On 7-3-2024, the Ministry of Corporate Affairs issued 2 separate notifications vide which it increased the existing threshold value of assets and turnover mentioned under Section 5 of the Competition Act, 2002 (‘Act’) relating to “combinations” and thresholds allowing exemption from notification based on assets and turnover of the target company.
Key Points:
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Central Government in consultation with the Competition Commission of India (‘CCI’) has enhanced the value of assets and turnover by 150% for the purposes of Section 5 of the Act on the basis of wholesale price index.
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Enterprises have been exempted from being parties in the following situations, where the value of assets being acquired/ taken control of/ merged/ amalgamated is not more than Rs. 450 crores in India/ turnover of not more than Rs. 1250 crore in India:
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Acquisition referred in Section 5(a) of the Act;
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Acquiring of control by a person over an enterprise when such person has already direct or indirect control over another enterprise engaged in production, distribution or trading of a similar or identical or substitutable goods or provision of a similar or identical or substitutable service referred to in Section 5(b) of the Act;
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any merger or amalgamation referred to in Section 5(c) of the Act.
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In case, where a portion of enterprise/ division/ business is being acquired/ taken control of/ merged/ amalgamated with another enterprise, the value of asset of said portion/ division/ business, the threshold will be calculated on relevant assets and turnover.
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Such a relevant value will be determined by taking the book value of assets shown in the audited books of accounts, where the financial statement has not yet become due to be filed.
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Value of assets will include- value of goodwill/ value of copyright, patent, permitted use, collective mark, registered proprietor, registered trademark, registered user, homonymous geographical indications, geographical indications, design or layout- design or similar other commercial rights.
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Turnover will be certified by a statutory auditor on the basis of the latest available accounts of the company.
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Note:
Section 5 mandates that all transactions amounting to “combinations” exceeding a specified threshold of assets or turnover are supposed to seek prior approval of the Competition Commission of India (‘CCI’) before they are consummated.
