In this article, Shatarupa Chaki who is currently pursuing M.A. IN BUSINESS LAWS, from NUJS, Kolkata, discusses, Combination (Merger Control) Regulations.

Abstract of the research undertaken on Combination (Merger Control) Regulations

  1. This paper describes Merger Control regulations of India only
  2. “Combination” covers “acquisitions, mergers, amalgamations and de-mergers”. While this paper will primarily cover “mergers” but may overlap with other definitions of “combination”. Moreover, “Mergers and Acquisitions” or “M & A” is a commonly used terminology, loosely referring to “combinations”, especially involving mergers and “amalgamations” (as defined by the relevant laws) and the words “Merger” and “Merger and Acquisition” are often used loosely and interchangeably (usually for business and commercial purposes) to refer to “amalgamations” under relevant laws. Hence, the paper covers relevant regulations related to “Combinations” and not just “mergers” in the strictest sense.
  3. Legal definitions, where required, have been maintained without any dilution or modifications as provided under relevant laws

What Are “Combinations”

Following the economic liberalization reforms, when India joined the free market economy, Mergers and Acquisitions, or M&As as it is commonly known, became a common phenomenon throughout India, making it one of the most sought after ways for companies to gain strategic advantage in both domestic and international markets, to expand and diversify their businesses, gain competitive advantage, reduce costs, and unlock value.

Looking at a legal and structural distinction between Mergers and Acquisitions:

A Merger is an arrangement, between two or more companies, that assimilates the assets of all the merging companies and vests their control under one company – which can be an existing entity (one of the companies being merged) or a completely new entity. In such cases, all the concerned companies lose their pre-merger identities (forming a completely new entity) or become a part of the identity of the company under which the control is being vested.

An Acquisition happens when one company buys the ownership of another company and its assets, both tangible and intangible. Such a purchase may include one company buying the controlling interest in the share capital of another company or in the voting rights of the other company.

So, in an acquisition situation, the acquiring company purchases the interests of the acquired company’s shareholders who then cease to have any interest or right in the acquired company, whereas in Mergers both companies pool their interests, so that the shareholders of both the companies still have their interests from their existing companies and also get interests in the new merged entity.

Advantages of “Mergers and Acquisitions”

Mergers and Acquisitions are an important way for companies to grow and become stronger and larger organizations.

M&As add the following value

  1. Builds a company’s reputation
  2. Reduces and optimizes operating expenses and costs
  3. Allows scalability
  4. Gives access to management and technical talent and manpower, niche skills and knowledge, proprietorial information etc.
  5. Gives access to new product lines or expansion of current portfolio, adding of more customer categories etc.
  6. Helps companies grow their market share by complementing, supplementing, or diversifying their current business lines / products / services etc.
  7. Gives quick access to new markets or allows easy diversification by allowing entry into a new industry
  8. Consolidates the market
  9. Gives access to new technology, manufacturing capacity or suppliers
  10. Builds goodwill through brand acquisition

Background to the Current Regulations

In the wake of liberalization and privatization in India in the early nineties, came the realization that India needed to build a transparent, well-regulated, investor friendly environment, to build an economy that encouraged and nurtured competition by allowing free market forces to shape businesses and companies, while preventing any abuse of power and with that realization, it became obvious that the existing Monopolistic and Restrictive Trade Practices Act, 1969 (“MRTP Act”) was not equipped to handle “competition” especially in the open market / open economy scenario. So, it became imperative to move the focus of competition laws from curbing monopolies to ensuring a climate of growth and investment.

“Competition”: meaning and benefits

Competition is when sellers (this includes literally anyone, i.e. individuals, companies, businesses, enterprises etc.) work towards attracting buyers / customers (of the goods and services being offered by such sellers) with the expectation of achieving business objectives such as increasing profits, market share, sales volume, market value, customer base, market penetration, changing customer preferences etc.

Competition, when fueled by the free market, gives free rein to entrepreneurial forces, innovation, and productivity, and offers consumers a vast array of cost effective choices while optimizing resource allocation; all of which fuels economic growth and technical break-throughs, creating a positive growth spiral with technology and growth fueling each other.

