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Latest from the Regulator - September 2024
New Rules for Mergers Involving Foreign Firms announced
The Ministry of Corporate Affairs (MCA) has introduced important regulatory changes for companies involved in Mergers and Amalgamations, particularly in cases involving Foreign Entities. According to the new rules, any merger between a foreign holding company incorporated outside India and its wholly-owned subsidiary (WOS) incorporated in India will now require prior approval from the Reserve Bank of India (RBI). Under the amended regulations, foreign holding companies must obtain permission from the RBI for mergers with Indian corporations.
In addition to obtaining RBI approval, the transferee Indian company must also adhere to the provisions of Section 233 of the Companies Act, 2013, which outlines the process for 'Fast Track Merger'. This includes the requirement for the Indian company to file an application with the Central Government as part of the merger process.
The updated regulations emphasize that the application for mergers must be submitted under Section 233 of the Companies Act, reinforcing the need for legal and regulatory oversight in cases involving Cross-Border Mergers.
Government to launch PM Internship Scheme by October, 2024
The government is set to roll out the Prime Minister's Internship Scheme by the end of October, aimed at providing unemployed youth with meaningful work experience through partnerships with the top 500 companies. The program, announced during the Union Budget, will select companies based on their average Corporate Social Responsibility (CSR) spending over the last three fiscal years. Targeting individuals aged 21 to 24 from economically disadvantaged backgrounds, the scheme focuses on households without income tax payers and those who have not attended top-tier institutions like IITs or
IIMs. Each intern will receive a monthly stipend of Rs 5,000, along with a one-time allowance of Rs 6,000. The government will bear most of the costs, while companies will contribute to training and 10 percent of the stipend from their CSR funds. On average, each company could host around 4,000 interns annually over a five-year period. The Ministry of Corporate Affairs will soon be releasing guidelines for the programme.
Amendment to the Competition Amendment Act, 2023
On September 9, 2024 the Ministry of Corporate Affairs announced certain provisions of the Competition (Amendment) Act, 2023, which will overhaul the merger control regime in India, effective September 10, 2024. Key amendments include:
• New deal value thresholds: Any merger or acquisition deal with a global transaction value exceeding C2,000 crore will be subject to CCI notification. Additionally, the target company must have 'Substantial Business Operations' (SBO) in India, i.e. if the Indian turnover or gross merchandise value (GMV) exceeds INR 500 crore ($60 million) or at least 10% of the global figures in these metrics.
• Reduced review timelines: The Competition Commission of India (CCI) has shortened merger review timelines. The period for forming a prima facie view on a notified transaction has been cut from 30 working days to 30 calendar days, and the overall review period has been reduced from 210 to 150 calendar days.
• Wider definition of 'control': The revised regulations have expanded the definition of “control,” which now includes the “ability to exercise material influence” in any manner over the management, affairs, or strategic commercial decisions of another enterprise or group. This may bring more M&As under stringent purview and more efficient regulation by the CCI.
• Minimum Value Rules: Minimum Value Rules codify the pre-existing de-minimis exemption where a transaction will not require notification to the CCI if the target has either turnover of less than INR 1,250 crore/INR 12.5 billion (approx. USD 150.60 million) or assets less than INR 450 crore/INR 4.5 billion (approx. USD 54.21 million) in India.
These changes aim to streamline the merger review process and introduce new standards for assessing the notifiability of transactions.
SEBI Tightens Timelines and Boosts Transparency: Key Amendments to Non-Convertible Securities Regulations Announced
The Securities and Exchange Board of India (SEBI) has amended the Securities and Exchange Board of India (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (“NCS Regulations”) on September 17, 2024, inter-alia, including the following amendments:
• Reduction of time period for seeking public comments from existing seven working days to five days;
• In case the issuer has its specified securities already listed on the recognized stock exchanges the same shall be posted for one day immediately after the date of filing the draft offer document with stock exchange(s).
• An option to make advertisement through electronic modes such as online newspapers or website of the issuer or the stock exchange. While opting these modes the QR code and link to complete advertisement shall be published in an English national daily and regional daily newspaper with wide circulation at the place where the registered office of the issuer is situated;
• The Offer period shall be opened for minimum two working days instead of present three working days;
• The extension of bidding period is now allowed for a minimum period of one working day;
• The amendments in the disclosures to be made in the Offer Document are as follows:
• Details of Promoters;
• Details of Branches or Units;
• Details of project cost and means of “financing;
• Details regarding Financial Information;
• Attestation in Offer Document; and
• Disclosure regarding purchase/ acquisition of immoveable property.
The changes/ amendments mentioned above are welcoming in nature as they will facilitate a more efficient process for issuance of Non-Convertible Securities, by reduction in the offer period, disclosures in the offer documents making the offer document more concise.
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Institute of Directors (IOD) is an apex national association of Corporate Directors under the India's 'Societies Registration Act XXI of 1860'. Currently it is associated with over 30,000 senior executives from Govt, PSU and Private organizations of India and abroad.
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