Combination Filing: MCA Revises Threshold Limits for Mergers

As a step towards ease of doing business, the Ministry of Corporate Affairs (MCA) has enhanced the value of the assets and that of the turnover by 150% for acquisitions, mergers, or amalgamations to constitute a combination under competition law. The threshold limits for combination filings were last revised in the year 2016.

Section 5 of the Competition Act, 2002, deals with combinations and prescribes the threshold limits as per which an acquisition, merger or amalgamation would constitute a combination. For entering into a combination, a notice has to be given to the Competition Commission of India (CCI).

Section 20(3) of the Act requires the Central Government to review the value of assets, turnover or transaction every two years on the basis of the wholesale price index, fluctuations in the exchange rate of rupee or foreign currencies, or other relevant factors. The same has to be done in consultation with the Commission. Accordingly, the value of the assets and that of the turnover has been increased by 150%, based on the wholesale price index and exchange rate of rupee.

When it comes to acquisitions, as per the revised threshold limits, if the acquirer and the target jointly have assets in India, valued at more than INR 2,500 crore or a turnover of more than INR 7,500 crore, the acquisition would constitute a combination of the enterprises and hence, a notice has to be given and the applicable fee has to be paid with respect to such combination. The acquisition will also constitute a combination if the acquirer and the target jointly have, in India or outside India, in aggregate, assets of the value of more than USD 1.25 billion with at least INR 1,250 crore in India or turnover of more than USD 3.75 billion with at least INR 3,750 crore in India. The press release dated March 8, 2024, provides a comparison between the existing and the revised thresholds.

Moreover, the MCA has come out with another notification exempting certain enterprises from the provisions of Section 5, if the value of assets being acquired, taken control of, merged, or amalgamated does not exceed INR 450 crore or turnover is not more than INR 1,250 crore in India. This exemption will apply for a period of two years. The revised de-minimis thresholds were considered necessary in the public interest.

Date: March 11, 2024