To ensure that the free market remains free, and that the economy continues to grow, countries across the globe protect their markets and economies by enacting competition laws that protect free market forces while curbing any anti-competitive strategies and practices being employed by companies and enterprises for their own short-term gains.

In the same way, India, also enacted the Competition Act, 2002 as an omnibus code to deal with matters relating to the existence and regulation of competition and curbing monopolies. The Act is intended to supersede and replace the MRTP Act in a phased manner. The Act is procedure intensive and is written in a simple way to make it more flexible and easy to comply with. Though the Act operates in tandem with other laws, the provisions of the Act, takes precedence over other Acts in case of any inconsistencies.

It is through the Competition Act that the Merger Controls are enacted in India.

Key Points on Combination Regulations (Under the Competition Act, 2002):[1]

The Regulatory Framework and The Relevant Regulatory Authorities:

The Competition Act 2002 is the principal legislation in India, that regulates combinations, i.e. acquisitions, mergers, amalgamations, and de-mergers. It is an omnibus legislation that works in tandem with other laws and Acts (e.g. The Companies Act 2013). The sections, 5 and 6 of the Act, that deal with the regulation of combinations and have come into force since 1 June 2011.

The procedure for notifying combinations is set out in the following Regulations of the Competition Commission of India:

  1. Regulations 2011, as amended on 7 January 2016 – this regulation details the procedures related to the transaction of business as related to combinations.
  2. Regulations 2009 – details out general regulations

The Competition Commission of India (CCI) is the regulatory authority responsible for reviewing proposals for combinations and assessing whether such combinations are likely to adversely affect competition in Indian markets.

Combinations where the involved companies, exceed the assets / turnover thresholds as defined under the Act (details given below), is mandatorily required to obtain the CCI’s approval for such combinations.

The CCI can charge the Director General (DG) with a Phase II investigation of a combination as required. The DG performs all investigations under the aegis of the CCI.

The Primary Responsibility of CCI

The CCI is primarily responsible for regulating combinations to ensure that “competition” is not adversely affected (“appreciable adverse effect on competition or AAEC”) and uses the following criteria to determine the same:

These are described in section 20(4), of the Competition Act

  • What is the impact this combination will have on the market share in the relevant market?
  • What is the extent of barriers to entry?
  • What is the level of combination already present in the relevant market?
  • What is the degree of countervailing power?
  • To what extent are substitutes available?
  • What is the extent to which the market is likely to be able to sustain effective competition?
  • How much do imports impact the actual and potential level of competition in the market?
  • Will this combination eliminate a strong competitor?
  • What is the nature of and to what extent is vertical integration taking place with this combination?
  • Is there a possibility of a failing business?
  • What will be the impact of the nature and extent of innovation?
  • Will this combination contribute to economic development despite the likelihood of an AAEC?
  • Will the benefits of the combination outweigh any negative impact it may otherwise have?

The Process

  1. Companies / enterprise who cross certain thresholds and do not have any exceptions that are applicable to them, as described in the Act are required mandatorily to notify the CCI of the intended combination
  2. The CCI is expected to respond (passes an order or issues directions) within 180 days. The Competition Act allows for a deemed clearance if the CCI does not pass an order within 210 days from the date of notification
  3. The CCI may conduct a two phase investigation and at the end of either at the end of Phase I or Phase II, the CCI can reach any of the following decisions:
  4. Unconditionally clear the combination
  5. Approve the combination, subject to modifications or remedies
  6. Block the transaction completely if it believes that the combination is likely to cause an AAEC and that it cannot be addressed adequately through modifications. The Act further defines rights of third parties and prescribes remedies, penalties and appeals and regulation of specific industries
  7. Joint ventures and their treatment remain nebulous

Notifiable And Triggering events

Notifiable Events:

  1. The acquisition by one or more companies / enterprises / parties of the control, shares, voting rights or assets of one or more companies / enterprises / parties, where the acquiring companies / enterprises / parties meet the specified assets/turnover thresholds as defined in the Act.
  2. If a person / party / group takes control over an enterprise with which it competes, where the parties, or the acquiring person / party / group meet the specified assets/turnover thresholds.
  3. Mergers or amalgamations, where the enterprise remaining, or the new enterprise that is created, or the group to which the enterprise will belong after the merger/amalgamation, meets the specified assets/turnover thresholds.


