Following statutory provisions apply to mergers, amalgamations and acquisitions from competition law perspective:
Any acquisition, merger or amalgamation that meets the following jurisdictional thresholds, as provided in Section 5 of the Competition Act, 2002 (“Act”), is a “combination” for the purpose of the Act. The thresholds relate to the assets and turnover of the parties to the combination, i.e., target enterprise and acquirer (or acquirer group) / merging parties (or the group to which merged entity would belong).
At present, thresholds prescribed under the Act (as enhanced by the Central Government vide its Notification No. S.O. 675(E) dated March 4, 2016) are as under:
> INR 2000 crore
> INR 6000 crore
Worldwide (with India component)
>USD 1 bn
with at least
INR 1000 crore in India
>USD 3 bn
with at least
INR 3000 crore in India
> INR 8000 crore
> INR 24000 crore
Worldwide (with India component)
> USD 4 bn
with at least
INR 1000 crore in India
> USD 12 bn
with at least
INR 3000 crore in India
The Act requires mandatory notification of all combinations within stipulated timelines. Combinations must be notified to CCI within 30 days of a trigger event (see further answer to Question no. 9) and cannot be given effect to until the expiry of certain deadlines (see further answer to Question no. 26).
In case of an acquisition of assets, shares, voting rights or control, the value of assets and turnover of the acquirer(or acquirer group, for calculating group-level thresholds) and the target enterprise, whose assets, shares, voting rights or control are being acquired, are required to be taken into account for calculating jurisdictional thresholds. (See Section 5(a) of the Act)
In case of acquisition of control by a person over an enterprise when such person already has direct or indirect control over another enterprise engaged in production, distribution or trading of a similar or identical or substitutable goods or provision of a similar or identical or substitutable service, the value of assets and turnover of the enterprise(or group to which the enterprise would belong, for calculating group-level thresholds) over which control has been acquired along with the enterprise over which the acquirer already has direct or indirect control, are required to be taken into account for calculating jurisdictional thresholds. (See Section 5(b) of the Act)
In case of mergers / amalgamations, the value of assets and turnover of the enterprise (or group, for calculating group-level thresholds) remaining after the merger or created as a result of the amalgamation should be taken into account for calculating jurisdictional thresholds. (See Section 5(c) of the Act)
The value of assets is determined by taking into account the book value of assets shown in the audited books of accounts of the enterprise for the financial year immediately preceding the financial year in which (a) the proposal relating to merger/amalgamation was approved by the Board of Directors of the enterprises concerned; or (b) any agreement or other document for acquisition was executed (See sub-section (2) of Section 6 read with Explanation (c) to Section 5 of the Act)
Value of turnover is also determined by applying the same principle.
In combinations involving a series of inter-related steps/transactions, where assets are transferred to an enterprise for the purpose of such enterprise entering into an agreement relating to an acquisition/merger/amalgamation with another person or enterprise, the value of assets and turnover of the transferor enterprise shall be attributed to the value of assets and turnover of the transferee enterprise for the purpose of calculation of thresholds under Section 5 of the Act.
Parties intending to file a notice with the CCI are encouraged to approach the CCI for an informal pre-filing consultation in case of any doubts / queries. However, the advice given during pre-filing consultation is non-binding and may not necessarily reflect the views of the CCI.
A request for pre-filing consultation on substantive issues should be made by the parties intending to file a notice at the earliest and at least 10 days before the intended date of filing, to allow time for allocating a case team for the pre-filing consultation. A copy of draft application comprising of Form I/II/III, as the case may be, and supporting documents, should be forwarded along with the request for scheduling a pre-filing consultation. For further details, please refer to the information on pre-filing consultation on the CCI website.
In addition to the above, CCI also provides pre-filing consultation on interpretational issues relating to Sections 5 and 6 of the Act and the Combination Regulations. In such cases, a request for pre-filing consultations must be sent at least 5-7 days before the meeting is requested to be scheduled. Complete and sufficient details regarding facts of the case including the sector/relevant market, legal provisions, decisional practices of the CCI and of other jurisdictions (if available and material to the facts of the case) should be provided in the request for pre-filing consultations on interpretational issues.
The email seeking pre-filing consultation may be sent to the email id: firstname.lastname@example.org with the subject “Request for pre-filing consultation on interpretational issues”.
In case of mergers or amalgamations, a notice under Section 6(2)(a) of the Act is required to be filed with CCI within 30 days of the board resolution approving the merger or amalgamation passed by the board of directors of the enterprises concerned with such merger or amalgamation.
In the case of an acquisition, a notice under Section 6(2)(b) of the Act is required to be filed with CCI within 30 days of the execution of any agreement or other document for acquisition.(See Section 6(2) of the Act)
Yes. As per Notification No. S.O. 674(E) dated March 4, 2016, acquisitions where enterprises whose control, shares, voting rights or assets are being acquired (i.e. the target enterprise), have assets of not more than Rs. 350 crore in India or turnover of not more than Rs. 1000 crore in India, are exempt from Section 5 of the Act for a period of 5 years (i.e., up to March 3, 2021). Accordingly, a notice for such acquisitions need not be filed with CCI.
