Small sized M&A deals — where target had an asset size of less than ₹350 crore or turnover of less than ₹1,000 crore — have been exempted from the Competition Commission of India’s (CCI) merger control norms for five more years. Such M&A and amalgamation deals — commonly referred as combinations — need not be prior notified or reported to the competition regulator till March 2027, the Corporate Affairs Ministry (MCA) has said.
MCA has now extended by five more years the ‘de minimis’ exemption that was provided by the Central government in March 2017 for five years.
‘Welcome move’
The extension is particularly significant in the post-Covid world which is seeing a flurry of M&A activity, said Akshay Sachthey, Associate Partner, Phoenix Legal, a law firm.
There has been a 40 per cent hike in M&A deal value and 60 per cent increase in deal volumes in India in 2021 and the stage is set for a bumper 2022. This extension is likely to be seen as a welcome one as it continues to relieve the administrative burden of the CCI to some extent, he added.
Under this exemption, ‘combinations’ i.e. acquisitions, mergers and amalgamations, do not need to be notified to the regulator if the target has assets/turnover below specified thresholds (assets not more than ₹350 crore in India or turnover not more than ₹1,000 crore in India).
‘A logical decision’
Pritika Kumar, Founder - Cornellia Chambers, another law firm, said the move will add to the ease of doing business in India.
Mayank Mehta, Partner, Pioneer Legal said: “To ensure that acquisitions below a certain threshold do not require approval from the CCI, thereby slowing down the deal closure process, the government had, in the past, granted exemptions to combinations below a certain threshold. The applicability of the previous exemption that was valid for five years has now been extended by five more years. The thresholds themselves remain unchanged. The decision is a logical one given the CCI would only be concerned about acquisitions of a certain size.”
It maybe recalled that the Centre had, in March 2017, extended the de minimis exemption to mergers and amalgamations as well (earlier it was applicable only for acquisition) and clarified that where only a portion of an enterprise is being acquired, the value of assets/ turnover of that portion alone should be looked at.
The MCA had also recently decided that companies (that satisfy the thresholds) entering into combinations need not, for five more years, notify the CCI of proposed combination within 30 days.
The Indian merger control regime came into effect on June 1, 2011, with the notification of Sections 5 and 6 of the Competition Act, 2002. Under the regime, a ‘combination’ must be notified to and approved by the CCI, if it breaches the prescribed asset and turnover thresholds and does not qualify for any statutory exemptions.