M&A under New Companies Act, 2013- 04.10.14 Final

BACKGROUND And M & A DRIVERSBACKGROUND And M & A DRIVERS

05/03/23 Corporate Legal Practice

Overview of EXISTING PROCESS under Old Act;Overview of EXISTING PROCESS under Old Act;

Scenario under New Regime (NEW ACT); Scenario under New Regime (NEW ACT);

Corporate Legal Practice05/03/23

Introduction of NCLT-“Single Window Clearance” for corporate re-structuring

Notice of Meeting to be sent to

various regulatory authorities

Approval of Scheme

through Postal Ballot

Extinguishment of Treasury

Shares Merger of Listed Company with

Unlisted CompanyFast Track

Merger

Limit for Objection to

Compromise/ Arrangement

Cross Border Merger

NCLT

Valuation Report by Registered

Valuer

Minority Squeeze out

Exit options for Dissenting

Shareholder

CDR


Point-wise Key Changes: Point-wise Key Changes: Approvals/ Notice of Meeting – to whom?Approvals/ Notice of Meeting – to whom?

Approval/Objection by regulators within 30 daysApproval/Objection by regulators within 30 days


Other Sectoral Regulators which are likely to be affected by the merger (like Department of Telecommunications for merger of telecom companies).Further, Notice to be placed on Website too.

Point-wise Key Changes (Cont.)Point-wise Key Changes (Cont.) Extinguishment of holding ‘Treasury Stocks’ [S 232(3)(b)]; Extinguishment of holding ‘Treasury Stocks’ [S 232(3)(b)]; M&A Scheme to be considered in a M&A Scheme to be considered in a board meeting board meeting only (S 232);only (S 232); Accounting Standards [S 232(3)];Accounting Standards [S 232(3)]; Valuation Report [S 232(2)];Valuation Report [S 232(2)]; Approval of Scheme through postal ballot [S 230(6)];Approval of Scheme through postal ballot [S 230(6)]; Threshold on Threshold on Objections Objections by shareholders/ Creditors [S 230(4)]; by shareholders/ Creditors [S 230(4)]; Set-off of fees paid on authorised capital by transferor company Set-off of fees paid on authorised capital by transferor company

[provisio to S 232(3)][provisio to S 232(3)] {{Bombay HC -YOU Telecom India Pvt. Ltd. In re [(2008) 141 comp cases 43]; Bombay HC -YOU Telecom India Pvt. Ltd. In re [(2008) 141 comp cases 43]; Madras HC -Madras HC -Bysani Consumer Electronics Ltd. inBysani Consumer Electronics Ltd. in Re [(2006) 134 comp case 99]; Calcutta HC – AREVA T & D INDIA Re [(2006) 134 comp case 99]; Calcutta HC – AREVA T & D INDIA LTD. LTD. vv. UOI [(2008) 87 CLA 58 (CAL)]; . UOI [(2008) 87 CLA 58 (CAL)]; Kemira Laboratories Ltd.’s case [(2007) comp cas 817 (AP)]}Kemira Laboratories Ltd.’s case [(2007) comp cas 817 (AP)]}

Dispensation of creditors’ meeting possible at Discretion of NCLT Dispensation of creditors’ meeting possible at Discretion of NCLT subject to receiving confirmation (by Affidavit) of at least 90% subject to receiving confirmation (by Affidavit) of at least 90% creditors in value [S 230(9)];creditors in value [S 230(9)];

Buy-Back to be made only in compliance with S 68 [S 230(10)]; Buy-Back to be made only in compliance with S 68 [S 230(10)]; NCLT to provide NCLT to provide exit offer exit offer to dissenting shareholders [S 230(7)(e)];to dissenting shareholders [S 230(7)(e)]; Compulsory Purchase from minority shareholders (S 236) - (by Compulsory Purchase from minority shareholders (S 236) - (by

Shareholders who acquired 90% of equity capital)Shareholders who acquired 90% of equity capital)


MERGER OF A LISTED COMPANY INTO AN MERGER OF A LISTED COMPANY INTO AN UNLISTED ONE [S 232(3)(h)]:UNLISTED ONE [S 232(3)(h)]:

