In a notification dated February 23 2012, the Competition Commission (Procedure in Regard to the Transaction of Business Relating to Combinations) Amendment Regulations 2012 were published, amending the existing Competition Commission (Procedure in regard to the transaction of business relating to combinations) Regulations 2011.
After almost eight months gaining experience in relation to the implementation of the regulations, the commission has amended the regulations with a view to:
- avoiding the filing requirement for combinations that are unlikely to raise adverse competition concerns;
- reducing the compliance requirements;
- making filings simpler; and
- moving towards greater clarity and certainty in the application of the Competition Act 2002 and the regulations.
The major changes made by the present amendments in the regulations are as follows.
Alignment with SEBI Takeover Code
The regulations no longer require a notice to be filed for acquisitions of less than 25% of the shares or voting rights of a company on a cumulative basis. Previously, the threshold was 15% of the shares or voting rights on a cumulative basis. This change is in line with the new Securities and Exchange Board of India Takeover Code, which raised the open offer trigger from 15% to 25% of the shares acquired (Schedule I, Category 1).
To reduce the compliance burden on companies that are looking for intra-group restructuring, the commission has added a new Category 8A to Schedule I. The regulations have now dispensed with the requirement of filing a notice in respect of intra-group mergers or amalgamations involving wholly owned subsidiaries of holding companies within the same group, among other things.
Considering the resources deployed in the assessment of the notice, and keeping in view the fees charged by other regulatory authorities abroad, the commission has decided to bring the filing fees to a more realistic level. The fee has therefore been increased:
- from Rs50,000 to Rs1 million in respect of Form I; and
- from Rs1 million to Rs4 million in respect of Form II.
Furthermore, it is expected that the number of filings will be reduced substantially, as the requirement for companies to file a notice in several instances that are not likely to have an adverse effect on competition has been removed (Regulation 11).
Acquisitions of shares or voting rights pursuant to a bonus issue, stock split or buy-back, and acquisitions of shares or voting rights pursuant to subscription of a rights issue (without the restriction of their 'entitled proportion') that do not lead to acquisition of control - and therefore normally would not require a filing with the commission - are now included in the list of transactions in Schedule I (Schedule I, Category 6).
The company secretary, once duly authorised by the board, may now sign Form I or Form II on behalf of those persons specified under Regulation 11(1)(c) of the Competition Commission (General) Regulations 2009 (ie, the managing director or the director authorised by the board) (Regulations 9(1) and (3) proviso).
In order to provide certainty with respect to transactions involving asset transfers (eg, slump sales) and the calculation of the value of assets and turnover for the purposes of Section 5 of the act, a new provision has been introduced for inclusion of the value of assets and turnover of a transferor company to the transferee company, where assets are transferred to the transferee company for the purpose of effecting a combination (Regulation 5(9)).
Since Form III must be filed within seven days, a provision has been made that allows the belated filing of Form III in respect of transactions covered under Section 6(5) of the act. Furthermore, Form III may now be filed along with a copy of the loan or investment agreement (Regulation 6).
In Form I, the distinction for completing Part I for certain types of transaction and Part II for the remaining transactions has been removed, leading to clarity and uniformity. To make it more relevant, Form I has been amended and a provision has been introduced for parties to provide:
- details of the value of the assets and turnovers for the purpose of Section 5; and
- a copy of the agreement and board resolution, among other things, as mentioned in Section 6(2).
Form I remains the default form, and has been simplified. Parties retain the option of filing Form II, especially in cases where there may be significant horizontal overlap (more than 15%) or a significant vertical relationship (more than 25%) between the parties (Regulations 5(2) and (3)).
In order to facilitate a quick and efficient review of the notice, parties are required to file a brief summary of the combination, in not less than 2,000 words, when filing the notice (Regulation 13(1A)).
For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4929 2525), fax (+91 11 2332 0484) or email ([email protected]).