Mergers and Acquisition rules from June 1 CCI scanner on takeovers
April, 08th 2011
The government today stood firm on implementing the mergers and acquisition rules from June 1 that would put these takeovers under the scanner of fair-market watchdog, Competition Commission of India (CCI).
The implementation date of June 1 and also the provision of the (CCI) Act remains the same. Only certain implementation issues will be ironed out Corporate Affairs Secretary D K Mittal told reporters after meeting representatives of the industry.
He further said the issues that needed to be resolved were operational matters.
CCI has come out with draft rules, which gives it the power to vet high-voltage mergers and acquisitions. Industry has some concerns on these rules for which the secretary met legal representatives of the industry today.
Mittal said one of the issues raised by the industry was the high fees that corporates would have to pay for filing under Form 1. Form 1 requires companies to provide few details regarding their takeover proposals. A more detailed information would be needed in Form 2.
Another issue was regarding clarity as to which foreign companies with Indian presence would require the CCI's approval for merging or acquiring another company abroad.
He said industry also expressed concern that companies would need to approach the Commission even for small transactions like bonus share transfers. This would also be addressed, he added.
The industry body is voicing concern that mishandling of merger provisions could lead to regulatory and procedural hurdles, thereby hurting the countrys growth momentum.
According to provisions of the Act, companies with a turnover above the threshold of Rs 1,500 crore would have to approach the CCI for approval before merging with another firm.
Besides, only those proposals would need the CCI's nod where the companies have combined assets of Rs 1,000 crore or more, or a combined turnover of Rs 3,000 crore or more.
Also, the target companys net assets have to be a minimum of Rs 200 crore or it should have a turnover of Rs 600 crore for CCI intervention.
Among other things, CCI would take a prima facie view on proposed combinations within a month of filing by companies, which had addressed a major concern of industry about the time limit the body would take to vet mergers. Also, the maximum time limit the CCI would take to vet mergers has been reduced to 180 days, from the earlier 210 days, after facing opposition from the industry.