Govt relaxes CCI threshold limits for deal approvals

The government has raised the financial threshold limit for companies seeking a nod from the Competition Commission for proposed mergers and acquisitions. The move aimed at improving the ease of doing business

The latest steps by the corporate affairs ministry would benefit businesses, especially start-ups, where deal valuations are not too high.

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In a notification, the ministry said it is enhancing “on the basis of the wholesale price index, the value of assets and the value of turnover, by hundred per cent for the purposes of Section 5 of the said (Competition) Act”.

For instance, only those mergers where the combined Indian assets is worth over Rs 2,000 crore or total Indian turnover is more than Rs 6,000 crore would require prior approval from the Competition Commission of India (CCI).

Besides, combinations where the target company has less than Rs 350 crore worth assets or up to Rs 1,000 crore turnover would not require prior approval from CCI.

These threshold limits would be in place for five years till March 3, 2021. It is related to the financials of the target enterprise and not to the value of assets being transferred.

The fair trade watchdog came out with small target exemption with regard to combinations in 2011 for five years.

Previously, the limit was up to Rs 250 crore for assets and turnover of less than Rs 750 crore.

"The latest changes will help in the government's agenda towards ease of doing business. It is a welcome step and indicates the government wants to ensure that competition law does not come as a hurdle for investments coming into India for small targets," Karan Singh Chandhiok, head (competition and dispute resolution practice) at Chandhiok & Associates said.

According to him, the number of filings related to combinations are also expected to come down. "This will help CCI to have a more detailed look at the proposals that need approval as well as help in reducing the time taken for giving clearances," he added.

Meanwhile, the government has extended the exemption for enterprises with respect to group thresholds for another five years till March 3, 2021. This would be applicable in case the voting right of the group is less than 50 per cent in another enterprise.

With regard to the changes, the Ministry issued three notifications related to the Competition Act, 2002 on March 4.