Companies making false mergers and acquisitions disclosures to CCI to be penalised heavily

False M&A disclosures can lead to companies paying heavy fines to CCI

New Delhi: Making an incomplete or false disclosure to the Competition Commission of India (CCI) will lead to companies being penalized heavily. CCI chairperson Ashok Kumar Gupta said the provisions in the Competition (Amendment) Bill, 2022, for faster approval of mergers and acquisitions (M&As) will work on a trust-based system. After its introduction in the Lok Sabha in the recently concluded monsoon session , the amendment bill was referred to Parliament’s standing committee. As per the bill, companies found exploiting this trust-based regime by making incomplete disclosures will be heavily penalized, apart from other consequences, Gupta told Economic Times.

Competition (Amendment) Bill, 2022

The bill, among other notable changes, also proposes to cut down the overall time limit for approving M&As to 150 days from 210 days. It mandates the competition watchdog to form a prima facie opinion within 20 days of the receipt of notice.

These revisions are in line with the CCI’s current practices as the average number of days to approve M&As that don’t have any adverse competition impact is currently 17 days, according to Gupta. “However, the underlying assumption for a trust-based regime to succeed is that parties will reciprocate by providing complete and full disclosures,” he noted.

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Moreover, in a bid to be notified of overseas M&As, the bill has brought in a new mandatory condition for filing a notification with the CCI. All M&A deals will need to be notified to the CCI if the deal value exceeds Rs 2,000 crore and the target company fulfils the local nexus criterion.

While concerns have been red flagged about this provision as it could bring several global mergers with little India connection under the CCI’s purview. Gupta allayed worries by saying that the local nexus criterion is meant to exclude M&A transactions where the target company exclusively operates abroad or has limited business operations in India.

“Let me assure that the commission will deliberate on the issue in great detail and only after wideranging public consultations with stakeholders such regulations will be firmed up. We will provide certainty and predictability to stakeholders,” he said.

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Among other changes suggested, one is about the change in the definition of control. Currently, this means control over affairs or management of a company. Once the bill is passed, control will be defined as the ability to exercise material influence over management, or the company’s affairs or strategic commercial decisions.

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