The Hindu Business Line : M&A approvals: Queues may soon get shorter

Easier norms
Ministry may suggest a limit of 10-15 per cent of the equity in the proposed regulations governing the issue of M&As for unlisted and listed companies.
Corporates will need to approach the Competition Commission only if the deal exceeds the stipulated level.

Richa Mishra
Moumita Bakshi Chatterjee

New Delhi, Dec. 26 To cut down on the number of companies queuing up for M&A (mergers and acquisitons) approvals, the Competition Commission of India (CCI) is considering a minimum slab – for quantum of shares, percentage of voting rights or assets – only above which a company acquiring stake in another would require the Commission’s nod.

Indications are that the Ministry of Corporate Affairs may suggest a limit of 10-15 per cent of the equity in the proposed regulations governing the issue of M&As for unlisted and listed companies.

“In this era of M&As, such a provision is aimed at cutting down the number of companies approaching the CCI for approvals,” Mr V.K. Dhall, Member of CCI and Acting Chairman, said. Currently, the Competition Act does not specify a threshold for the transaction size. However, if this ‘de minimus provision’ as proposed in the draft regulation comes into effect, corporates would need to approach the CCI only if the deal exceeds the stipulated level.

The CCI, at the behest of the Ministry, has already struck a dialogue with various industry associations, legal experts, professional institutes, and various Bar councils, and it now plans to open discussions with various consumer fora.

Speaking to Business Line, the Minister for Corporate Affairs, Mr P.C. Gupta said, “The Act is not for the corporate sector alone, but has to protect consumer interest too. We do not want to put a roadblock by bringing in unnecessary conditions but that does not mean that the consumer should suffer. Certain checks and balances are required. The intention of the Ministry is to create a level playing field for the corporate sector.”

The industry has been expressing apprehensions on the time limit of 210 days given to the Commission for clearing a merger. The Minister said that the waiting time in the case of India was not very different from other systems like the EU and China or that recommended by the International Competition Network. Besides, the Act provides for three stages in a merger review. Under the proposed draft regulation, the Commission is likely to have short time caps for each stage.

As regards concerns on cross-border mergers to be notified to CCI, the Minister said that the Act stipulates that this would hold true only if the merged entity has a ‘domestic nexus’ as per a prescribed threshold limit. The CCI is also considering a ‘de minimis provision’ in the draft regulations to the effect that both the merging parties should separately have a minimum asset/turnover in India.