India Inc on Thursday came out largely in support of the proposed changes to the takeover code even while demanding that the concept of ‘non-compete’ fees should not be done away with.

The SEBI-appointed Achuthan committee had recommended abolition of non-compete fees separately paid by an acquirer to the promoter of a target company.

At a meeting chaired by the Chief Economic Advisor to the Finance Ministry, Dr Kaushik Basu, in North Block today, the representatives of apex industry associations pointed out that payment of non-compete fees was a global practice and not confined to India alone. Some of them even highlighted that the securities appellate tribunal (SAT) too had recognised such payments in various rulings.

The meeting was convened by the Finance Ministry to discuss the Achuthan committee recommendations and also gauge the views of industry on the same. This is expected to help the Government firm up its views before they are discussed at the level of the SEBI Board.

All the three apex chambers—CII, FICCI and Assocham—were not opposed to the Achuthan committee proposal to raise the initial acquisition threshold for a mandatory open offer to 25 per cent of the voting capital of the target company from the current 15 per cent.

“We have not opposed the hike in threshold to 25 per cent. But we did ask for some form of transitional provisions and a fair chance for existing promoters to raise their holding”, Mr Pawan Kumar Vijay, head of Assocham’s Mergers and Acquisition council told Businessline.

Meanwhile, on the issue of 100 per cent open offer rule, there were differing views from industry chambers. Assocham is understood to have opposed the proposed 100 per cent open offer rule and instead suggested that the open offer level be capped at 75 per cent. The Federation of Indian Chambers of Commerce and Industry (FICCI) was not totally opposed to this proposal, but highlighted the need to phase it in as and when Indian industry is allowed to avail acquisition finance locally. CII also had no reservations to the proposed 100 per cent open offer rule, it is learnt.

India Inc also conveyed to the Finance Ministry that the proposed changes to the takeover code should not be inconsistent with the existing competition law or norms issued by the department of industrial policy and promotion (DIPP). A case in point was the FDI sectoral caps and how the proposed 100 per cent acquisition rule would be applicable in sectors with FDI limits.

A CII statement said that the chamber had appreciated the consultative approach adopted by the Ministry of Finance. CII made a detailed representation at the meeting and highlighted the key issues for the attention of the Chief economic advisor such as broad definition of ‘control’; need to harmonize the new Takeover Code with the requirements of merger regulation under the Competition law, re-instatement of exemptions provided presently from the requirement of making an open offer, etc.

>krsrivats@thehindu.co.in

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