CCI’s M&A overhaul: Stricter scrutiny, faster approvals under new rules | Economy & Policy News

India’s merger and acquisition (M&A) regulatory regime has recently undergone a seismic transformation. These amendments, notified on September 9, 2024, primarily stemming from the Competition (Amendment) Act, 2023, will reshape the future of corporate mergers both domestically and internationally. These revisions mark several positive changes in India’s regulatory approach, introducing ease of doing business (EoDB), the need for cross-border compliance, stringent oversight, clear deal value thresholds, and speedier decisions.

Dhanendra Kumar

A few major changes:

Deal value thresholds: A game changer

Under the new rules, M&A valued above Rs 2,000 crore ($240 million) must be notified to the Competition Commission of India (CCI), provided the target has “substantial business operations” in India, viz., if the Indian turnover or gross merchandise value (GMV) exceeds Rs 500 crore ($60 million) or at least 10 per cent of the global figures in these metrics.

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  Aim and challenges of the regime:

This move aims to bring greater transparency and accountability to high-value deals, ensuring that large transactions undergo regulatory scrutiny to prevent anti-competitive practices. The limit of Rs 2,000 crore might filter out smaller deals and lead to speedier consolidation for greater efficiency.

Expedited timelines for M&A

There is now a shortened merger review timeline by the CCI. Earlier, the CCI had 30 working days to form a prima facie view on a notified transaction, which has now been reduced to 30 calendar days. Additionally, the overall review period has been reduced from 210 to 150 calendar days.

Wider definition of ‘control’

The revised regulations have expanded the definition of “control,” which now includes the “ability to exercise material influence” in any manner over the management, affairs, or strategic commercial decisions of another enterprise or group. This may bring more M&As under stringent purview and more efficient regulation by the CCI.

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  ‘Material influence’:

Exemption rules and minority share acquisitions

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  Intra-group transactions:

The exemption for intra-group transactions remains intact, but M&A within the same group is exempt only if they do not result in a change in control. This ensures that intra-group restructuring for operational efficiency does not undermine market competition.

Derogation from “standstill obligations” in open offers

Parties to open market transactions will now be exempt from the “standstill obligation” and, pending CCI’s approval, can acquire shares from various sellers through transactions on a regulated stock exchange or an ‘open offer,’ subject to stipulated conditions.

Increased filing fee

The Form I filing fee has been increased from Rs 20 lakh to Rs 30 lakh, and for Form II, from Rs 65 lakh to Rs 90 lakh.

Appointment of monitoring agencies

To ensure adherence to CCI’s orders, the CCI can now appoint monitoring agencies. These agencies can be accounting firms, management consultancies, chartered accountants, company secretaries, or cost accountants.

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  Accountability of agencies:

The agency so appointed will be responsible for informing the CCI in case of any non-implementation or non-compliance with its orders.

Conclusion: A new era of accountability, oversight, and efficiency

India’s recent changes to its M&A regime underscore the country’s growing investment attractiveness, EoDB, and need for robust regulatory oversight.

The introduction of deal value thresholds, streamlined timelines, and revised exemption rules all point to a more mature and nuanced approach to managing corporate mergers and acquisitions. The new regime is at par with advanced global regimes and leads a regulatory approach to encourage M&A activities.

While these changes may add layers of compliance for businesses, they also provide clarity, ensuring that India remains an attractive destination for both domestic and international investments. As the global economy evolves, India’s proactive regulatory measures will play a pivotal role in shaping the M&A landscape within the country and globally.

First Published: Sep 19 2024 | 5:49 PM IST