By way of its June 29 2107 notification, the Ministry of Corporate Affairs has exempted the parties to a combination (ie, a merger, acquisition or amalgamation which meets the financial threshold) from notifying the Competition Commission of India (CCI) within the 30-day period provided under Section 6(2) of the Competition Act 2002.
Under Section 6(2) of the act, the parties to a combination had to notify the CCI within 30 days of the:
- approval of the proposal relating to the merger or amalgamation by the board of directors of the enterprises concerned in the case of a merger or an amalgamation; or
- the execution of an agreement or other document in the case of acquisitions, including acquisitions of control.
The circumstances provided under Section 6(2) of the act are known as 'trigger events' in competition law parlance.
Before the notification was issued, the parties to a combination which failed to notify the CCI within 30 calendar days of such trigger events were liable for a penalty of up to 1% of the total assets or turnover of the combination, whichever was higher under Section 43A of the act.
Even in cases where the delay in notifying the CCI was caused on account of a genuine error, the CCI was known to impose penalties on the parties,(1) as it did not distinguish between delayed filings and pure gun jumping (ie, consummating the transaction without approval).
The 30-day deadline provided under Section 6(2) of the act placed an unnecessary burden on parties, particularly because of the ambiguity surrounding the scope of a trigger event.
The notification is a welcome step, as it reduces the burden on parties to ensure strict adherence to the 30-day period provided under Section 6(2) of the act and aligns the Indian merger control regime with international best practices.
However, parties to a combination must bear in mind that the Indian merger control regime is suspensory in nature and that any instance of gun jumping would make the parties liable to penalties under Section 43A of the act.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4249 2525) or email ([email protected]). The Vaish Associates website can be accessed at www.vaishlaw.com.
Endnotes
