This piece was first published in the September 2017 issue of The Practical Lawyer [(2017) PL (Comp. L) September 82]
The Indian merger control regime has evolved substantially over the years since its introduction in June 2011. The preceding six years have seen a steady series of five amendments to the Combination Regulations, the primary regulations which supplement the merger control provisions under the Competition Act, 2002 (Act), to bring greater certainty, transparency and ease in relation to the Competition Commission of India (CCI) filing processes. In line with this trend and overarching objective of promoting the ease of doing business in India, the Ministry of Corporate Affairs, Government of India, recently issued a notification dated 29 June 2017 (Notification) which has done away with the strict filing timeline of 30 calendar days from the date of the trigger document. The Notification is applicable for a tenure of 5 years until 28 June 2022. This piece briefly examines issues with this strict statutory timeline and the welcome ramifications that ensue this policy change.
A proposed acquisition of shares, voting rights, control or assets or a merger/amalgamation which satisfies the pecuniary statutory thresholds set out under the Act and is unable to benefit from applicable exemptions under the Act or the Combination Regulations is reportable to the CCI. Such a pre-merger notification was required to be filed within the timeline as set under the Act. Originally, parties to a notifiable transaction were required to notify the CCI within 7 days of receiving board approval for a merger or amalgamation, or pursuant to the execution of any agreement or other document in case of an acquisition (Trigger Document). Subsequently, by way of an amendment in 2007, the filing timeline was extended from 7 to 30 days.
It is apposite to point out that the merger control regime in India is a mandatory suspensory one. This implies that the parties to a notifiable transaction are not only required to compulsorily notify the transaction to the CCI but are even prohibited from part or complete consummation of the transaction prior to receipt of the CCI approval or expiry of the outer limit of 210 days (computed based on the formula set out under the Act). Further, failure to notify within the 30 day timeline attracted penalties up to a maximum of 1 per cent. of the total turnover or assets of the parties to the combination, whichever is higher. The extension of filing timelines from 7 to 30 days was therefore speculated to be an ostensible attempt to limit escape of reckless or un-scrutinized consummation of M&A activity and whirl pooled into more issues than it cured. The following paragraphs provide a quick snapshot of the resultant key issues:
- The Trigger Document Dilemma
Considering that the clock to file the CCI notification started to tick at the execution of the Trigger Document, the first step was to identify which document would be the correct trigger. The scope of the term “any agreement” and “other document” is rather wide and not very clearly defined under the Act or the Combination Regulations. Therefore, while non-contentious and straight-forward binding agreements like Share Purchase Agreements, Shareholders’ Agreements, Business Transfer Agreements, etc. were identified as the correct Trigger Document with ease, other documents like binding term sheets and memorandum of understandings were often found to be the subject matter of debate on whether these could constitute the relevant Trigger Document by the CCI. Thus, the issue of identifying the correct Trigger Document, which seemed rather benign at one point, transformed into a hot bed of controversy over the years. In fact, Regulation 5 of the Combination Regulations, which explained the scope of ‘other document’ underwent changes twice in 2015 and 2016 owing to the contentious nature of this issue. The Notification eliminates the requirement to identify the correct Trigger Document as the parties are free to file the merger notification at any time after conclusively deciding to undertake the transaction but prior to part or complete consummation of the transaction. The parties will now have sufficient time to negotiate and finalize agreements without having any time crunch pressure which will also expel issues relating to modifications to Trigger Document after the merger notification has been filed with the CCI.
- Fines and Invalidations
As a result of incorrect Trigger Document identification, enterprises have often filed merger notifications post expiry of the 30 day limit and faced penalties under the Act even though such transactions were not consummated at the time of CCI filing. The impact of this restrictive timeline was more pronounced in global transactions where parties notified transactions based on preliminary M&A agreements with sketchy details of the transaction. For instance, in Baxter/Baxalta, parties were fined for non-notification of the transaction based on the global agreement as opposed to the India specific agreement (which contained greater details of the India aspects of the transaction). Further, the limited timeline also resulted in proforma notifications with sparse details and consequently faced invalidations with the obligation to re-file with complete details.
Considering that the relevance of identifying the correct Trigger Document stands largely diluted, the fear of fines for what was often referred to as ‘belated filings’ will now become a thing of the past. However, the risk of imposition of penalty for gun-jumping or consummation of the transaction prior to CCI approval still subsists. Further, it is expected that the number of invalidations for failure to provide complete transaction details (or for changes in transaction structure, post filing) will also decline as a result of elimination of the 30 day deadline allowing parties sufficient time to assess their transaction and its impact on competition in India.
- Failed Transactions Anomaly
The 30 day filing requirement had significant implications on transactions that fell through during the pendency of the CCI review process. In fact, despite failure of the transactions, parties have been penalized for belated filings. This scenario further highlighted the redundancy of having a specific timeline which required scrutiny of a transaction which was no longer pursued by the parties merely because a Trigger Document was signed. However, post the Notification, the parties will no longer be required to obtain CCI clearance as a consequence of a valid Trigger Document if the parties have decided to drop the transaction mid-way.
The Indian merger control policy has been long criticized for being one of the few jurisdictions which has a prescribed filing timeline despite being a mandatory suspensory regime. This cosmetic deadline of 30 days did not serve any real purpose and proved to be unnecessarily onerous on the parties. Further, the International Competition Network’s (ICN) Recommended Practices for Merger Notification Procedures also prohibits imposition of a deadline in jurisdictions where closing is contingent upon receipt of antitrust clearance. Over the years, more nations have progressively moved towards removing such a deadline. For instance, in 2004, the European Commission abolished its one week deadline for filing merger notifications and recently, in 2012, the Brazilian Competition Regulatory Agency also abolished its 15 day filing timeline.
The Notification therefore ushers a much needed policy change commensurate with global best practices by dispensing a rigid timeline for merger filings. While the sum and substance of the mandatory suspensory regime applicable in India remains unaffected and preserved, the procedural difficulties stemming from the 30 day deadline now stand uprooted.
* This piece was co-authored by Anisha Chand, Principal Associate.
 The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011.
 Caladium/Bandhan Bank, Combination No. C-2015/01/243 and Sutlej Textiles/14 Birla Textiles, Combination No. C-2015/04/266 were both filed based on a binding term sheet etc. However, in ABNL/Pantaloon Retail, Combination No. C-2012/10/80, decided on 14 August 2012, the CCI rejected the filing for being premature and based on an MOU.
 Originally, the Combination Regulations provided that communication of intention to acquire to the Central Government, State Government or Statutory Authority would constitute as the other document. In 2015, the proviso was amended to remove Central Government and State Government, deeming only communication to a Statutory Authority to be the other document. However, in 2016, the proviso was further amended to restrict the deeming fiction to include only a public announcement made under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as an ‘other document’.
 Combination No. C-2015/07/297.
 Abbott/St. Jude Medical, Combination No. C-2016/08/418.
 Kinder/Zulia, Combination No. C-2013/06/124, decided on 1 August 2013