The New Act requires Tribunal's order to state that merger of a The New Act requires Tribunal's order to state that merger of a listed company into an unlisted company will not listed company into an unlisted company will not ipso ipso factofacto make the unlisted company listed. It will make the unlisted company listed. It will continue to be continue to be unlisted until it comply with listing regulations and SEBI unlisted until it comply with listing regulations and SEBI guidelinesguidelines. Further, if the shareholders of the listed company . Further, if the shareholders of the listed company decide to exit, the unlisted company would facilitate the decide to exit, the unlisted company would facilitate the exit exit option option with a pre-determined price formula with a pre-determined price formula ((shall not be less shall not be less than price arrived as per the relevant SEBI regulations)than price arrived as per the relevant SEBI regulations). Prima . Prima facie it appears that such shareholder can exercise the exit facie it appears that such shareholder can exercise the exit option even if transferee company gets listed. option even if transferee company gets listed.

The The Old Act was silent Old Act was silent on it. on it. SEBI had relaxed the norms SEBI had relaxed the norms by by granting exemptions from complying with the listing granting exemptions from complying with the listing requirements u/s 19(2)(b) of SCRA requirements u/s 19(2)(b) of SCRA on a case-to-case basison a case-to-case basis. SEBI . SEBI had issued guidelines stating that if had issued guidelines stating that if Scheme provides for listing Scheme provides for listing of shares of an unlisted company of shares of an unlisted company without complying with the IPO without complying with the IPO requirements, then, upon court’s approval to the Scheme, the requirements, then, upon court’s approval to the Scheme, the unlisted unlisted company should file application seeking such exemption company should file application seeking such exemption from SEBIfrom SEBI. The changes under the New Act are in line with SEBI . The changes under the New Act are in line with SEBI requirements. requirements.


KINDS OF M&AKINDS OF M&A


COMPROMISE OR ARRANGEMENTCOMPROMISE OR ARRANGEMENT: : Disclosure In Affidavit To NCLTDisclosure In Affidavit To NCLT


NCLT may NCLT may dispense with holding of meetings of dispense with holding of meetings of creditors only if 90% in total value of creditors file creditors only if 90% in total value of creditors file affidavit confirming their approval to the schemeaffidavit confirming their approval to the scheme. . (new).(new).Applicable to creditor’s meeting only. Not apply to Applicable to creditor’s meeting only. Not apply to member’s meeting. member’s meeting.


Notice of proposed meeting required to be sent to- All Creditors (including debenture-holders), Members, every class of them; Central Government,Income Tax AuthorityRBISEBIROCRespective Stock ExchangesOfficial LiquidatorCCISectoral Regulators or Authorities which are likely to be affected

Notice shall also be placed on the Website of the Company, if any. (new) Notice is also required to be published in a news-paper, as may be prescribed.

All these authorities will give their representation within 30 days of receipt of notice, failing which it shall be presumed that they have no representation to make on proposed compromise or arrangement.


Voting and ResolutionVoting and Resolution:: At the meeting- (Either in person or by proxy)At the meeting- (Either in person or by proxy) By Postal Ballot (to revert within a month)By Postal Ballot (to revert within a month)It appears that both physical meeting and postal ballot It appears that both physical meeting and postal ballot

process will be required and that process will be required and that combined results combined results will will have to be considered. have to be considered. Objections Objections can be made by can be made by persons holding 10% in shareholding or having o/s debt persons holding 10% in shareholding or having o/s debt of atleast 5% as per last audited financial statement.of atleast 5% as per last audited financial statement.(new)(new). However, making proviso to section dealing with . However, making proviso to section dealing with voting suggests that negative votes can be casted only voting suggests that negative votes can be casted only if the members complying with the above (though if the members complying with the above (though seems to be unintended and can be used only for seems to be unintended and can be used only for argument sake).argument sake).

Condition of Condition of ‘present & voting’ is replaced by ‘voting’‘present & voting’ is replaced by ‘voting’. . Majority appears to be computed w.r.t. those members Majority appears to be computed w.r.t. those members who voted (& not of all members of that class). who voted (& not of all members of that class). Resolution Resolution to be passed by consent of to be passed by consent of majority of majority of persons voted representing 3/4persons voted representing 3/4thth in value. in value.


