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In a pro business move, the Centre has extended by five more years the validity of an existing exemption available to companies as regards notification of prospective mergers to the competition authorities.
This would mean that companies entering into combinations need not, for five more years, notify the Competition Commission of India (CCI) of proposed combinations within 30 days.
The law requires combinations to be notified within 30 days before they are implemented. However, keeping in mind the practical challenges that were faced by the companies to notify the CCI within 30 days, the Centre had in June 2017, granted companies an exemption from this norm for five years. The Corporate Affairs Ministry (MCA) has now again extended this exemption by five more years till June 2027.
The 30-day time limit provided under the Act was proving to be a challenge since it required parties to provide comprehensive information within a short timeline failing which, they ran the risk of non-compliance or even a delay in receiving an approval in cases where the CCI found shortcomings in their submissions. In most jurisdictions, businesses can notify competition authorities of prospective mergers at any time before the merger becomes effective.
Industry reacts
Sonam Chandwani, Managing Partner, KS Legal & Associates, said the move seeks to make doing business in India easier and will certainly favour more combinations covered by the Competition Act, 2002.
While Pritika Kumar, Founder - Cornellia Chambers, said this would reduce compliance burden and help the enterprise proposing to enter into a “combination”, Anu Monga, Partner, AnantLaw, said the move can clearly be considered pro-business/investment.
Ravisekhar Nair, Partner, Economic Laws Practice, termed it a continuity measure. This essentially recognises the commercial reality that parties who need to secure the mandatory approval from the CCI for their transaction will in any event act in a prudent, compliant and time bound manner, he added.
As per the Competition Act, 2002, when there is an acquisition of one or more enterprises by one or more persons or merger or amalgamation of enterprises it shall be termed as a combination of such enterprises and persons (there are thresholds for a transaction to be considered as a combination).
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