Government Unveils Draft Rules To Exempt Select Combinations From CCI Approval
As per the draft rules, shares acquired in the ordinary course of business will be exempt.
The Ministry of Corporate Affairs notified on Monday the draft criterion for exempting certain classes of combinations—such as acquisitions, mergers, and amalgamations—from approval of the Competition Commission of India.
The draft rules enlist certain combinations that will be exempt from regulatory approval due to the fact that these combinations may not cause any competitive imbalance in the market.
An acquisition of shares or voting rights as solely an investment that does not entitle the acquirer to hold 25% or more of the total shares or voting rights of the company will be exempted, according to the draft.
The acquisition will be treated as solely an investment only when conditions, such as the acquirer not gaining a right to have a representation on the board of directors and not gaining a right to access commercially sensitive information of any enterprise and the like, are satisfied.
Shares acquired in the ordinary course of business will be exempt. Ordinary course of business will mean different things for different categories of investors.
For any normal investor or a stockbroker, an acquisition will be in the ordinary course of business when it does not entitle the acquirer to hold 25% or more of the total shares or voting rights of the company. For a registered mutual fund, the acquisition threshold will be 10%.
An acquisition of additional shares of an enterprise, where the acquirer or its group entities, prior to the acquisition, already hold shares of the enterprise but do not hold 25% or more of the shares of the enterprise—either prior to or after such an acquisition—will also be exempt.
When an enterprise already holds 25% or more shares of an enterprise, this exemption will be extended if after the acquisition, the enterprise holds less than 50% of the shares of the concerned enterprise.
Some other exemptions:
A merger or amalgamation within the same group, provided that the transaction does not result in change of control.
An acquisition of assets by one person or enterprise of another person or enterprise within the same group, except in cases where there is change in control over assets being acquired.
An acquisition of assets, not directly related to the business activity of the party acquiring the asset or made solely as an investment.
An acquisition of shares pursuant to a bonus issue or stock split or consolidation of face value of shares or buyback of shares or subscription to rights issue of shares, not leading to a change in control.
The ministry has invited public comments on the draft up till April 10, 2024.