It may be noted that this De Minimis exemption is applicable only to acquisitions and is not applicable to mergers or amalgamations.
Any share subscription or financing facility or any acquisition, by a public financial institution, foreign institutional investor, bank or venture capital fund, pursuant to any covenant of a loan agreement or investment agreement are not subject to filing requirement under Section 6(2) of the Act. Therefore, approval of the CCI is not required in respect of these transactions.
However, such acquirers are required to file details of the acquisition in Form III with the CCI within 7 days from the date of the acquisition. The details of the acquisition in Form III must include the details of control, the circumstances for exercise of such control and the consequences of default arising out of such loan agreement or investment agreement, as the case may be. (See Section 6(4) and Section 6(5) of the Act)Further, any combination pertaining to a banking company in respect of which the Central Government has issued a notification under Section 45 of the Banking Regulation Act, 1949 is exempt from filing requirements for a period of 5 years. ( Notification No. S.O. 93(E) dated January 8, 2013)
The “other document” means any binding document, by whatever name called, conveying an agreement or decision to acquire control, shares, voting rights or assets.
In cases where a public announcement has been made in terms of the SEBI Takeover Code, regarding an acquisition (of shares, voting rights or control), the public announcement shall be deemed to be the “other document”.
In cases of hostile acquisitions, the “other document” shall be any document executed by the acquiring enterprise, by whatever name called, conveying a decision to acquire control, shares or voting rights.
The notice in respect of a combination is required to be filed in original, along with one (1) copy, and an electronic copy thereof, with the registry of the CCI. The notice should be complete in all respects (must be filed in required format) and accompanied by filing fees. (See Regulation 13(1) of the Combination Regulations) (See also response to Question no. 22 below)
In the event the parties are claiming confidentiality on certain information provided by them in the notice, a public version of the notice, and an electronic version thereof, is also required to be filed. (See proviso to Regulation 13(1) of the Combination Regulations) (See also response to Question no. 24 below)
The notice must also be accompanied by summary(ies) of the combination, as required in terms of Regulations 13(1A) and 13(1B) of the Combination Regulations, along with separate electronic copies thereof.
Detailed instructions on how to file a notice are set out in the Introductory Notes to Forms, Notes to Form I and Regulations 5, 9, 10, 11, 12, 13 and 30 of the Combination Regulations.
Generally, following documents are required to be filed along with the notice (in Form I).
However, it may be noted that this is not an exhaustive list of documents to be filed along with the notice and, depending on the nature of the combination, other documents may also be required to be filed.
Any person who is duly authorized by the notifying party may sign the notice (See Regulation 9(1) and 9(3) of the Combination Regulations).In the event the notifying party is an Indian company, a certified copy of the board resolution authorizing the said person(s) to sign the notice must be submitted along with the notice. For body corporate organized/incorporated under foreign laws, the following documents may be submitted:
Notifying parties have the discretion to file a notice either in Form I or Form II, as set out in Schedule II of the Combination Regulations. However, in the following cases, a notice should preferably be given in Form II:
In cases where the parties to the combination have filed a notice in Form I and CCI requires information in Form II to form its prima facie opinion as to whether the combination is likely to cause or has caused an AAEC within the relevant market, CCI shall direct the parties to the combination to file a notice in Form II.
In line with best practices, CCI treats all documents as confidential in terms of and subject to the provisions of Section 57 of the Act. In this regard, the notifying parties are required to submit a request for confidential treatment to the information filed by them. Such request can only be made if making public of such information or parts thereof will result in disclosure of trade secrets or destruction or appreciable diminution of the commercial value of any information or can be reasonably expected to cause serious injury.
The confidentiality request must be submitted by the notifying parties in writing stating that a document or documents, or a part or parts thereof, be treated confidential, along with a statement setting out cogent reasons for such treatment and, to the extent possible, the date on which such confidential treatment shall expire. In this regard, it may be noted that mere statement(s) that the document(s) or information or part(s) thereof contain trade secret(s) or are of such commercial value that disclosure of the same will cause serious injury, shall not be sufficient ground for accepting the request for confidentiality. A request for confidential treatment of information should be accompanied by an affidavit stating that the conditions prescribed for the grant of confidential treatment set out in Regulation 35 of the General Regulations are satisfied. (See Regulation 30 of the Combination Regulations and Regulations 35 and 42 of the General Regulations)
Please note that in the event the notifying party claims confidentiality on the information provided in the notice and /or responses or other documents submitted during the course of inquiry by the CCI, it is required to submit a public version of the notice and /or responses of other documents filed with the CCI. (See Regulations 13(1) and 13(2) of the Combination Regulations and Regulations 35(5) and 35(6) of the General Regulations)
CCI may initiate suo motu inquiries into mergers, amalgamations and acquisitions that have not been notified to it, as to whether such a combination has caused or is likely to cause an AAEC. However, CCI will not initiate inquiries after the expiry of 1 year from the date on which the combination has taken effect. (See Section 20(1) of the Act) (See Case No. C-2015/01/241, GE/Alstom & Case No. C-2015/02/249, Piramal/Shriram)
In such cases, CCI may commence proceedings under Section 43A of the Act for failure to file notice in terms of Section 6(2) of the Act.