Other requirements:Other requirements: Company needs to file a Company needs to file a certificate from its auditor certificate from its auditor to the to the

effect that accounting treatment is in conformity with the effect that accounting treatment is in conformity with the prescribed accounting standard prescribed accounting standard (new)(new)

In case arrangement involves In case arrangement involves reduction of share capitalreduction of share capital, , the provision relating to the reduction provided in the new the provision relating to the reduction provided in the new Act should not be applicable Act should not be applicable (new)(new) . .

In case the arrangement involves In case the arrangement involves take-over offers take-over offers for for unlisted companies, an aggrieved party may apply to the unlisted companies, an aggrieved party may apply to the Tribunal Tribunal (new).(new).

In nutshell, criteria for implementing the Scheme- (a) In nutshell, criteria for implementing the Scheme- (a) Passing of resolution(Passing of resolution(majority of persons voted majority of persons voted representing 3/4representing 3/4thth in value) in value) by members, creditors and by members, creditors and every class of them; and (b) every class of them; and (b) the Scheme is sanctioned by the Scheme is sanctioned by the order of Tribunal. the order of Tribunal. Then, it would be binding on Then, it would be binding on company, all members, creditors, and every class of them, company, all members, creditors, and every class of them, Liquidator & contributory (in case company is under Liquidator & contributory (in case company is under winding up).winding up).


Tribunal order may includeTribunal order may include


MERGERS/ AMALGAMATIONS/ MERGERS/ AMALGAMATIONS/ RECONSTRUCTION (INCLUDING DEMERGER):RECONSTRUCTION (INCLUDING DEMERGER):

The New Act provides for The New Act provides for entirely separate procedures entirely separate procedures for for compromise or arrangement involving Amalgamation. Once compromise or arrangement involving Amalgamation. Once an application u/s 230 dealing with compromise or an application u/s 230 dealing with compromise or arrangement involving an amalgamation is made, the arrangement involving an amalgamation is made, the process prescribed u/s 232 needs to be followed and orders process prescribed u/s 232 needs to be followed and orders are to be passed u/s 232 (and not u/s 230). Clarity still are to be passed u/s 232 (and not u/s 230). Clarity still needs as to how to deal with composite scheme involving needs as to how to deal with composite scheme involving compromise and amalgamation (i.e. whether it would be compromise and amalgamation (i.e. whether it would be governed by both the S 230 and 232? Or by S 232). governed by both the S 230 and 232? Or by S 232).

Now lets see the key changes in provisions of Now lets see the key changes in provisions of Amalgamation: Amalgamation: Amalgamation needs Amalgamation needs approval at the BOARD MEETING approval at the BOARD MEETING (previously, it (previously, it

was not mandatory, so the resolution could have been passed by was not mandatory, so the resolution could have been passed by circulation). circulation).


M&A (cont).M&A (cont). The Old Act provided that for Amalgamations, the The Old Act provided that for Amalgamations, the

Transferor company can be a body corporate (which Transferor company can be a body corporate (which includes company). Hence, Amalgamation of certain non-includes company). Hence, Amalgamation of certain non-company entities with a company was possible. But, in company entities with a company was possible. But, in absence of similar provisions in New Act, absence of similar provisions in New Act, Amalgamation Amalgamation of non- company entity may not be possibleof non- company entity may not be possible. .

Provisions like disclosure under an Provisions like disclosure under an affidavit, circulation of affidavit, circulation of notices, voting rights, majority notices, voting rights, majority approval requirements approval requirements and and auditors certificateauditors certificate discussed under compromise or discussed under compromise or arrangement arrangement would equally apply to Amalgamation would equally apply to Amalgamation as as well. However, certain well. However, certain additional documents additional documents to be to be attached with notice (a) draft Scheme adopted by BOD; attached with notice (a) draft Scheme adopted by BOD; (b) Confirmation that a copy of scheme is filed with ROC (b) Confirmation that a copy of scheme is filed with ROC (new); (new); (c) Report adopted by BOD explaining the impact (c) Report adopted by BOD explaining the impact of the scheme on promoter’s and non-promoters of the scheme on promoter’s and non-promoters shareholding; (d) Valuation Report by experts shareholding; (d) Valuation Report by experts (new)(new); (e) ; (e) Supplementary account, if the last annual accounts Supplementary account, if the last annual accounts relates to financial year ending 6 months before the date relates to financial year ending 6 months before the date of first meetingof first meeting(new).(new).


