Acquisition of listed company shares by a Foreign Institutional Investor (FII) attracts provisions of the Competition Act

Brief Facts
 GS Mace Holdings Limited (the Acquirer) is a Mauritius based sub-account of Goldman Sachs & Co., an FII registered with SEBI.
 Notice was filed with the Competition Commission of India (CCI) by the Acquirer on 30 December 2011 in Form III for acquisition of the shares of Max India Limited (Max), a listed company under the applicable provisions of the Competition Act, 2002 (the Competition Act) read with CCI (Procedure in regard to transaction of business relating to combinations) Regulations, 2011 (the Combination Regulations).
 Acquirer and its affiliates acquired the shares of Max as under:
‒ Xenok Limited, a Cyprus based company, an affiliate of the acquirer had acquired 9.101% equity shares of Max pursuant to an investment agreement dated 25th February 2010;
‒ 0.002% of equity shares of Max are held by an Indian affiliate of the Acquirer; and
‒ Acquirer acquired 6.499% equity shares of Max on the NSE on 13th December 2011.
 Considering all the above acquisitions, the aggregate shareholding of the acquirer along with its affiliates exceeded 15% of the equity share capital of Max.
 Acquirer filed Form III on the acquisition of 6.499% equity shares of Max under section 6(5) of the Competition Act.
Notice under section 6(5) is required to be filed for acquisition made by banks, FII, Venture Capital Funds, public financial institutions pursuant to any covenant of a loan agreement / investment agreement.
 CCI on 17 January 2012 requested the Acquirer to furnish following:
‒ Copy of loan agreement or investment agreement with respect to the aforesaid acquisition of 6.499% equity shares of Max; or
‒ Provide clarification as to why notice was not filed in Form I / II under section 6(2) of the Competition Act read with the Combination Regulations.
Conclusion
The CCI order provides that acquisition of shares through broker note does not tantamount to an acquisition by a FII under an investment agreement which does not require prior approval of CCI. If the monetary threshold limits for acquisition of shares triggers provisions relating to Combination, even FII / VCF / Banks / public financial institutions will require prior approval of CCI.
Source: CCI Order dated March 20, 2012