Background
Competition Commission of India (CCI) had on, 11 May 2011, issued the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations) which deals with procedural aspects relating to Combination, exemption available to certain Combinations and pre-merger notification process. The Combination Regulations were brought into force from 1 June 2011.
CCI has, after gaining experience of implementation of the Combination Regulations, amended the Combination Regulations on 23 February 2012 with a view to provide relief to the corporate entities from making filings for combinations which are not likely to have any adverse competition concerns, reduce their compliance requirements, make filings simpler and to move towards certainty in the application of the Competition Act and the Regulations thereunder.
The highlights of the key amendments are as under.
Relaxation in categories of exemption under Combination Regulations
The categories exempted from filing notice of a proposed combination with CCI as provided in the Combination Regulations have been liberalized as follows:
Acquisition of shares or voting rights solely as an investment or in ordinary course of business such that total shares or voting rights held by the acquirer directly or indirectly does not entitle the acquirer to hold 25% of the total shares or voting rights of the company and not resulting in acquisition of 'control' are exempted from filing of notice.
In addition to the existing transactions (i.e. bonus issue, stock splits or consolidation of face value of shares), acquisition of shares or voting rights pursuant to buyback of shares and subscription of rights issue (without the restriction of their „entitled proportion‟) not leading to acquisition of control are exempted from filing of notice
Merger or amalgamation involving:
‒ a holding company and its subsidiary wholly owned by enterprises belonging to the same group; and/or
‒ mergers or amalgamations involving subsidiaries wholly owned by enterprises belonging to the same group
are now exempted from filing of notice.
Simplification in the procedure of filing notice with CCI
Parties to the combination may, at their option, file notice in Form II (i.e. detailed information) and preferably in following 2 instances:
‒ Parties to combination are engaged in the production / supply etc. of similar / identical / substitutable goods / services and combined market share is more than 15% in the relevant market; or
‒ Parties to the combination are engaged at different stages of the production chain in different markets in production/ supply etc. of goods / services, and their individual or combined market share is more than 25% in the relevant market.
In cases of acquisition by PFI, FII, bank or VCF requirement to file certified copy of the loan agreement or investment agreement is now mandatory. Further, time limit for fling the specified form has been relaxed.
Filing fees is substantially increased as under:
‒ Form I – From ` 50,000 to ` 1,000,000
‒ Form II - From ` 1,000,000 to ` 4,000,000
Others
It has been clarified that in case of a series of steps or individual transactions that are related to each other pertaining to combination, assets are being transferred to an enterprise for the purpose of such enterprise entering into an agreement relating to an acquisition or merger or amalgamation with another person or enterprise, for the purpose of computation of thresholds for combination, the value of assets and turnover of the enterprise whose assets are being transferred shall also be attributed to the value of assets and turnover of the enterprise to which the assets are being transferred;
Parties to combination are now required to file a brief summary of the combination not containing any confidential information in the manner specified.
Conclusion
Amendments relating to exemptions for group merger or amalgamations, acquisition pursuant to buyback of shares, subscription to rights issues without restriction on entitled proportion and other procedural changes are a welcome change and on expected lines. The amendments will significantly reduce the burden on business conglomerate from filing of notice with CCI consequent to specified internal restructuring involving merger or amalgamation.
Competition Commission of India (CCI) had on, 11 May 2011, issued the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations) which deals with procedural aspects relating to Combination, exemption available to certain Combinations and pre-merger notification process. The Combination Regulations were brought into force from 1 June 2011.
CCI has, after gaining experience of implementation of the Combination Regulations, amended the Combination Regulations on 23 February 2012 with a view to provide relief to the corporate entities from making filings for combinations which are not likely to have any adverse competition concerns, reduce their compliance requirements, make filings simpler and to move towards certainty in the application of the Competition Act and the Regulations thereunder.
The highlights of the key amendments are as under.
Relaxation in categories of exemption under Combination Regulations
The categories exempted from filing notice of a proposed combination with CCI as provided in the Combination Regulations have been liberalized as follows:
Acquisition of shares or voting rights solely as an investment or in ordinary course of business such that total shares or voting rights held by the acquirer directly or indirectly does not entitle the acquirer to hold 25% of the total shares or voting rights of the company and not resulting in acquisition of 'control' are exempted from filing of notice.
In addition to the existing transactions (i.e. bonus issue, stock splits or consolidation of face value of shares), acquisition of shares or voting rights pursuant to buyback of shares and subscription of rights issue (without the restriction of their „entitled proportion‟) not leading to acquisition of control are exempted from filing of notice
Merger or amalgamation involving:
‒ a holding company and its subsidiary wholly owned by enterprises belonging to the same group; and/or
‒ mergers or amalgamations involving subsidiaries wholly owned by enterprises belonging to the same group
are now exempted from filing of notice.
Simplification in the procedure of filing notice with CCI
Parties to the combination may, at their option, file notice in Form II (i.e. detailed information) and preferably in following 2 instances:
‒ Parties to combination are engaged in the production / supply etc. of similar / identical / substitutable goods / services and combined market share is more than 15% in the relevant market; or
‒ Parties to the combination are engaged at different stages of the production chain in different markets in production/ supply etc. of goods / services, and their individual or combined market share is more than 25% in the relevant market.
In cases of acquisition by PFI, FII, bank or VCF requirement to file certified copy of the loan agreement or investment agreement is now mandatory. Further, time limit for fling the specified form has been relaxed.
Filing fees is substantially increased as under:
‒ Form I – From ` 50,000 to ` 1,000,000
‒ Form II - From ` 1,000,000 to ` 4,000,000
Others
It has been clarified that in case of a series of steps or individual transactions that are related to each other pertaining to combination, assets are being transferred to an enterprise for the purpose of such enterprise entering into an agreement relating to an acquisition or merger or amalgamation with another person or enterprise, for the purpose of computation of thresholds for combination, the value of assets and turnover of the enterprise whose assets are being transferred shall also be attributed to the value of assets and turnover of the enterprise to which the assets are being transferred;
Parties to combination are now required to file a brief summary of the combination not containing any confidential information in the manner specified.
Conclusion
Amendments relating to exemptions for group merger or amalgamations, acquisition pursuant to buyback of shares, subscription to rights issues without restriction on entitled proportion and other procedural changes are a welcome change and on expected lines. The amendments will significantly reduce the burden on business conglomerate from filing of notice with CCI consequent to specified internal restructuring involving merger or amalgamation.
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