MCA raises exemption limit for M&A without prior CCI approval

These easier rules apply only if the deal is not too big.

In a bid to boost ease of doing business, the government on March 8 announced to raise the threshold for smaller business deals, including mergers and acquisitions, to happen without prior approval of the Competition Commission Of India (CCI).

When one company buys another or merges, if the deal for assets is up to Rs 450 crore in India or if the businesses' turnover is Rs 1,250 crore, they will be exempted from prior approval under the Competition Act, the Ministry of Corporate Affairs said in a gazette notification.

The earlier threshold stood at Rs 350 crore for value of assets and Rs 1,000 crore for turnover.

The increased asset and revenue thresholds described above are applicable for a period of 2 years, with effect from 7 March, 2024.

“These easier rules apply only if the deal is not too big. Specifically, if the deal is for assets worth up to Rs 450 crore (about $54 million) in India, or if the businesses involved make up to Rs 1,250 crore (about $150 million) in sales in India. If just a part of a company is being bought or merged, only the value and sales of that part count. The value includes things like brand value, patents, copyrights, and similar rights,” Venkatesh, Managing Partner, SKV Law Offices, told Moneycontrol.

The value of assets in India of the target enterprise (including its divisions, units and subsidiaries) has to be less than or equal to Rs 450 crore or the value of turnover in India of the target enterprise (including its divisions, units and subsidiaries) has to be less than or equal to Rs 1,250 crore, Avaantika Kakkar, Partner, Cyril Amarchand Mangaldas, told Moneycontrol.

“The reference point for determining the applicability of the financials for the exemption is the consolidated books of accounts of the immediately preceding financial year in which the definitive agreements for the transaction are executed,” Kakkar said.

Revising the threshold is in line with the increasing transaction values. Also, with the increased dollar rate, the rupee equivalent begged to be revised, Rohit Jain, Managing Partner, law firm Singhania & Co., told Moneycontrol.