M&A (cont).M&A (cont). There is no change regarding the There is no change regarding the discretion of NCLT to discretion of NCLT to

dispense with the meetingdispense with the meeting. Approval by 90% of creditors’ . Approval by 90% of creditors’ confirmation on affidavit is not applicable to Amalgamation. confirmation on affidavit is not applicable to Amalgamation.

New Act allows New Act allows offsetting of fees paid on authorized capital offsetting of fees paid on authorized capital by the transferor companyby the transferor company, against fees payable on , against fees payable on authorized capital by the transferee company post authorized capital by the transferee company post amalgamation. However the benefit of stamp duty paid by amalgamation. However the benefit of stamp duty paid by the transferor company on authorized share capital is lost. the transferor company on authorized share capital is lost.

Appointed dateAppointed date is to be specified in the scheme, and the is to be specified in the scheme, and the scheme can not be deemed to be effective from any scheme can not be deemed to be effective from any subsequent date. subsequent date. (new)(new)

Certified Certified copy of the Tribunal order is to be filed with ROC copy of the Tribunal order is to be filed with ROC within 30 days of the receipt of order copy. within 30 days of the receipt of order copy.

Following the order and prior to the completion of the Following the order and prior to the completion of the scheme, every company being party to the order shall file a scheme, every company being party to the order shall file a statementstatement, , certified by a CA/ certified by a CA/ CS/CS/ICWAICWA, , that scheme is that scheme is being complied with as per the order of the Tribunal or notbeing complied with as per the order of the Tribunal or not. . (new)(new)


Order of NCLT to provide for the following:Order of NCLT to provide for the following:


Corporate Legal Practice

THE NEW KINDS OF MERGERS :THE NEW KINDS OF MERGERS :FAST TRACK MERGER (S 233):FAST TRACK MERGER (S 233):

Unlike the Old Act where merger of all companies required Unlike the Old Act where merger of all companies required court approval, the New Act provides separate procedure court approval, the New Act provides separate procedure for “small companies” and “the holding- WOS”. It requires for “small companies” and “the holding- WOS”. It requires consent of shareholders holding 90% in value and creditors consent of shareholders holding 90% in value and creditors representing 90% of debt in value + approval of the representing 90% of debt in value + approval of the Scheme by the CG Scheme by the CG in case no objections are received from in case no objections are received from the OL and ROC. the OL and ROC. NCLT order is not required for such NCLT order is not required for such mergersmergers. But, . But, if CG is of the opinion that the Scheme is not if CG is of the opinion that the Scheme is not in the interest of the stakeholders, he may approach the in the interest of the stakeholders, he may approach the NCLT NCLT who could follow the normal merger procedure who could follow the normal merger procedure prescribed under the New Act. prescribed under the New Act.

S 2(85) of New Act defines "Small Companies" as a private S 2(85) of New Act defines "Small Companies" as a private company, with a company, with a paid-up capital of maximum Rs. 50 lacs paid-up capital of maximum Rs. 50 lacs or or a prescribed amount up to Rs. 5 crores a prescribed amount up to Rs. 5 crores OROR with with a turnover a turnover of maximum Rs. 2 crore of maximum Rs. 2 crore or a prescribed amount up to Rs. or a prescribed amount up to Rs. 20 crores. It excludes (i) holding & subsidiary companies; 20 crores. It excludes (i) holding & subsidiary companies; (ii) a company governed by Special Act or (iii) charitable (ii) a company governed by Special Act or (iii) charitable companies formed u/s 8.companies formed u/s 8.

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Process for Fast Track MergerProcess for Fast Track Merger The New Act provides an option of simplified and fast The New Act provides an option of simplified and fast

track process of merger /demerger in cases of track process of merger /demerger in cases of specified Small Companies and between holding and specified Small Companies and between holding and its wholly-owned subsidiary. its wholly-owned subsidiary.

