All high-value M&As will need CCI nod from 1 June

All high-value M&As will need CCI nod from 1 June

New Delhi: All high-value merger and acquisitions with combined turnover of 4,500 crore or more will require approval of competition watchdog CCI from 1 June 2011, with an object to safeguard interest of consumers and promote industrial growth.

“We have exempted routine merger and acquisition deals from seeking CCI nod. 95% of the deals will be cleared within 30 days and the rest we will do in 180 calendar days," CCI chairman Dhanendra Kumar told reporters after notifying the regulations.

The regulation -- Competition Commission of India (CCI) (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011, will take into account only those deals which are triggered after 1 June 2011.

“All M&A deals prior to 1 June will be excluded and only those which are triggered post 1 June will require CCI nod," Kumar said.

The notification will provide legal certainty and clarity to corporate entities regarding mergers and acquisitions, he said, adding, it is “big positive".

Under the regulations, if the joint asset and turnover of the merging entities exceed 1,500 crore and 4,500 crore respectively, the companies will have to seek approval of the CCI.

In case the asset and turnover of the target company exceed 250 crore and 750 crore respectively, the merger would come under the purview of CCI.

“The objective of CCI is to safeguard the interest of consumer and ensure freedom of trade," Kumar said, adding rules and regulations pertaining to corporate M&A would help accelerate growth and promote FDI inflow.

The regulations follow the notification of Section 5 and 6 of the Competition Commission Act, 2002, dealing with mergers and acquisition (M&A) in March by the government.

The regulations said that category of business transactions such as acquisition of stock in trade, assets or investment in ordinary course of business, bonus issue, stock split, would be exempted from seeking CCI clearance.

Also the mergers happening entirely outside India with insignificant local nexus and effect on markets in India would not be required to file notification.

Commenting on the new regulations, industry Chamber FICCI said, “Exempting foreign transactions taking place entirely outside India with insignificant local nexus comes as a huge relief and greater certainty to particularly foreign players."

Further, the minimum fees to be paid to the CCI by the companies would be 50,000, significantly lower than the originally 40 lakh proposed by the Commission. However, in certain cases the fees could go up to 10 lakh.

Kumar said the CCI is in the process of introducing the concept of e-filing of clearances, adding that the Commission would ensure confidentiality of all M&A applications.

Asked if M&As in banking space would come under preview of CCI, Kumar merely said, “as of now we are implementing the Act. The government has powers to grant exemption (under the Act)".

Finance minister Pranab Mukherjee had already said the merger and acquisitions in the banking sector would be kept outside the purview of the Competition Act.

Kumar said there would not be any regulatory overlap because of the new guidelines.

According to a senior official of law firm Amarchand Mangaldas’, Shweta Shroff Chopra, the Bill pertaining to Banking Amendment, which is pending before Parliament, gives power to RBI to clear mergers and acquisitions in the banking sector.

During the intervening period, she said, some clarification would be needed from the respective regulators.