Digital firms with Rs 500 crore turnover must seek CCI approval for M&As | News
 "Merger, M&A")
Illustration: Binay Sinha
Increasing the ambit of companies that would now be mandatorily required to seek the nod of India’s antitrust watchdog, the Competition Commission of India (CCI) on Tuesday released new regulations for mergers. Companies with a turnover of more than Rs 500 crore or over 10 per cent of global turnover in India in the preceding financial year would be considered to have substantial business operations (SBO) in India and would need CCI’s approval for a merger.
For digital services, the number of end users in India would be a key factor in determining substantial India operations.
Any transaction where the “deal value” exceeds Rs 2,000 crore would be notifiable for the CCI’s approval, provided that the target entity has “substantial business operations” in India. To determine the value of the deal, the CCI will look at all forms of consideration for a period of two years prior to the transaction.
Before this, the CCI would consider only asset and turnover as the criteria for the requirement of approvals for mergers and acquisitions. By bringing the deal value threshold within the ambit of the Competition Act, the government has tried to capture mergers that may otherwise evade scrutiny under the traditional “asset” or turnover-based threshold.
“In case there is no reasonably certain way of determining the deal value, the regulations require mandatory notification if the target has substantial business operations in India. This new test will capture many more transactions within the net, as the de minimis target-based exemption will not be available where the deal value threshold is met,” said Shweta Shroff Chopra, partner, Shardul Amarchand Mangaldas & Co.
Competition law experts feel that the latest notification could put ongoing deals on hold.
“It would bring considerable uncertainty to deal timelines and require urgent attention by all deal-making parties to ensure they do not fall foul of the law and attract penalties for gun-jumping,” Chopra added.
The regulations have come a day after the Ministry of Corporate Affairs notified the provisions of the law, which come into effect from September 10. Experts said that the regulations mean companies would need to do an urgent re-assessment of transactions signed or approved prior to September 10, 2024, but not yet fully consummated.
“As the deal value threshold comes into effect, both the CCI’s operational load and the compliance requirements for parties will see a marked increase,” said Vaibhav Choukse, partner – competition law, JSA.
CCI has also revised the exemptions available to companies from notifying mergers, which may become inapplicable in certain cases. For instance, the exemption available for minority share acquisitions would not be applicable if it gives the right or ability to access commercially sensitive information.
The anti-competition watchdog has notified that the overall deal review timelines will be shortened to 150 calendar days from 210 days earlier, with a deemed automatic approval if the CCI is unable to form a prima facie view in the first 30 calendar days. The prima facie review of 30 working days has been curtailed to 20 calendar days in the new regulations.
“Parties will have to assess the implications of these changes on any ongoing or proposed transactions. This will also involve assessing the inclusion of incidental arrangements or interconnected transactions,” said Abhay Joshi, partner at Economic Laws Practice.
First Published: Sep 10 2024 | 5:47 PM IST
