Investors prepare for merger control in June

On 4 March India’s Ministry of Corporate Affairs notified the much debated and dreaded merger control provisions under the Competition Act, 2002. The provisions relate to combinations such as mergers and amalgamations outlined in sections 5 and 6 of the act. Although notified in March, these provisions will take effect from 1 June, giving investors and companies a period of three months to tie-up loose ends and complete unfinished transactions to avoid being entangled by the act. Transactions that have not been completed by this date must be notified to the Competition Commission of India (CCI).

* The definition of “group” has been modified to increase the percentage of shareholding from 26% to 50% for the purposes of compliance with section 5 of the Competition Act.

According to section 5 of the act, a combination includes: 1) the acquisition of control, shares, voting rights or assets by a person; 2) acquiring control of an enterprise where the acquirer already has direct or indirect control of another entity engaged in the same business; and 3) a merger or amalgamation between or among enterprises, that cross the financial thresholds set out in section 5.

The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.