Indian Competition Regulator Eases Rules for Group Restructuring

Competition Commissions of India (CCI), anti trust watchdog of India has amended regulations of transaction of business related to combinations under The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2012.

In a move that will assist corporate houses undertaking group restructuring, the Competition Commission of India (CCI) has notified that the merger of wholly owned subsidiaries with the parent holding company will no longer require the approval of the antitrust body.

Alongside this, CCI has also increased the threshold limit on the acquisition of shares that require prior approval to 25% from 15%, in sync with the takeover code of the Securities and Exchange Board of India. 

The antitrust regulator has also significantly increased the filing fees for companies that are obliged to inform it of mergers and acquisitions (M&A) activity by law. While the filing fee for form I has been increased to Rs10 lakh from Rs50,000, the fee for form II has been increased to Rs40 lakh from Rs10 lakh. While form I is for initial scrutiny, form II requires greater detail in terms of reporting the transaction to CCI and is filed when there’s likely to be a greater anti-competitive effect in the market. 

The notification also said that in the case of buy-back of shares, where there is no acquisition of control, companies do not need to seek CCI approval. Currently, only bonus, stock split and subscription of rights issues, where there is no acquisition of control, are outside CCI’s purview. 

From 1 June 2011, all high-value deals came under the CCI scanner. The new regime came into effect with the notification of sections 5 and 6 of the Competition Commission Act, 2002. According to the provisions of the Act, companies with a turnover of more than Rs1,500 crore will have to approach CCI for approval before merging with another firm. Further, only those proposals would need CCI’s nod where the companies have combined assets of Rs1,000 crore or more, or a combined turnover of Rs3,000 crore or more, as per the Act. CCI has, since June last year, approved 23 merger proposals.