Indian Government Amends Merger Control Regulations

March 15, 2016

On March 4, 2016, the Indian government through the Ministry of Corporate Affairs issued a number of notifications[1] (the ‘Notifications‘) which have substantially (a) amended the merger control thresholds and, (b) amended as well as extended the existing target based exemption under the merger control regulations in India for another five years.

Target Based Exemption

On March 4, 2011, the Indian government had introduced a de-minimis target based exemption (i.e., based on the valuation of assets or turnover of the target company) which excluded certain transactions from the provisions of Section 5 of the [Indian] Competition Act, 2002 (the ‘Competition Act‘) for a period of five years. Transactions that fell below the threshold did not have to be notified to the Competition Commission of India (‘CCI‘).

The Notifications have now extended the exemption for another five-year period, i.e., until March 4, 2021. The value of assets/turnover thresholds under the exemption have also been raised. Therefore, there is no requirement to notify the CCI about a transaction (structured as an acquisition of shares, voting rights, control or assets) if:

• the value of assets of the target in India is less than INR 350 crores (approx. USD 52 million); or
• the turnover of the target in India is less than INR 1000 crores (approx. USD 150 million).

Increased Thresholds

Section 5 of the Competition Act sets out the asset and turnover thresholds that are required to be satisfied for a transaction to qualify as a "combination". A qualifying combination is required to be mandatorily notified to the CCI for prior approval.

The revised thresholds are set forth below:

Conclusion

This is another step towards increasing the ease of doing business in India as these amendments will ensure that a larger number of transactions will now not require notification to the CCI for prior approval. This will also result in reducing transaction timelines.

   [1]   Notification S.O. 673(E), 674 (E), 675(E) dated March 4, 2016.

   [2]   Group for this purpose continues to be defined as where 50% or more voting rights are exercised for the purpose of merger control.