Mergers and Acquisitions. Protect the interests of pre existing entities and all their stakeholders resulting into no resistance.
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The Income Tax Department (ITD)
A transaction that causes appreciable adverse effect on competition is void under the Competition Act 2002 (“Act”). Any acquirer entering into a transaction above a specified threshold is required to give a notice to the Competition Commission of India (‘CCI’) disclosing the details of such transaction. If the CCI is of the view that the transaction might cause an appreciable adverse effect on competition, it will direct that the transaction not to take effect.
Where the CCI feels that certain modifications in the transaction might prevent an appreciable adverse effect on the competition, it shall direct the acquirer to make such modifications. The acquirer may accept the modification or make amendments which will have to be approved by the CCI. Further, the CCI has power to make inquiries in case of certain agreements, abuse of dominant position or any combination thereof. Additionally, the CCI has the power to impose penalties in case of any offence under the Act.
Documents for obtaining approval from the Board of Directors and Shareholders of both the acquirer and target company, wherever applicable
Scheme/Petition to be filed before the concerned authority
Notices to the shareholders and creditors
Consent from the shareholders and creditors
Notice to be published in newspaper
Public Announcement in case of acquisition of shares of a listed company
Various affidavits, declarations and other documents
Share subscription/ purchase agreement
Share Transfer form and
Reporting to stock exchanges in a prescribed format in case of a listed company, as applicable
In case of a scheme of merger, approval from the shareholders of respective companies shall be required. However, where written consent of the shareholders has already been filed along with the merger petition before the NCLT, the NCLT may dispense with the requirement of convening a shareholders meeting at its discretion.
In case of acquisition of shares, the Indian acquirer company may be required to obtain approval of the shareholders where its total investment is in excess of the threshold provided under Indian laws in this regard. Where the acquirer is a foreign company, the requirement of shareholders’ approval shall be governed by the laws of its overseas jurisdiction.
In India, it is open for the parties entering into a deal to negotiate and agree upon the terms and conditions of the deal. Some of the common conditions attached to an offer in connection with a deal are the fulfilment of the conditions precedent and subsequent (findings of the comprehensive due diligence exercise), lock-in period of the securities, restriction on transfer of shares and affirmative voting rights to be provided to the investor. In case of acquisition of a listed company, the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations 2011, requires the acquirer to make an open offer conditional as to the minimum level of acceptance
The industry specific rules that apply to the company being acquired depends on the particular sector to which the company falls. Typically, the said rules apply to highly regulated sectors or sectors of strategic importance, such as banking, financial services, insurance, media, telecommunications, defence, civil aviation, electricity etc.
Accordingly, sector-specific regulators have been established to regulate some of the aforesaid industries, e.g. the Telecom Regulatory Authority of India. And the Department of Telecommunications regulate the telecommunications sector. The Directorate General of Civil Aviation regulates civil aviation. The Reserve Bank of India regulates the banking and financial services sectors. The Insurance Regulatory and Development Authority regulates the insurance sector. And the Ministry of Information and Broadcasting regulates the electronic media sector.
Further, the Foreign Direct Investment Policy, the Foreign Exchange Management Act 1999 and its regulations contain industry specific rules such as the permissible limit of foreign investment, entry routes etc.
contains provisions pertaining to inbound and outbound mergers and amalgamations. The provision envisages a scheme of amalgamation providing for, amongst other things, payment of consideration, including by way of cash or depository receipts or a combination of both.
It provides that foreign investment in India can be made either with or without the approval of the Reserve bank of India. Further, the rules and regulations framed by the Reserve Bank of India under the Foreign Exchange Management Act 1999 will be applicable to cross border transactions in India.
The Foreign Direct Investment Policy prescribes certain conditions for making investments in India in different sectors, such as maximum permissible limits on investment by a foreign party, pricing guidelines to be adhered to for making the investments, lock-in requirements of such foreign investment, etc.
The Act requires an acquirer holding 90% (ninety percent) or more of the issued equity shares in a company, to make an offer to the minority shareholders to buy the equity shares held by such minority shareholders in the company and the minority shareholders may sell their equity shares to the majority shareholders at the price determined on the basis of valuation by a registered valuer.
Further, the said Act also gives a right to the minority shareholders to make an offer to the majority shareholders to purchase their shares.