India's Competition Commission eases M&A norms

In an important move aimed at reducing regulatory hurdles in corporate mergers and acquisitions, fast tracking clearances for mergers and acquisitions, the government has announced an easing of Competition Commission of India rules for M&As.

Besides relaxing compliance requirements, the amendments to competition rules exempt corporates from seeking the CCI's permission for certain M&A deals, like transactions between two entities where one of the enterprises holds more than a 50-per cent stake in the other.

All M&A transactions involving Indian companies have to get approval from the fair competition watchdog CCI.

The CCI has moved amendments to the combination regulations contained in the CCI Transaction of Business Relating to Combinations Regulations, 2011. It will come into effect as soon as the new rules appear in the official gazette the CCI said in a release on Friday.

Under a notification issued on 4 April, companies now do not have to file a notice with the CCI for purchasing shares or voting rights in another entity if the acquisition "is less than five per cent of the shares or voting rights of the company in a financial year", CCI said.

It added that the rules have been amended "with a view to further simplify filing requirements and bring about greater certainty in the application of the Act and the Regulations".

 The relaxations are with regard to certain filing requirements for corporate entities planning combinations that are unlikely to raise competition concerns.

The exemption is subject to the condition that the acquirer already holds more than 25 per cent but less than 50 per cent of the shares or voting rights of the target company.

"In a step which would significantly reduce compliance requirements, the provision for giving notice is now dispensed for mergers/amalgamations involving two enterprises where one of the enterprises has more than fifty per cent (50 per cent) shares or voting rights of the other enterprise.

"Similarly, the requirement of giving notice is also dispensed for merger or amalgamation of enterprises in which more than fifty per cent (50 per cent) shares or voting rights in each of such enterprises are held by enterprise(s) within  the same group," the notification said.

Clarifying rules on intra-group acquisitions, CCI said that relaxation of norms would not be applicable in cases where the "acquired enterprise is jointly controlled".

 The provisions of Competition Act related to regulation of combinations have been in force from June 1, 2011.