CCI is required to pass an order or issue a direction on a combination in accordance with provisions of Section 31 of the Act within two hundred and ten days from the date of the notice given to CCI under Section 6(2) of the Act. This timeline is subject to the clock stops set out in Sections 31(11) and 31(12) of the Act. Further, the said timeline includes both Phase I and Phase II assessment of combinations by the CCI. (See Sections6(2A), 31(11)and 31(12) of the Act)
Further, in accordance with the provisions of Regulation 19(1) of the Combination Regulations, CCI is required to form its prima facie opinion as to whether a combination is likely to cause or has caused an AAEC within the relevant market in India within 30 working days of receipt of the notice. Please note that this timeline is subject to clock-stops provided in the relevant provisions of the Combination Regulations and the Act.(See Regulations 5(4), 5(6), 9(2), 14(2A), 14(5), 19(2) and 19(3) of the Combination Regulations and Sections 31(11) and 31(12) of the Act)
A defect letter is an indication that the notice/response filed by you is either incomplete or is not in conformity with the relevant provisions of the Combination Regulations. The letter will generally indicate nature of defect / gaps in the notice. You would be given a time period within which to furnish the requisite information. In the event you fail to furnish the said information within the stipulated time, the notice filed by you, may be treated as not valid.
However, it may be noted that the time taken by you in removing such defects or furnishing the required information including document(s) shall be excluded from statutory time limits as explained in question no. 29 above.
The onus of determining whether a transaction amounts to a notifiable combination rests on the parties. In case audited financial statements of the previous financial year are unavailable, you may determine notification requirements on the basis of unaudited financial statements or best available estimates.
However, failure to notify a transaction which satisfies jurisdictional thresholds based on audited financial statements of the previous financial year would attract penalty under the provisions of Section 43A of the Act.
Acquisition of up to 25% shares where the acquirer does not acquire control and the acquisition is solely as an investment or in ordinary course of business, need not normally be notified to the CCI for prior approval.
The acquisition of less than 10% of the total shares or voting rights of an enterprise shall be treated as solely as an investment. Provided that in relation to the said acquisition,-
The Act provides for an inclusive definition of “control”, as including “controlling the affairs or management” of a target enterprise or group. The manner in which CCI has interpreted the meaning of the term “control” may be seen, inter alia, from the following orders: Case No. C-2012/03/47, Independent Media Trust; Case No. C-2012/06/63, SPE Holdings/MSM/Grandway & Atlas; Case No. C-2012/09/78,Century Tokyo/Tata Capital Financial Services Limited; Case No. C-2015/04/267, AXA India/SociétéBeaujon/Bharti AXA General Insurance; Case No. C-2015/07/296, FIH Mauritius Investments/Fairfax; Case No.C-2015/09/308, Standard Life/HDFC Standard Life Insurance; Case No. C-2015/10/326, Aviva International/Dabur Invest Corp/Aviva Life Insurance; and Case No. C-2015/12/346, AIA International Limited/Tata Sons Limited/Tata AIA Life Insurance
The ‘Group’ has been defined by the Act to mean two or more enterprises which, directly or indirectly, are in a position to —
Further, the Central Government vide a notification has exempted a ‘Group’ exercising less than 50 % of voting rights in other enterprise from the provisions of section 5 of the said Act for a period of five years from the date of notification i.e. 04.03.2016
Several inter-related transactions may constitute a single combination, if the ultimate intended effect of the transaction is sought to be achieved by such series of steps / smaller individual transactions. In such cases, a single notice covering all these steps/transactions must be filed by parties. Some of the decisions in which CCI has treated multiple transactions as inter-connected steps of a single combination are: Case No. C-2014/10/219, VISCAS Corporation/Sterlite Technologies Limited; Case No.C-2014/12/234, TPG/Manipal; Case No.C-2015/02/249, Piramal Enterprises Limited; Case No. C-2015/04/267, AXA India/SociétéBeaujon/Bharti AXA General Insurance; Case No. C-2015/05/270, Advent/MacRitchie/Crompton Greaves; Case No. C-2015/06/285, Sapphire Food/Yum! India,;Case No.C-2015/07/290, Koneru Holdings Limited; Case No.C-2015/10/329, Baramati Speciality Steels/Kalyani Investment/KSL Holdings; and Case No.C-2015/10/334, Blue Star Limited/Blue Star Infotech Limited/Blue Star Infotech Business Intelligence and Analytics Private Limited.