The Competition Commission of India (“CCI“) has notified the Competition Commission of India (Procedure in regard to the transaction of business relating to combination Amendment Regulations, 2012 (“Amendment Regulations“) on 23 February 2012. The Amendment Regulations amend the merger control regulations notified by the CCI on 1 June 2011 (“Merger Regulations“). Changes have been made in the procedural as well as substantive provisions of the Merger Regulations.
The main changes brought out in the regime are as follows:
- Regulation 4 of the Merger Regulations prescribes that categories of combinations mentioned in Schedule I are ordinarily not likely to cause an appreciable adverse effect on competition in India and therefore, a notice under Section 6 of the Competition Act, 2002 (“Act“) need not normally be filed (section 6 of the Act mandates the parties contemplating a combination to give an advance notice to CCI in this regard). Before the Amendment Regulations came into force, Schedule I exempted those investments where the total shares or voting rights held by the acquirer, directly or indirectly, do not exceed 15% of the total shares or voting rights in the company. The Amendment Regulations substitute the phrase ‘do not exceed 15%‘ by the phrase ‘does not entitle the acquirer to hold 25% or more‘. Acquisitions with a possibility of future conversion provision as well as put and call option will become relevant for the purpose of this clause as they give future entitlement. This amendment also reflects the changes made by the SEBI in the Takeover Code in 2011.
- A further amendment has been made to Schedule I as a result of which acquisition of shares pursuant to buy-backs will not require filing with the CCI as long as such acquisition if not leading to change of control. The Amendment Regulations also bring intra-group mergers and amalgamations within the scope of Schedule I. An entry 8A has been added to the Schedule I as a result of which mergers and amalgamations involving wholly owned subsidiaries will qualify for exemption.
- A sub-regulation 9 has been inserted after Regulation 5(8) of the Merger Regulations. The effect of this Regulation is that in case of an indirect sale of business unit, where assets of an entity are transferred to another entity and this transferee enters into an agreement for acquisition, merger or amalgamation with another entity, then the value of assets and turnover of the enterprise whose assets are being transferred will also be attributed to the value of assets and turnover of the enterprise, to which the assets are being transferred. This will bring further clarity into what needs to be computed while determining the thresholds for the purpose of the Act.
- Regulation 5(2) earlier specified instances where notice under Section 6 of the Act should ordinarily be filed in Form I. The amended Regulation 5(2) has omitted the description of such instances. In furtherance, Regulation 5(3) has been amended. The amended version expressly contains a preference for filing Form II where the parties have a combined market share of more than 15% in a horizontal combination and 25% in a vertical combination.
- Regulation 11 has been amended to increase the fee payable along with the notice in Form I and Form II. Where the notice is to be filed in Form I, the fee payable has been increased from Rs. 50,000 to Rs. 10,00,000. Similarly, where the notice is to be filed in Form II, the fee has been increased from Rs. 10,00,000 to Rs. 40,00,000.
- Regulation 9 stipulates that in case of an acquisition or acquiring of control of enterprise, the acquirer and in case of a merger or an amalgamation, the parties to combination jointly must file Form I or Form II, as the case may be. Regulation 11 of the CCI (General) Regulation, 2009 provide that in case of a company, the managing director, and in his or her absence, any director, duly authorized by the board of directors may sign the Forms. The Amendment Regulation amend Regulation 9(1) and 9(3), authorising a company secretary, duly authorised by the board of directors of the company, to sign Form I of Form II, as the case may be. This will provide more flexibility to the companies in making the necessary filings with the CCI.
The Merger Regulations have been amended with a view of simplifying the process of making filings with the CCI and to keep the Merger Regulations at pace with the needs of the market. It will be interesting to note how the corporations react to the above changes.