In event of the following threshold of assets / revenues being exceeded, combinations need to be notified and approval needs to be obtained from the CCI.

The thresholds are as follows (having any one would trigger the approval process)

  1. Where the combined assets or turnover of both enterprises within India are either:
    1. Combined assets of the companies are INR 2000 crores
    2. Combined turnover in India of INR 6000 crores
  2. Where the combined assets or turnover of both enterprises within India and Worldwide are either:
    1. Combined global assets of USD 1 billion (approx. INR 1200 crores, calculated at an exchange rate of INR 63 to the US Dollar), including combined assets in India of INR 1000 crores
    2. Combined global turnover of USD 3 billion (approx. INR 3600 crores, calculated at an exchange rate of INR 63 to the US Dollar), including a combined turnover in India of INR 3000 crores
  3. Where the acquiring group has:
    1. Assets in India of INR 8000 crores
    2. A turnover in India of INR 24000 crores
  4. Where the acquiring group has:
    1. Global assets of USD 4 billion (approx. INR 4800 crores, calculated at an exchange rate of INR 63 to the US Dollar), including assets in India of INR 1000 crores
    2. Global turnover of USD 12 billion (approx. INR 14400 crores, calculated at an exchange rate of INR 63 to the US Dollar), including a turnover in India of INR 3000 crores.

Exemptions to the Notification Requirements

  1. Where the target enterprise has either Indian assets of less than INR 350 crores or an Indian turnover of less than INR 1000 crores. (This is applicable till March 2021 by the order of the Government of India)
  2. Combinations that are not likely to cause an appreciable adverse effect on competition

So, when thresholds are met and no exemption is available then it is mandatory to notify the CCI of the proposed “combination”.

Timeline for Companies entering into a Combination

A combination must be notified to the CCI within 30 days of either:

  1. Executing a binding agreement for acquisition
  2. Passing of the board resolution approving the combination (in the case of a merger/amalgamation).

However, the following are allowed as an exception, to provide a post facto notification within 7 days from the acquisition of share subscriptions, financing facilities or an acquisition made under an investment agreement or loan agreement:

  1. Public financial institutions
  2. Foreign institutional investors
  3. Banks or venture capital funds

Timelines for CII

The CII is expected to pass an order or issue directions within a period of 180 days from the date of notification.

The Competition Act allows for a deemed clearance if the CCI does not pass an order within 210 days from the date of notification.

Responsibility for notification

For acquisitions, the acquirer must file the notification. For mergers/amalgamations, the parties to the combination must jointly file the notification with the CCI.

References to “Amalgamation / Merger” Under Various Other Acts (Previous and Current with Comparisons)

The Companies Act, 1956 and 2013[2]

The 1956 Act:

In the 1956 Act, the terms “amalgamation” and “merger” are used interchangeably, however neither of these two terms are afforded a precise definition under the Act.

Sections 390 to 395 of the 1956 Act, dealt with arrangements, amalgamations, mergers, and the procedures to be followed under them, compromise, scheme of amalgamation, approvals etc. However, once again it fails to define the terms “merger” or “acquisition”.

Company law in India underwent a complete overhaul and a new law was finally passed in 2013.

However, the provisions relating to mergers covered in Sections 230 to 240 have been notified and have been implemented only since December 15, 2016.

The 2013 Act:

The following are the key changes introduced in the 2013 Act and comparisons between the 1956 and 2013 Acts regarding “mergers”. In the 2013 Act, also the word “mergers” continues to be used interchangeably with “amalgamations”.

Key changes to the Framework under the 2013 Act

  • Definition of “Amalgamation” provided
  • Introduction and formation of the National Law Company Tribunal (“Tribunal“) for adjudicating on various matters related to companies (including “amalgamations”). The Tribunal takes over the jurisdiction of High Courts for sanctioning mergers by virtue of having jurisdiction over the Registered offices of companies

Chapter XV of the 2013 Act deals with “Compromises, Arrangements and Amalgamations”, and details out the various provisions related to them. However, other than the provisions covered under Chapter XV, various other provisions also become applicable at different stages in the process of amalgamation.

