Govt’s decision to relax CCI threshold limits for deal approvals has removed atleast one regulatory hurdle for business houses: CUTS

KNN India, March 09, 2016

Jaipur, March 9 (KNN) The Corporate Affairs Ministry’s decision to raise the financial threshold limit for companies seeking nod from Competition Commission for proposed mergers and acquisitions will remove atleast one regulatory hurdle for businesses, said an expert. The move is expected to benefit lots of start-ups, where deal valuations are not too high.

In a reply to KNN, the Associate fellow of CUTS Institute for Regulation & Competition (CIRC) Saket Sharma pointed that the current notifications by the MCA will remove one regulatory hurdle to take permission from the CCI by the set of businesses which get exemption due to changes in thresholds that has been double and further increase in the target based exemption.

In a notification on March 7, 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.

He also said that the combination approval is a time taking process and requires lot of investments in terms of resources, human resources and time for approvals by companies.

Growth through inorganic way by M&A activity is also important and major way for required consolidation in some sectors, he added.

“Let the market find ways to better ways of doing business and consolidate also for achieving scale,” Sharma suggested.

This also eases work of CCI as it will get more time to analyse big mergers, he said adding that as far as the concern of abuse might be there in future, there are instruments in Competition Law to take care of the ex-post anti-competitive effects.

He said Ease of Doing Business can be aimed by use of various legal and policy levers.

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

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