M&A deals: More clarity on applicability of CCI norms

Providing clarity on regulatory requirements, the government today said all forms of M&A deals falling within the stipulated threshold limits for turnover and assets will not require CCI approval.
With revised norms being put in place, entities would have more clarity in the case of deals where only a portion of business is getting merged or acquired.
Mergers and acquisitions beyond certain thresholds are required to get approval from the Competition Commission of India (CCI) in order to consummate the deals.
The new notifications with respect to applicability of CCI threshold exemption limits to all forms of combinations is in line with the objective of promoting ease of doing business, the Ministry said in a release today.

The move is expected to make India a more attractive destination for foreign direct investment, it added.
Prior to the changes, where only a segment/portion/ business of an enterprise was being combined with another enterprise, the relevant assets and turnovers attributable to the target segment were not being considered.

Instead, the transferor's total assets and turnover were being considered for determining the applicability of the exemption by the CCI, as per the release.
Now, with the new notification there is clarity on the applicability of the threshold exemption limits to all forms of combinations under Competition Act.
Another notification seeks to provide more clarity on the methodology to be adopted for calculating the relevant assets and turnover of the target entity when only a portion of business is involved in a deal.

In this case, relevant assets and turnovers of a particular segment of an enterprise that is being combined with another entity would be considered for exemption from Competition Act instead of transferor's total assets and turnover, the release said.
These changes have been effected amid concerns raised by stakeholders about lack of clarity on certain CCI requirements.
Currently, combinations where the target company has less than Rs 350 crore worth assets or up to Rs 1,000 crore turnover would not require prior CCI's approval.
Earlier these limits were Rs 250 crore and Rs 750 crore, respectively.
However, these limits were appliacble to combinations which resulted only from acquisition but was not extended to merger/amalgamation and acquiring of control cases.

The Ministry also said the latest measures are expected to enable greater freedom to industry in taking legitimate business decisions towards further accelerating country's economic growth.