Amalgamation is defined as below:

In an amalgamation, the property, assets, and liabilities, of one (or more) company are transferred to and absorbed by either an existing company or a new company. So, the transferring company integrates with the company to which it is being transferred and while the first company loses its separate identity it does so without actually closing.

The 2013 Act also introduces a new quasi-judicial body, the National Law Company Tribunal (“Tribunal“) which adjudicates on various matters related to companies and the Tribunal has also been granted the jurisdiction to sanction mergers, that has been with High Courts till now, by virtue of being granted jurisdiction over the Registered Offices of the companies seeking merger.

Changes in the Process under the 2013 Act

  • Retention of the “Scheme” with changes in procedures
  • Recognition of different types of mergers and separate procedures for the same
  • Penalties

Describing the process under the 1956 Act, will help set the context for the changes under the 2013 Act. Some of the key steps described in the 1956 Act are described below.

Under the 1956 Act, companies which have reached a consensus to merge were expected to prepare a “scheme” of amalgamation/merger (“Scheme“). The Lenders (financial institutions and / or banks), if any, of the merging companies were required to provide in principle approval to the “Scheme”, followed by the approval of the respective Board of Directors of the merging entities. Post the approval by the Boards, listed Companies, involved in the merger, then required that all price-sensitive information be communicated to the stock exchange immediately, to seek approval from the capital market regulator, Securities and Exchange Board of India (“SEBI“), which was done simultaneously with the public notification. The companies would then apply to the relevant High Court seeking an order to convene shareholders’ and creditors’ meeting. This would allow any Shareholder wishing to raise an objection to the Scheme do so during the court proceedings.

The 2013 Act retains the elements of preparing the Scheme and additionally:

  • Recognizes cross border mergers
  • Sets out separate procedure for merger of small companies and those of holding with wholly-owned subsidiaries
  • Prescribes thresholds for objections
  • Describes mandatory filings to ensure legal compliance.

What has changed in the process

  1. Regulatory/Third party approvals: The 2013 Act requires that notice of the Merger be sent along with such other documents as the Scheme and valuation report, not only to shareholders and creditors, but also to various regulators like the Ministry of Corporate Affairs, the Reserve Bank of India (in cases, where non-resident investors are involved), SEBI and Stock Exchanges (for listed companies), Competition Commission of India (in cases where the prescribed fiscal thresholds are being crossed and the proposed merger could have an adverse effect on competition), Income Tax authorities and any other relevant industry regulators or authorities which are likely to be affected by the merger. This ensures compliance of the Scheme with any and all other regulatory and statutory requirements that need to be followed by the merging entities. The 2013 Act also prescribes a 30-day period for the regulators to make representations, failing which the right would cease to exist. The 1956 Act provided no such period, leading to considerable delays in the court proceedings since it was mandatory to receive approvals from all relevant authorities before proceeding.
  2. Approval of the Scheme through postal ballot: The 1956 Act required the presence of the shareholders and creditors in the physical meetings, either in person or by proxy, to cast their vote for/against the Scheme. In the 2013 Act, the shareholders and creditors have also been given the option to cast their vote through postal ballot.
  3. Valuation Report: Though the 1956 Act does not require companies to submit a valuation report, most listed companies did so from a perspective of good governance and transparency. The Courts required the valuation report to be submitted along with the application. The 2013 Act mandates that the valuation report needs to be made readily available to shareholders and creditors.
  4. Objections: The 2013 Act allows objections to be raised only by shareholders holding 10% or more of equity and creditors whose debt represent 5% or more of the total debt as per the last audited financial statements. This helps companies to avoid frivolous objections/litigation.
  5. Accounting Standards: As a matter of practice, frequently the Scheme provided for accounting treatment that would deviate from the prescribed accounting standards necessitating a note to this effect in the balance sheet of the company. This was frowned upon by the tax authorities. Consequently, in case of listed companies, the listing agreement was amended to provide that an auditor’s certificate stating that the accounting treatment is in accordance with the accounting standards was required to be filed for seeking approval of the stock exchanges. The 2013 Act makes such prior certification from an auditor mandatory for both listed and unlisted companies.
  6. Merger of a listed company into an unlisted one: The 2013 Act specifically allows the order by the Tribunal to state that the merger of a listed company with an unlisted company will not automatically make the unlisted company listed. It will continue to be unlisted until all the applicable listing regulations and SEBI guidelines have been complied with. In addition, if the shareholders of the listed company choose to exit, the unlisted company would have to facilitate the exit with a pre-determined price formula which shall be within the price specified by SEBI regulations. The 2013 Act captures SEBI guidelines for listing shares of unlisted companies and for merger of listed companies and merger of listed companies with unlisted companies.

