M&A norms for CCI approval significantly relaxed – Read Notification

The Ministry of Corporate Affairs, earlier this week, issued a notification significantly relaxing the requirements for applying to the Competition Commission of India (CCI) for combination approval under Section 5 of the CCI Act, 2002..Under Section 5 of the CCI Act, 2002, all ‘combinations’ that exceed certain thresholds are statutorily required to seek CCI approval. These combinations include mergers, acquisitions and control of voting rights by one enterprise over another..Two tests are applied to check whether these ‘thresholds’ are breached. First, whether the assets of the combined entity exceed the stipulated threshold and second, where the turnover of the combined entity crosses this threshold..The CCI had last year issued a notification revising the thresholds for application for notification of combinations. The thresholds remain unchanged, for assets at ₹350 crores and for turnover at ₹1000 crores. This means that if both enterprises collectively hold more than ₹350 crores in assets and ₹1000 crores in turnover, they will be required to apply to the CCI..However, the latest notification significantly relaxes the ‘applicability requirements’..Until now, the norm was that the assets or turnover of the entire resulting group/entity would be taken into account. Moving forward, the assets or turnover of only the unit or the business sought to be merged or acquired will be taken into account..For instance, if Company A acquires two businesses of Company B, which have assets of less than ₹350 crores, CCI Approval will not be required even if the resulting value of assets of both groups exceeds ₹350 crores..This will significantly reduce the number of applications that the CCI will receive..(Read the notification)