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Posted on Dec 19, 06:52PM | IBNS
The Competition Commission of India (CCI) has so far cleared 100 cases of FORM I which are large in number of amalgamations or acquisitions with a meager share of mergers, said Dr. Geeta Gouri, Member, Competition Commission of India (CCI) here on Wednesday.
While inaugurating the ASSOCHAM National Conference on Mergers and Acquisitions- tax implications, Gouri said, "most of the cases in the case of amalgamations related to intra-group corporate restructuring, in the case of acquisitions the 'green shoots' with expansions into vertical silos of the same business or horizontal expansions focused on enhancing the value of the initial business."
"Also the thresholds of 15pc in the case of horizontal mergers and 25pc in the case of vertical mergers indicative of trigger points start raising bells not necessarily alarm bells," said Gouri.
She also pointed that the nature of cases where FORM II would be required is critical and in all cases the commission requires adequate time for assessment of the combination. The amendment also seeks to compute the period of assessment from the day on which FORM II is filled.
Releasing the ASSOCHAM-Deloitte study on "Merger and Acquisitions- Tax and regulatory implications", Gouri said that the new regulation is related to direct v/s indirect acquisition and merger/amalgamations where assets are transferred to new or existing company for the purpose of effecting a combination, the financial of the transferor enterprise would also be considered for the purpose of determining combination under section 5 of the act.
"It was observed by the competition commission that filling of form III pursuant to section 6(5) are not accompanied by agreement referred in the said provisions. The extra regulations do not mandate filling of copies of the said agreements.
"In terms of Act, notice under section 6(5) has to be filed within 7 days from triggering event mentioned therein. The commission has come across belated filling of form III with request for condonation of delay. To address such case, the amendment empowers the commission to admit belated filling of FORM III," said Gouri.
Keeping in mind, there would be acquisition of control or change in control unless at least a person acquires/ holds more than 25pc of the voting capital of the target company, the existing limit of 15pc in category-I of schedule-I was amended to be increased to 25pc in line with business practices, mentioned Gouri.
P.K. Bindlish, Chief General Manager, SEBI, said, "SEBI has been taking necessary steps to address the regulatory aspects of the risk involved to ensure smooth execution of M and A transactions. India has been witnessing a significant change on the regulatory front including notification of the new takeover regulations, competition act."
He further said, "Eurozone crisis and the consequent global uncertainties have adversely impacted M and A in 2011-12 and it is reflected in a fall in value of M and A deals in 2011 at USD 54 bn as against USD 62 bn.
"This trend reversal in 2011 also saw a shift from domestic to cross-border M and A. Domestic deals contributed to only 10pc of the M and A activity in 2011 as against 30pc in 2009 and 2010."
Bindlish also highlighted: "Amongst the BRIC countries, India has the least percent of domestic deals by value at 11pc with China at 53pc . Russia lags just behind China at 44pc and Brazil is at 25pc . This demonstrates that China's M and A market is largely domestic, whereas Indian M and A is significantly cross border in nature. Within cross border, India is split evenly between inbound and outbound, whereas China is largely outbound and Russia and Brazil are largely inbound."
"In addition to the uncertain global business environment, inbound M and A also suffer from India specific M and A risk such as political risk, regulatory risk and integration risk," said Bindlish.