The new kinds of mergers being recognised

Apart from the changes mentioned above, the 2013 Act provides for separate provisions for the following:

  1. Cross border mergers
  2. Merger of two small companies
  3. Holding with wholly-owned subsidiaries

However, corresponding changes in other laws are yet to be done, in order for this to be implemented in its entirety.

  1. Cross-border mergers: The 1956 Act allowed cross-border mergers only when the Company transferring was a foreign company. However, the 2013 Act allows, in-principle mergers between an Indian and a foreign entity, provided it is located in a jurisdiction notified by the central government in periodic consultation with RBI. Such mergers require RBI approval and the Scheme can allow for payment in cash or depository receipts or both. The payment in cash or depository receipts allows those shareholders to exit, who do not want to be part of the of the merged entity. However, The Income Tax Act only grants tax exemptions on mergers if the receiving Company is an Indian company and does not recognize a foreign company, as the receiving company as described under the 2013 Act.
  2. Merger of “small companies” and holding with wholly-owned subsidiaries: The 1956 Act did not differentiate between companies’ basis their nature or size and expected court approval for all companies wishing to enter into an amalgamation. The 2013 Act allows for a separate procedure for small companies and the holding and wholly-owned subsidiaries. Section 233 of the 2013 Act allows for a simplified fast track procedure for these mergers and does not require the approval of the Tribunal, provided consent is obtained from the following: (a) Shareholders holding 90% in value (b) Creditors representing 9/10th of debt (c) Approval of the Scheme by the Regional Director, Ministry of Corporate Affairs with “no objections” from the Official Liquidator and Registrar of Companies. Approval of the Tribunal is not required for such mergers. This allows these smaller merging entities to be exempted from the following: (a) In the case of a listed company – file documents required to be filed under the listing agreement (b) give notice to various authorities, (c) provide auditor’s certificate of compliance with applicable accounting standards. However, if the Regional Director is allowed to approach the Tribunal if s/he believes of the opinion that the Scheme is not in the interest of the stakeholders. The Tribunal may then follow the entire amalgamation procedure, prescribed under the 2013 Act. This allows for both flexibilities as well as good governance.

The Income Tax Act, 1961

The Income Tax Act, 1961 defines the term ‘amalgamation’ under section 2(1B) of the Act as the merger of one or more companies to form one company in such a manner that all the properties and liabilities of the amalgamating company(s) become the properties and liabilities of the amalgamated company, and not less than three-fourth shareholders of the amalgamating company become the shareholders of the amalgamated company.

In Conclusion:

The lawmakers have made every effort to ensure that Combination Regulation is:

  1. Simplified
  2. Easy to implement
  3. Holds authorities and companies accountable to ensure speedy implementation
  4. Aligns various laws / Acts and remove contradictions

However, different parts of the Acts have yet to be notified or have existed for too short a period for the industry and law makers to be sure of its efficacy and will continue to require focus from law makers to not only remove any issues that may be there in current legislations and alignments among various Acts, it will also need to be scrutinized periodically to keep the legislation relevant and topical.


[1] Retrieved from, Law stated as at 17-May-2016, Authors: Shweta Shroff Chopra, Partner and Toshit Shandilya, Associate, Shardul Amarchand Mangaldas & Co

[2] “India: Merger Regime Under The Companies Act, 2013”, Author: PSA Legal, Retrieved from

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