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Govt clarifies norms on CCI approval for M&A deals

LiveMint logoLiveMint 30-03-2017 Shreeja Sen

Fewer companies will now be required to seek clearance from the Competition Commission of India (CCI) when they are going for mergers and acquisitions (M&As).

The corporate affairs ministry on Thursday clarified norms related to exemptions for certain firms that were notified on March 2016.

The government had then exempted firms with assets less than Rs350 crore or revenue of Rs1,000 crore in India going for merger and acquisition transactions from seeking prior approval of the Commission.

On Thursday, the ministry clarified that the threshold exemption would apply to all kinds of mergers, amalgamations and acquisitions.

It also laid down a methodology to be followed to compute the relevant assets and revenue to be considered for firms which are headed for mergers.

“Now, the rule is that when a company divests only a part of its business or is divesting one of its assets, or a particular division, which is not a legally organized unit, then only the value of relevant asset or relevant turnover will be taken into consideration for testing whether the target exemption applies. For example, if a company has Rs1,000 crore of assets, if it is divesting only one particular division that is Rs300 crore, then the exemption would still be applicable,” said Amitabh Kumar, partner handling competition matters at law firm J. Sagar Associates.

He added that this would lead to a “drastic reduction in the number of merger filings”.

The government said these notifications would bring India on par with global standards and improve the ease of doing business.

“The reform is in pursuance of the government’s objective of promoting Ease of Doing Business in the country and is expected to make India a more attractive destination for foreign direct investment,” the government said in a press statement.

The government, in its statement, said that the earlier exemptions did not apply to mergers or amalgamations.

It also noted that instead of considering only the assets and turnover related to the segment of business being acquired, the entire turnover or all assets would be considered.

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