MCA revises thresholds for mergers and amalgamation under Competition Act | News – Business Standard

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Merger transactions with acquisition targets having assets under Rs 450 cr or turnover below Rs 1,250 cr are exempt from CCI approval

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In a relief to India Inc, the Ministry of Corporate Affairs (MCA) has raised the threshold limit for mergers and amalgamation requiring approval from the Competition Commission of India (CCI).

In its latest notification, the MCA enhanced the threshold value on the basis of wholesale price index and exchange rate of rupee by 150 per cent. 

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In another notification, the MCA said that if the acquisition target has asset value of less than Rs 450 crore or turnover of less than 1,250 crore then such a merger transaction would be exempt from the CCI approval as well. 

This relief is valid for a two-year period from the date of publication in the Official Gazette.

“The Central Government, acting in the public interest, provides exemptions to enterprises engaged in specific activities under the Competition Act. These include acquisitions as per clause (a) of Section 5, the acquisition of control by an individual over an enterprise as per clause (b) of Section 5, and mergers or amalgamations under clause (c) of Section 5,” said Sunayana Basu Mallik, Partner, King Stubb & Kasiva.

As per Section 5 of the Competition Act, acquisition of one or more enterprises or merger or amalgamation of enterprises, which exceeds the threshold prescribed therein shall be a ‘combination’ for the purposes of the Act.

In scenarios where a part of an enterprise or division is being acquired, merged, or amalgamated, the calculation of thresholds under Section 5 of the Competition Act depends on the value of the said portion or division involved in the transaction.  

“This value is determined by considering the book value from audited books of accounts or the statutory auditor’s report if the financial statement is pending. It encompasses brand value, goodwill, or the value of various commercial rights, and the turnover is certified by the statutory auditor based on the last available audited accounts of the company,” Mallik added.