The The scheme approved by the boards of directors of scheme approved by the boards of directors of companies will need to be sent to ROC and OL for their companies will need to be sent to ROC and OL for their suggestions or objections within 30 dayssuggestions or objections within 30 days. The scheme . The scheme will then be will then be considered in the meetings of shareholders considered in the meetings of shareholders or creditors, along with their suggestions or objections or creditors, along with their suggestions or objections of ROC/ OLof ROC/ OL, and will have to be approved by – (a) , and will have to be approved by – (a) Shareholders holding Shareholders holding 90% of the total number of 90% of the total number of shares shares at a general meeting; (b) at a general meeting; (b) Majority creditors Majority creditors (representing 90% in value)(representing 90% in value) in a meeting convened in a meeting convened with 21 days’ notice. with 21 days’ notice.

The concept of members ‘present and voting’ is not included. The concept of members ‘present and voting’ is not included. No distinction is made between fully paid & party paid shares. No distinction is made between fully paid & party paid shares.


Each company involved in merger has to file declaration of solvency with the ROC; (timing not specified)

Only Transferee Company shall file the approved schemes with the CG (i.e. RD), ROC and OL;

ROC and OL shall communicate their objections / suggestions to the scheme to CG within 30 days from the receipt of notice;

If no communication is received from ROC and OL or they have communicated that they have ‘no objection’ to the scheme or CG has not formed an opinion, the CG shall register the scheme and issue the confirmation to the companies;

However, if CG has opinion that scheme is not in public interest or creditors, then within 60 days of the receipt of the scheme, CG may file an application to NCLT and requesting NCLT to consider the scheme under normal merger provisions.

Out of intense complexities, intense simplicities emerge.

Fast Track Process (Cont.)


Fast Track Process (Cont.)Fast Track Process (Cont.) If Scheme is approved, the If Scheme is approved, the order should be communicated to order should be communicated to

ROC of transferee company ROC of transferee company who should register the same who should register the same and issue and issue confirmation confirmation to the companies, which should be to the companies, which should be communicated to the ROC of transferor companiescommunicated to the ROC of transferor companies. .

Registration of Scheme by CG/ROC should be Registration of Scheme by CG/ROC should be deemed to deemed to have the effect of the dissolution of transferor company have the effect of the dissolution of transferor company without winding upwithout winding up. .

Effect of Registration of Scheme- Effect of Registration of Scheme- (a) TRANSFER OF ASSETS & LIABILITIES to transferee Company (a) TRANSFER OF ASSETS & LIABILITIES to transferee Company (b) enforceability of CHARGES against the transferee company; (b) enforceability of CHARGES against the transferee company; (c) LEGAL PROCEEDINGS shall continue in the name of the (c) LEGAL PROCEEDINGS shall continue in the name of the

transferee company; transferee company; (d) PURCHASE OF SHARES OF DISSENTING SHAREHOLDERS or (d) PURCHASE OF SHARES OF DISSENTING SHAREHOLDERS or

settlement of creditors, if provided, shall become the liability settlement of creditors, if provided, shall become the liability of the transferee company. of the transferee company.


BENEFITS OF FAST TRACK MERGER: Approval of NCLT is not required (so Company may not be required to file documents

required to fined under clause 24(f) of the listing agreement, in case of listed companies). Notice is not required to be given to various authorities (and shorter timelines) No Need of separate RBI/ Income Tax approval/ Registered Valuer. Auditor’s certificate of compliance with applicable accounting standard is not required. Discouraging argument- CG’s power to transfer the Scheme to NCLT; Approval of shareholders and creditors holding 90% share/debt value is needed. Benefit of this fast track merger is not available to small public companies. But, in

merger between a holding and its WOS, these provisions are applicable for both public and private companies.

FAST TRACK MERGER

SMALL CO.

SMALL CO.

HOLDING CO.

WHOLLY OWNED SUB CO.

Central Government has the power to sanction the scheme, no requirement to approach NCLT

In nutshell,


CROSS BORDER MERGER

UNDER OLD ACT

Foreign Company(can be only

Transferor Co.)

Indian Company (Only can be

Transferee Co.)

UNDER S 234 OF NEW ACT

Foreign Company Indian Company

Notified by CG

Now Indian Co. can be transferor as well as transferee co. (but only for the CG notified jurisdictions).CG may make the Rules, in consultation with RBIPrior approval of RBI is also required. Other approvals or process- same as merger or demerger discussed earlier. The scheme may provide for payment in cash or in depository receipts or in both.

