Competition Commission of India on Mergers and Acquisitions
The Competition Commission of India needs to be notified for all transactions involving mergers and acquisitions in the country – including pre-merger clearances. Since June 1, 2011 prior clearance from the CCI authorities is required if mergers or acquisitions result in a “combination” within the meaning of Sections 5(a), (b) and (c) (Combination) of the Competition Act and the Combination exceeds any of the thresholds of Section 5 of the Competition Act (Threshold Test).
Threshold test statistics:
The Combinations Regulations specify a category of transactions not likely to have an appreciable adverse effect on competition in India as: The acquisition of shares or voting rights of an enterprise:
- Made as an investment or in the ordinary course of business such that the total shares/voting rights held by the acquirer directly or indirectly, does not exceed 15 percent of the total shares/voting rights of the target and does not lead to acquisition of control of the target
- Where the acquirer held majority shares/voting rights in the target prior to the acquisition, except where the transaction results in transfer from joint to sole control
- Made pursuant to a bonus issue, stock splits, consolidation of shares or rights issue to the extent of the entitled proportion, not leading to any acquisition of control
- By a securities underwriter or registered stock broker of a stock exchange on behalf of its client
Format of filing with the CCI
The Combinations Regulations permit parties the option to resolve whether they would file the notification in Form I or Form II.
Form I is an uncomplicated form and the Combinations Regulations identify a list of transactions which would ordinarily be eligible for filing in this Form I. Form I is divided into two parts. The list of transactions for which a notification in Form I, Part I must be made includes:
- Where the parties to the Combination neither operate in the same or similar market nor in a market that is upstream or downstream of the other party’s market
- Combinations involving parties predominantly engaged in the export of goods or services provided that the market share of the parties does not exceed 15 percent of the relevant market in India
- An enterprise would be predominantly engaged in export if at least 75 percent of its turnover is derived from exports out of India
- Acquisition of enterprises under liquidation or financial reconstruction or a sick company under Indian law
- Acquisitions resulting from gift or inheritance
- Acquisition of a trustee company or arising from a change of trustees of a mutual fund established under the relevant regulations of the Securities and Exchange Board of India (SEBI)
The list of transactions for which a notification in Form I, Part II must be made includes:
- Combinations involving parties operating in the same or similar market (horizontal combinations) when their combined market share is less than 15 percent
- Combinations involving parties operating in the upstream or downstream market of the other parties’ market (vertical combinations) provided that their individual or combined market share is less than 25 percent in the relevant market
Form II is a lengthy and comprehensive format intended for the more noteworthy Combinations within India.
The CCI has reserved its judgment to seek more information even for notifications in Form I including asking the parties to make a Form II filing before it forms its prima facie opinion with respect to the proposed Combination.
Form III is planned for Combinations that the Competition Act excludes from applicability of the Sections 5 and 6 including acquisitions by public financial institutions, listed foreign institutional investors, banks or registered venture capital funds and the like. The announcement in Form III must be made within 7 days of the acquisition.
Form I: Rs.50,000
Form II: Rs.1,000,000
Form III: No fees