between two enterprises of a group where more than 50% shares in
each of them are held by enterprises in the same group. However,
this exemption is subject to the condition that transaction does
not result in transfer from joint to sole control. Let us take an
illustration: There is a company X, where company Y holds 58%
equity and the rest 42% is held by company Z. X is under the sole
"control" of Y. Now, X and Y merge. If the control of the
merged entity is with the same shareholder(s), no clearance is
required from CCI. However, in the same facts, if X is under the
joint control of Y and Z, and the amalgamation of X and Y will
result in sole control of a shareholder, then the transaction will
have to be notified to the CCI. This change will facilitate merger
of a subsidiary into its parent. Before the amendment, the
exemption was only provided to merger of a wholly-owned
subsidiaries with its parent.
The amendments will reduce the number of filings before the CCI,
but highlights the commitment of the government to give impetus to
the M&A activity at large.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
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.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).