CROSS BORDER MERGER



Cross-border mergers (S 234):Cross-border mergers (S 234): The Old Act permits The Old Act permits cross-border mergers only where the transferor is a foreign cross-border mergers only where the transferor is a foreign company. The New Act permits mergers between an Indian company. The New Act permits mergers between an Indian and a foreign company located in a jurisdiction notified by and a foreign company located in a jurisdiction notified by the CG in consultation with RBI. Such a merger would be the CG in consultation with RBI. Such a merger would be subject to subject to RBI approval RBI approval and Scheme may provide and Scheme may provide payment payment in cash or depository receipts or both to facilitate exit to in cash or depository receipts or both to facilitate exit to the shareholders the shareholders of the merging entity who do not want to of the merging entity who do not want to be a part of the merged entity. be a part of the merged entity.

Income Tax Act presently grants tax exemptions on Income Tax Act presently grants tax exemptions on mergers if the transferee is an Indian company and does mergers if the transferee is an Indian company and does not recognize a situation where the transferee will be a not recognize a situation where the transferee will be a foreign company, as contemplated under the New Act. foreign company, as contemplated under the New Act. The The introduction of cross-border mergers under the 2013 Act introduction of cross-border mergers under the 2013 Act may, therefore, require corresponding changes in other may, therefore, require corresponding changes in other laws, including FEMA (relating to ownership of real estate in laws, including FEMA (relating to ownership of real estate in India, sectoral caps, definitions of overseas holdings etc.), India, sectoral caps, definitions of overseas holdings etc.), security related laws (change in rules regarding dual security related laws (change in rules regarding dual listings), tax laws etclistings), tax laws etc..

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Where acquirer becomes registered holder of 90% or more of the issued shares due to scheme or contract involving transfer of shares or by virtue of an amalgamation, shares exchange, conversion of securities, then ;

Acquirer have to buy the minority shares as per following formula for price determination :-

In Case Of Listed Company Price as per SEBI Regulations; Registered valuer to provide valuation report to the Board

of Directors justifying the methodology of arriving at such price.

In Case Of Unlisted Co. (Including Pvt Co.) The highest price paid by the acquirer, person or group of

persons for acquisition during last 12 months; fair price of shares of the company to be determined by the

registered valuer after taking into account valuation parameters.

MINORITY SQUEEZE OUT [U/S 235 / 236]


TAKEOVER THROUGH COMPROMISE

ARRANGEMENT SCHME

LISTED COMPANY UNLISTED COMPANY

AS PER SEBI TAKEOVER

CODE

DRAFT RULE -15.11

acquisition of control of a company other than a listed company pursuant to a scheme of compromise or arrangement under section 230; or acquisition of fifty percent or more of the total share capital of a company other than a listed company pursuant to a scheme of compromise or arrangement under section 230

TAKEOVER through Compromise / ArrangementAnd its Strategies:


Defensive Strategies for Take Over- (a) Golden Parachute; (b) Poison Pills; (c) Staggered Board; (d) Pac Men defense.

POSITION UNDER STAMP ACT:POSITION UNDER STAMP ACT:

Order sanctioning scheme of amalgamation/ demerger Order sanctioning scheme of amalgamation/ demerger etc is an etc is an “instrument” “instrument” as defined under Section 2(l) of the as defined under Section 2(l) of the Bombay Stamp Act, 1958 and is covered within the Bombay Stamp Act, 1958 and is covered within the definition of definition of “Conveyance” “Conveyance” under Section 2(g) of the said under Section 2(g) of the said Act and accordingly liable to stamp duty under Act and accordingly liable to stamp duty under Article Article 25(da)25(da) of the said Act. of the said Act.

The Old Act had been in force for almost 57 years, during The Old Act had been in force for almost 57 years, during which may other laws were created/enacted (where cross which may other laws were created/enacted (where cross references were being used or references being made references were being used or references being made about S 391/394 etc) The same should be considered to about S 391/394 etc) The same should be considered to include the provision of New Act. For e.g. Bombay Stamp include the provision of New Act. For e.g. Bombay Stamp Act (definition of term, “conveyance” is defined with Act (definition of term, “conveyance” is defined with reference to S 394 of the 1956 Act. Stamp duty is reference to S 394 of the 1956 Act. Stamp duty is essentially linked to M&A section. essentially linked to M&A section.


