MCA Notifies ₹2,000 Crore Deal Value Threshold for Mergers and Acquisitions
The Union Ministry of Corporate Affairs (MCA) has introduced a significant update to India’s merger and acquisition regulations by notifying the deal value threshold (DVT) provision under the Competition (Amendment) Act, 2023. Effective from September 10, this new rule mandates that all mergers or acquisitions with a deal value exceeding ₹2,000 crore must undergo review by the Competition Commission of India (CCI) if the target company has substantial business operations in India. This move aims to address potential gaps left by traditional asset or turnover-based thresholds, especially in the context of high-value transactions within digital markets. By incorporating the DVT, the MCA intends to provide additional scrutiny to ensure that large digital deals do not escape regulatory oversight merely because they do not meet conventional financial criteria. Alongside the DVT provision, new rules under the Competition (Minimum Value of Assets or Turnover) Rules have been introduced, offering a safe harbour for certain combinations. Transactions involving enterprises with assets below ₹450 crore and turnover less than ₹1,250 crore are exempt from CCI approval, thereby easing regulatory burdens on smaller deals unlikely to pose anti-competitive risks. The CCI has also updated its regulations under the Competition Commission of India (Combinations) Regulations, 2024, detailing how deal value is to be calculated. All forms of valuable consideration—whether direct, indirect, immediate, deferred, or non-cash—are included. This encompasses payments related to covenants, technology assistance, intellectual property rights, branding, and other inter-connected transactions within two years of the deal. The updated regulations also specify filing fees for different types of combinations: ₹30 lakh for Form I filings and ₹90 lakh for Form II filings. If a combination’s market share exceeds specified thresholds, a more detailed review (Form II) is mandated to assess its impact on competition. The newly notified regulations will have an overriding effect on all other regulations under the Competition Act related to mergers and combinations, reinforcing the importance of these updates. The amendments, passed by the Lok Sabha in 2023, are intended to modernize India’s merger control regime by introducing a more comprehensive assessment criterion focused on deal value, particularly relevant to rapidly evolving digital and tech markets. This regulatory overhaul marks a critical step in aligning India’s competition framework with global standards, ensuring fair competition and protecting the interests of consumers in an increasingly digital economy. Source: Times of India