MCA Exempts Certain Enterprises from Competition Act's Mergers & Acquisitions Assets and Turnover Requirements for 2 Years

In a business-friendly decision, the Ministry of Corporate Affairs ( MCA ) has updated the 'de-minimis' or small target exemption threshold and the 'jurisdictional' thresholds triggering notification to the Competition Commission of India ( CCI ) for approval before finalizing deals, by revising the merger filing thresholds for 'combination' transactions under competition law.

Currently, not all M&A activities require notification to the Commission.

Only those meeting the asset and turnover thresholds specified in Section 5 of the Competition Act are termed as combinations. The Ministry has increased the de-minimis threshold to ₹450 crore for assets and ₹1,250 crore for turnover, up from ₹350 crore and ₹1,000 crore, respectively.

M&As below these thresholds are now exempt from merger filing. The jurisdictional thresholds, revised by the MCA, align with wholesale price index ( WPI ) changes, updating them from the 2016 specified levels at both the enterprise and group levels.

The Notification exempts the enterprises being parties to ––

(a) any acquisition referred to in clause (a) of section 5 of the Competition Act;

(b) acquiring of control by a person over an enterprise when such person has already direct or indirect control over another enterprise engaged in production, distribution or trading of a similar or identical or substitutable goods or provision of a similar or identical or substitutable service, referred to in clause (b) of section 5 of the Competition Act; and

(c) any merger or amalgamation, referred to in clause (c) of section 5 of the Competition Act, where the value of assets being acquired, taken control of, merged or amalgamated is not more than rupees Four hundred and fifty crore in India or turnover of not more than rupees One thousand two hundred and fifty crore in India, from the provisions of section 5 of the said Act for a period of two years from the date of publication of this notification in the Official Gazette.

Where a portion of an enterprise or division or business is being acquired, taken control of, merged or amalgamated with another enterprise, the value of assets of the said portion or division or business and or attributable to it, shall be the relevant assets and turnover to be taken into account for the purpose of calculating the thresholds under section 5 of the Act.

The value of the said portion or division or business shall be determined by taking the book value of the assets as shown, in the audited books of accounts of the enterprise or as per statutory auditor’s report where the financial statement have not yet become due to be filed, in the financial year immediately preceding the financial year in which the date of the proposed combination falls, as reduced by any depreciation, and the value of assets shall include the brand value, value of goodwill, or value of copyright, patent, permitted use, collective mark, registered proprietor, registered trademark, registered user, homonymous geographical indications, geographical indications, design or layout- design or similar other commercial rights, if any, referred to in sub-section (5) of section 3.

The turnover of the said portion or division or business shall be as certified by the statutory auditor on the basis of the last available audited accounts of the company."

To Read the full text of the Order CLICK HERE

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