Filing of Combination Notices
As per Section 5 of the Competition Act, acquisition of one or more enterprises or merger or amalgamation of enterprises, which exceeds the threshold prescribed therein shall be a ‘Combination’ for the purposes of the Act.
2. Filing Responsibility:
Regulation 9 of the Combination Regulations states that it is the responsibility of the acquirer to notify an acquisition or a hostile takeover. In case of a merger or an amalgamation, a joint notice is to be filed by the merging or amalgamating parties. In case of formation of a joint venture, the responsibility to file a notice would lie with all the parties forming the joint venture.
3. Thresholds for Combinations:
Section 5 of the Competition Act sets out thresholds for enterprises and groups, in terms of assets and turnover, which if exceeded triggers a requirement to notify to the CCI. The current thresholds are as follows:
4. Fee for Payment of Combination Notice:
• Amount of Fee
i. where the notice is filed in Form I, the fee payable shall be Rs. 20,00,000 (Twenty Lakhs only)
ii. where the notice is filed in Form II, the fee payable shall be Rs. 65,00,000 (Sixty-five lakh only).
• Mode of payment
The fee may be paid either by tendering demand draft or pay order or banker‟s cheque, payable in favour of the Competition Commission of India (Competition Fund), New Delhi or through Electronic Clearance Service (ECS) by direct remittance to the Competition Commission of India (Competition Fund), Account No. 1988002100187687 with “Punjab National Bank, IFSC: PUNB0198800, MICR: 110024115, Address: 7, Madame Bhikaji Cama Place, New Delhi-110066”.
5. De Minimis Exemption:
On 27th March 2017, the Central Government issued a notification exempting any acquisition, merger or amalgamation, if the enterprise being acquired, taken control of, merged or amalgamated has (i) assets less than INR 350 crore, or (ii) turnover less than INR 1000 crore. This exemption is valid for a period of 5 years from the date of publication of its notification in the official gazette. The de-minimis has been extended by Central Government for a further 5 year period vide notification dated 16th March 2022.
6. Combinations ordinarily not notifiable (Schedule I)
Regulation 4 of the Competition Commission of India (Procedure in regard to the transaction of Business relating to Combinations) Regulations, 2011 (“Combination Regulations”) states that certain transactions, listed in Schedule I of the Combination Regulations, are unlikely to have any AAEC and therefore, are not ordinarily notifiable. These transactions, listed below, do not enjoy absolute exemption and have to be assessed on a case-to case basis
1. An acquisition of less than 25% of shares or voting rights of an enterprise solely as an investment or in the ordinary course of business, not amounting to control
• In 2016, an amendment to the Combination Regulations clarified ‘solely as an investment’ to mean any acquisition of less than 10% of the total shares or voting rights of an enterprise, provided the acquirer has (i) rights as that of ordinary shareholders, and (ii) neither has representation on the board of directors nor any intention to participate in the affairs or management of the enterprise being acquired.
1(A) An acquisition of additional shares or voting rights by an enterprise having at least 25% and less than 50% of shares and voting rights in another enterprise, provided such an acquisition does not result in change of control.
2. An acquisition of shares or voting rights of an enterprise by an acquirer which already holds at least 50% shares or voting rights, unless the acquisition results in any change of control.
3. An acquisition of assets (i) not directly related to the business activity of the acquirer, (ii) undertaken solely as an investment or in ordinary course of business, and (ii) does not result in acquisition of control, except where the assets being acquired represent substantial business operations in a particular location or for a particular product or service of the enterprise being acquired, irrespective of whether such assets are organised as a separate legal entity or not.
4. An amended or renewed tender offer made in a combination where a notice has already been filed with the CCI by the party making the offer, prior to making the amended or renewed offer.
5. An acquisition of stock-in trade, raw materials, stores and spares, and other similar current assets in ordinary course of business.
6. An acquisition of shares or voting rights pursuant to a bonus issue or stock split or consolidation of face value of shares or buy-back of shares or subscription to rights issue of shares, not leading to acquisition of control.
7. Acquisition of shares or voting rights by a person acting as a securities underwriter or a registered broker of a stock exchange, on behalf of clients, in the ordinary course of business.
8. An acquisition of shares or voting rights or assets by a person/ enterprise of another person/ enterprise within the same group (intra-group acquisition), except where the acquired enterprise is jointly controlled by enterprises that are not part of the same group.
9. A merger or an amalgamation of two enterprises where (i) one enterprise has more than 50% shares or voting rights in the other, and/or (ii) 50% or more shares or voting rights in both enterprises are held by enterprise(s) belonging to the same group, provided there is no change from joint control to sole control.
10. An acquisition of shares, control, voting rights or assets by a purchaser approved by the CCI in accordance with section 31 of the Competition Act.
7. Government Notifications: (Sector Specific Exemptions)
1. Amalgamation of Regional Rural Banks:
On 10 August 2017, the Central Government granted exemption to amalgamation of ‘Regional Rural Banks’ as per section 23A(1) of the Regional Rural Banks Act, 1976, from the application of sections 5 and 6 of the Competition Act, for a period of 5 years from the date of notification in official gazette
2. Reconstitution, transfer and amalgamation of nationalised banks:
On 30 August 2017, the Central Government granted exemption to all cases of reconstitution, transfer and amalgamation of nationalized banks, under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, from the application of sections 5 and 6 of the Competition Act, for a period of 10 years from the date of notification in official gazette.
3. Banking Company in respect of which the Central Government has issued a notification under Section 45 of the Banking Regulation Act, 1949.
A notification dated 11 March 2020 issued by the Central Government exempts a ‘banking company’ whose business has been suspended under section 45 of the Banking Regulation Act, 1949, from the application of sections 5 and 6 of the Competition Act, for a period of 5 years from the date of notification in official gazette.
4. Combinations involving Central Public Sector Enterprises in the oil & gas sectors:
On 22 November 2017, the Central Government exempted all cases of combinations involving Central Public Sector Enterprises including their wholly or partly owned subsidiaries, operating in the Oil and Gas sectors, under the Petroleum Act, 1934 or under the Oilfields (Regulation and Development) Act, 1948, and rules made under these two laws, from the application of sections 5 and 6 of the Competition Act, for a period of 5 years from the date of notification in official gazette.