India: FAQs On Amendments To Indian Merger Control

Last Updated: 6 September 2017
Article by Karan Singh Chandhiok, Vikram Sobti and Kalyani Singh

Introducing De Minimis+

The original De Minimis Exemption was introduced in 2011 and later amended by way of a notification in 2016, exempted transactions from a notification requirement if the target enterprise (whose control, shares, voting rights or assets were being acquired) had assets of not more than INR 3.5 billion (~USD 54 million) OR turnover of not more than INR 10 billion (~USD 154 million). Whilst this was a valuable attribute of the Indian merger control regime, it had certain limitations – the De Minimis Exemption was limited to only acquisitions and was calculated on the basis of the total value of assets or turnover of the selling enterprise.

On 29 March 2017, in a major move towards improving India's "Ease of Doing Business Ranking", the Government of India has made significant changes to the Indian merger control regime by way of a notification (De Minimis+ Notification) issued by the Ministry of Corporate Affairs (MCA).

The changes will not only be welcomed by notifying parties, but also by the Competition Commission of India (CCI), which has seen its Combination Division flooded with merger notifications.

What is the De Minimis+ Notification all about?

The Notification, issued by the MCA has significantly:

  • expanded the current scope of the existing small target exemption to cover all types of transactions; and
  • altered the assessment of jurisdictional thresholds.

We discuss both these topics at Sections A and B, respectively, of this eAlert. Section C of this eAlert discusses the applicability of the notification and some open questions.

Section A – Scope of De Minimis+

What transactions are covered under De Minimis+?

Shedding the earlier artificial distinction drawn in the earlier notifications between acquisitions and mergers, the De Minimis+ Notification applies to both acquisitions and mergers. By doing away with this distinction, the new exemptions have now brought about much awaited clarity and uniformity in its application to transactions.

Section B – Calculating Jurisdictional Thresholds

Are there any changes in the asset and turnover thresholds?

No. The De Minimis+ Notification continues with the thresholds prescribed in the 2016 notification – i.e., for the exemption to apply, the value of assets being acquired, taken control of, merged or amalgamated, should not be more than INR 3.5 billion (~USD 54 million) in India OR turnover should not be greater than INR 10 billion (~USD 154 million) in India. However, as explained below, there are significant changes in the manner in which such thresholds are calculated.

Do I look at the total value of assets or turnover of the enterprise selling the assets or only to value of assets or turnover being transferred?

Previously, the value of assets or turnover of the entity selling the assets was considered in determining the De Minimis Exemption. This meant that large corporates selling assets of insignificant value would have transactions subject to clearance by the CCI.

Now, under the De Minimis+ Notification, if the transaction involves the acquisition, merger or amalgamation of a portion or business division of an enterprise, it is the value of assets and turnover of that portion or business division of the enterprise, which will be relevant for the assessment of notification requirement.

How do I calculate value of assets or turnover for the portion of the business or division being transferred?

The De Minimis+ Notification expressly provides for methodology of calculating the value of target assets or turnover.

For assets – the value will be determined by reference to the book value of the assets being transferred (after deducting depreciation) as reflected in the audited books of account or in the report of the statutory report. The target assets would include all types of assets classes – current, fixed, tangible, and intangibles, if such assets are proposed to be transferred and recorded in the books.

For turnover – the turnover of the portion of the business or division will need to be certified by the enterprise's statutory auditor. However, there is no clarity on the calculation of turnover for those enterprises that do not require a statutory auditor.

Section C – Applicability and Open Questions

When does the De Minimis+ Notification come into effect?

The Notification has come into effect since the date of its publication, that is, 29 March 2017.

When does the De Minimis+ Notification expire?

Midnight of 28 March 2022.

Is the application of the De Minimis+ Notification prospective or retrospective?

The applicability of the Notification is entirely prospective. The De Minimis+ Notification fully replaces the previous notification issued by the MCA in 2016 "except as respects things done or omitted to be done before such date" of the Notification.

What about the 'inbetweeners' – transactions that have been signed but not yet notified?

There are uncertainties concerning transactions, which were signed before the date of the De Minimis+ Notification. The Competition Act imposes an obligation on the parties to file a notice within 30 days from the date of executing definitive documents. The De Minimis+ Notification does not expressly clarify if deals signed prior to the date of publication, would be able to take benefit of this exemption. The CCI has in -informal consultations - taken the view that such combinations do not need to be notified. However, the CCI will continue to review those notices that have been submitted to it, even though, such combinations may be exempt.

Are there any more open questions?

Whilst there will be more questions when these rules are applied in practice, the CCI will have to address and fill the gaps for the following immediate questions:

  • The De Minimis+ Notification uses the expression "being... merged or amalgamated into another enterprise". For mergers, this would imply that the applicability of the notification should be tested against the value of assets or business being transferred. Hence, there is ambiguity as to whether the benefit of the De Minimis+ Notification would apply where a larger enterprise (i.e., above the prescribed thresholds) is merged into a smaller enterprise.
  • Similarly, it is not clear whether the De Minimis+ Notification requires the joint calculation of the value of assets or turnover where two or more enterprises amalgamate to form another new enterprise.
  • As stated above, the CCI will need to give guidance on the calculation of assets or turnover, where the enterprise does not have statutory auditors.

What is the verdict?

All in all, the De Minimis+ Notification is a fundamental transformation, which is not only likely to reduce the number of notifiable transactions, but also effectively reduce approval timelines. Further, this also brings convergence between the rather (in)famous Indian merger control regime and prevalent international practice of looking at value of assets for notification requirements.

Originally published March 2017

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.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
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).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions