SUMMARY
Investors can now get clearance for mergers and acquisition deals within 20 days of reporting about the transaction to the regulatory body, Competition Commission of India
Besides, investors may also face a heavy penalty for not disclosing information to the CCI
Sources said that the two propositions will change the way corporate transactions are regulated in the country
Investors can now get clearance for mergers and acquisition deals within 20 days of reporting about the transaction to the regulatory body, Competition Commission of India (CCI). However, this can be achieved only if the said authority does not object to such deals in its first impression.
Besides, investors may face a heavy penalty for not disclosing information to the CCI. The two propositions will be added to the novel Competition Act that is currently being assessed by the Parliament Panel, according to a Mint report.
At present, the CCI takes 210 days to clear a deal. However, in the new bill, the said timeline is reduced to 150 days.
The report quoted sources saying that the two propositions, which will be inclusive of the amended Competition Act, will change the way corporate transactions are regulated in the country.
According to the new proposition, when an investor updates the CCI about an M&A transaction then the anti-competition body would have to decide if that particular deal will affect competition in the market or not. If no negative first impression is given within 20 days of receiving the deal’s information, then the deal would be approved and no further order would be issued.
“It is only a prima facie opinion that CCI has to make within 20 days. For example, if a liquor producer is acquiring a cement manufacturer and there is no overlap in their respective markets, making a prima facie opinion on the impact of the deal on market competition will not take long. Mandating a 20-day deemed approval process by law will improve ease-of-doing-business,” a person privy to the matter told Mint.
It was further informed that the bill, which is conferred by the Parliament Panel, will impose penalties up to INR 5 Cr on investors for sharing false statements and omitting important details. In addition, the average time taken by the anti-competition body to clear the M&A deals has been reduced to 17 working days now.
Meanwhile, some experts believe that the proposed amendments in the novel Competition Act would increase the pre-notification discussion with the regulatory body in order to make sure that the M&A transaction is comprehensive and complete at the time of filing. Otherwise, inapt information can cause invalidation or financial penalties for the companies.
The latest developments come days after the CCI informed that some parameters including the level of consumer base and user data would help ascertain if the mergers happening in digital businesses would be regulated by it.
CCI Chief Ashok Gupta had said, “These criteria would largely be based on market-facing factors such as the number of users, the number of contracts, the aggregate amount of payment received, etc. of the target that are not completely reflected in assets and turnover as recorded in the financial statements,” he said as quoted in the report.
He further stated that the M&A deals that would exclusively target for aboard or would have limited operations in the country would not be regulated or overseen by the CCI.
