CCI approval must for big ticket M&A

CCI approval must for big ticket M&A

New norms to be applicable from June 1

The regulations governing M&A as compiled by the CCI will be effective from June 1 this year. Thus, it implies that all takeovers and mergers entered into by Indian companies after June 1 will come under purview of CCI. These regulations follow the notification of Section 5 & 6 of Competition Commission Act, 2002, dealing with M&A, announced in March by the government.

The Act empowers CCI to regulate combinations which have caused or are likely to cause “appreciable adverse effect” on competition.

As per the provisions in the Act, companies with a turnover of over Rs 1,500 crore will have to approach the CCI for approval before merging with another firm. Only those proposals would need the CCI’s nod where the companies have combined assets of Rs 1,000 crore or more, or a combined turnover of Rs 3,000 crore or more, as per the Act.

Also, the target company’s net assets have to be a minimum of Rs 200 crore or it should have a turnover of Rs 600 crore for CCI intervention. “The primary objective of these regulations is to ensure that any amalgamation does not adversely affect the competition in any segment of the economy,” CCI Chairman Dhanendra Kumar told reporters. He also pointed out that M&A taking place entirely outside India, with insignificant local nexus and effect on markets in India, need not seek CCI approval.

As per the notification, CCI will take a view on the proposed merger deals within 180 days of the filing of notice by the companies and it can approve the proposal, reject or modify it.

The panel has also introduced a category of transactions where no notification (seeking approval of CCI) is needed to be filed. This includes categories like acquisition of stock in trade, raw materials, assets/investments in ordinary course of business, bonus issues, stock splits, etc.

In response to suggestions made by the industry bodies the CCI has reduced filing fees to Rs 50,000 from earlier proposed Rs 40 lakh for Form-I in which all notices are required to be filed. For Form II, in which all notices are required to be filed, fees have been reduced from Rs 40 lakh to Rs 10 lakh, Kumar said.