MCA notifies changes concerning mergers and
acquisitions
The Ministry of Corporate Affairs (MCA) recently introduced
changes concerning mergers and acquisitions transactions. The gist
of the changes are summarized below:
1. MCA amends the Companies (Compromises, Arrangements
and Amalgamations) Rules, 2016 (Merger Rules)
MCA has issued the Companies (Compromises, Arrangements, and
Amalgamations) Rules, 2024 (Rules), amending Rule 25A of the
existing Merger Rules. These amendments will take effect from 17
September 2024. The key highlights of the Rules are as follows:
- The Rules regulate mergers between a holding company situated outside India and its wholly owned subsidiary in India (Indian WOS), wherein the holding company shall be the transferor company and the Indian WOS transferee company.
- Both companies shall obtain prior approval from the Reserve Bank of India (RBI).
- Indian WOS needs to follow the process of merger under Section 233 of the Companies Act, 2013 (which regulates mergers between certain classes of companies) and seek approval of the Central Government (powers delegated to the Regional Director, MCA).
- If the holding company is located in a country sharing a land border with India, prior approval under the FEM (Non-debt Instruments) Rules, 2019, is required, along with a declaration at the time of application under Section 233.
2. MCA issues Competition (Minimum Value of Assets or Turnover) Rules, 2024 (De Minimis Exemption)
Effective from 10 September 2024, the MCA has introduced rules
regarding the De Minimis Exemption. The exemption retains the
recently updated deal values, exempting certain transactions from
the notification requirement under the Competition Act, 2002. A
transaction is exempt if the target company (i.e., acquiree or
transferor) has:
- Assets in India of not more than INR 4.5 billion; or
- Turnover in India is not more than INR 12.5 billion.
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.
