In an industry-friendly move, the Centre has revised upwards the merger filing thresholds under the competition law for ‘combination’ transactions. 

The Corporate Affairs Ministry (MCA) has in two separate notifications revised the ‘de-minimis’ or small target exemption threshold for exempting M&As from the purview of Competition Act. It has also simultaneously revised upwards the ‘jurisdictional’ thresholds that trigger notification to and approval of the Competition Commission of India (CCI) before the deals are consummated.

Currently, not every M&A activity requires notification (merger filing) to the Commission. M&As that meet the asset and turnover thresholds — prescribed under Section 5 of the Competition Act — would be termed as combinations. 

Only those M&As that qualify as a combination require notification to and approval of the Commission prior to their consummation.

Absolute exemption

The Ministry has now revised upward the de-minimis threshold to ₹450 crore from ₹350 crore in case of assets or in case of turnover from ₹1,000 crore to ₹1,250 crore. Combinations below this threshold will be exempted from merger filing.

Hitherto de-minimis or small target exemption is an absolute exemption available to transactions where the asset value in India does not exceed ₹350 crore or the revenue from India does not exceed ₹1,000 crore.

For the jurisdictional thresholds, the MCA has revised the thresholds — from the year 2016 specified levels — both at the enterprise level as well as Group level (see table) in line with wholesale price index (WPI) changes. 

‘A positive step’

Samir Gandhi, Co-founder & Partner, Axiom5 Law Chambers, said the  revision of the merger thresholds is a positive step by the Government towards ensuring the ease of doing business since it eliminates the need for making combination filings for relatively small transactions. 

“As India’s economy grows in size and stature, it’s appropriate to revise regulatory requirements in line with it,” he said.

Vaibhav Choukse, Partner and Head of Competition Law, JSA Advocates and Solicitors, said: “This is a very important development concerning M&As in India. The Government has increased the existing financial thresholds as prescribed under Section 5 of the Competition Act by 150 percent. Further, the De Minimis or the Small Target Exemption thresholds have also been increased. 

This is in line with the government motto of ease of doing business in India as less M&A deals would require CCI approval.”

Amit Agarwal, Partner, Nangia & Co LLP, said: “This is a significant development with respect to ease of doing business as well as mergers and acquisitions in India towards ease of mergers and acquisitions in India.”