In a welcome development, the Government of India issued two Notifications on March 17, 2022 that extend: (i) the applicability of the exemption available to transactions involving a small target (‘Small Target Exemption Notification’) from notification to the Competition Commission of India (‘CCI’); and (ii) the exemption from notification of the transactions to the CCI within 30 days of a trigger event within the meaning of Section 6(2) of the Competition Act, 2002 (‘Act’).
The Small Target Exemption has been extended thrice since it was originally introduced in 2011, and it demonstrates the Government’s intent to not review transactions involving small targets. While notifiable transactions still require prior approval from the CCI and remain subject to penalties for gun jumping, removal of the filing deadline grants flexibility to parties to file a comprehensive notification. These notifications add credence to other measures the Government has been taking to make it easier for businesses to operate in India. We have set out the key takeaways of the notifications below.
1. Extension of Small Target Exemption to All Types of Combinations under Section 5 of the Act until March 29, 2027
The Small Target Exemption available to acquisitions (of shares, voting rights, assets or control), mergers and amalgamations was due to expire on March 29, 2022. The Small Target Exemption Notification extends the applicability of this exemption by another five years i.e., till March 29, 2027.
The asset and turnover thresholds for the application of the Small Target Exemption remain unchanged. Transactions where the enterprise (i.e., the enterprise whose shares, voting rights, assets or control are being acquired or are being merged or amalgamated) either has assets of less than Rs 3.5 billion (approx. US$ 46 million) in India, or has a turnover of less than Rs 10 billion (approx. US$ 132 million) in India will be exempt from the mandatory pre-notification requirement to the CCI.
2. Extension of Exemption from Notification to the CCI Within 30 Days of the Trigger Event
According to the Act, acquisitions, mergers and amalgamations meeting the prescribed thresholds of assets or turnover under the Act had to be notified to the CCI for its approval within a period of 30 days of the ‘trigger’ event. This requirement was suspended for five years from June 29, 2017 and was due to expire on June 28, 2022. The Government of India has further extended this suspension till June 28, 2027. There is no change to the suspensory nature of the merger control regime in India; transactions subject to CCI’s merger control review cannot be consummated until CCI clears the transaction or 210 calendar days have passed since notification to the CCI.