M&A UNDER COMPETITION ACT:M&A UNDER COMPETITION ACT: Objective of the Competition ActObjective of the Competition Act:: This Act was enacted to This Act was enacted to prevent practices having prevent practices having

adverse effect on competition, to promote and sustain adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants and to ensure freedom of trade carried on by other participants in markets, in Indiain markets, in India

A Competition Commission (CCI) was set up under this A Competition Commission (CCI) was set up under this Act to ensure healthy competition and freedom of trade.Act to ensure healthy competition and freedom of trade.

Section 6 of Competition Act:Section 6 of Competition Act:(1) No person or enterprise shall enter into a combination which (1) No person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India and such a competition within the relevant market in India and such a combination shall be void.combination shall be void.(2) …….. any person or enterprise, who or which proposes to (2) …….. any person or enterprise, who or which proposes to enter into a combination, shall give notice to the enter into a combination, shall give notice to the Commission……..Commission……..


M&A under Competition Act (cont)M&A under Competition Act (cont)

Procedure of making application by persons/ Procedure of making application by persons/ enterprises which propose to enter into enterprises which propose to enter into combination:combination:

1.1. File Form I with prescribed fees. (Rs. 15, 00, 000).File Form I with prescribed fees. (Rs. 15, 00, 000).2.2. File Form II with prescribed fees (Rs. 50, 00, 000) and File Form II with prescribed fees (Rs. 50, 00, 000) and

Form III if necessaryForm III if necessary3.3. Once, forms are submitted, CCI will deal with the notice in Once, forms are submitted, CCI will deal with the notice in

accordance with the power conferred upon it by the accordance with the power conferred upon it by the provisions of the Act.provisions of the Act.

4.4. Considering the nature of combination and taking other Considering the nature of combination and taking other factors into consideration, the CCI will pass an order as it factors into consideration, the CCI will pass an order as it may deem fit.may deem fit.

5.5. Exemptions where notice is not requiredExemptions where notice is not required


M&A under Competition Act (Cont). M&A under Competition Act (Cont).

Procedure followed by the commission while dealing Procedure followed by the commission while dealing with inquiries and notices:with inquiries and notices:1.1. CCI to conduct enquiry suo- moto or CCI to conduct enquiry suo- moto or by notice received by notice received

under section 6(2) of the Actunder section 6(2) of the Act2.2. Power of CCI to inquire and pass necessary order for Power of CCI to inquire and pass necessary order for a a

combination has taken place outside India or any party combination has taken place outside India or any party to combination is outside Indiato combination is outside India

3.3. Factors to be taken into consideration by CCI while Factors to be taken into consideration by CCI while determining appreciable adverse effect on competition.determining appreciable adverse effect on competition.

4.4. CCI may pass order as it deems fitCCI may pass order as it deems fit5.5. Order can be rectifiedOrder can be rectified6.6. Order is appealableOrder is appealable



CONCLUSION:CONCLUSION: ““A journey of a thousand miles begins with a A journey of a thousand miles begins with a

single step.”single step.” One also needs to look into various other laws One also needs to look into various other laws

applicable to M&A such as Tax, Insider Trading applicable to M&A such as Tax, Insider Trading Regulations, Listing Agreement, FEMA etc, we could Regulations, Listing Agreement, FEMA etc, we could not cover due to time curtailment on this presentation. not cover due to time curtailment on this presentation.

The exact time frame that the entire merger process The exact time frame that the entire merger process would involve will be known once it is tested after the would involve will be known once it is tested after the Tribunal is constituted and the rules implemented.Tribunal is constituted and the rules implemented.

““The people who get on in this world are the people The people who get on in this world are the people who get up and look for the circumstances they want who get up and look for the circumstances they want and, if they can't find them, make them.”and, if they can't find them, make them.”

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BY:BY:HARSHUL SHAHHARSHUL SHAH

ADVOCATE & SOLICITORADVOCATE & SOLICITORMob: +91 9867129866/ Tel: +91 022 26840267Mob: +91 9867129866/ Tel: +91 022 26840267

Email: Email: [email protected]: https://www.facebook.com/harshul1979Facebook: https://www.facebook.com/harshul1979

05/03/23

mailto:[email protected]

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M&A under New Companies Act, 2013- 04.10.14 Final