Fair trade regulator Competition Commission of India (CCI) has relaxed its rules for mergers and acquisitions, making hostile takeovers easier.
Key points
- Companies can now acquire up to 25 percent of a target firm’s shares in the secondary market without prior approval.
- The CCI Criteria for Exemption of Combinations Rules, 2024 outlines specific scenarios that do not require prior approval from the CCI. These include the acquisition of shares through bonus issues, stock splits, consolidation of face value, and group restructuring, provided these transactions do not result in a change of control.
- Investors must notify the CCI within 30 days of their initial on-market acquisition, and they may not be able to exercise voting rights with respect to management until they obtain the green light from the regulator.
- Another significant change introduced by the CCI is the requirement for CCI approval for global transactions involving businesses with substantial business operations in India. This could potentially impact the funding cycle of startups, as many venture capital fundings may exceed the threshold of Rs 2,000 crore.
- The new merger review norm based on deal value does not have a grandfathering clause, which means it applies to deals signed before September 10 but not closed yet. This could disrupt the timeline for closing such transactions.
- A grandfathering clause in legislative changes provides protection for individuals and businesses adhering to an old regulatory framework, shielding them from potential hardships caused by new regulations.
