The Ministry of Corporate Affairs has notified Competition (Minimum Value of Assets or Turnover) Rules, 2024 which has come into force with effect from the September 10, 2024.
The amendments were introduced in 2023. “These provisions were part of the amendments of 2023 but were pending notification. They have now been brought into force,” said Avaantika Kakkar, Partner (Head – Competition Law), Cyril Amarchand Mangaldas.
We expect the fine print to show up in the CCI’s regulations, which have been the subject of stakeholder consultation over the past few months.Avaantika Kakkar, Partner (Head – Competition Law), Cyril Amarchand Mangaldas
The amendments introduces deal-value transactions mandating CCI’s approval for transactions where the “deal value” exceeds INR 2000 crores. This requirement is subject to the target company having “substantial business operations” (SBO) in India. “The recent government notification under competition law introduces a new deal value threshold for mergers and acquisitions. Now companies must seek approval from the Competition Commission of India (CCI) if their deal exceeds ₹2,000 crore and the target company has substantial business operations in India,” said Vipul Jai, Partner, PSL Advocates & Solicitors.
This is a significant shift from the earlier criteria, which focused primarily on asset and turnover thresholds hence exempting various transactions. The change primarily aims to regulate digital and other sectors where transactions previously escaped CCI scrutiny, promoting fair competition and better regulatory oversight for high-value deals.Vipul Jai, Partner, PSL Advocates & Solicitors
Previously, the Competition Act only mandated transactions to be notified to the CCI where the value of assets or turnover of the parties to the transaction or the group to which they belong exceeded the specified threshold limits (on a domestic or worldwide basis). The newly added threshold will be an additional criteria for transactions that need to be notified to the CCI. “The new deal value threshold in competition law, allowing the CCI to review mergers and acquisitions over ₹2,000 crore, is a timely and necessary step,” said Divyaish Srivastava, Independent Policy Consultant & Advisor, Lets Learn Law (LLL)He adds, “It ensures that large transactions across industries are properly scrutinized, closing gaps in the previous system. This move will significantly impact the fast-evolving digital sector, where mergers and buyouts happen swiftly. It ensures that even substantial transactions receive a thorough review, addressing blind spots that previously escaped scrutiny.”
This change would promote transparency and fair competition, creating a level playing field for all businesses. It will also boost investor confidence as investors appreciate clear regulations and the revised threshold provides a predictable framework for evaluating deals.Divyaish Srivastava, Independent Policy Consultant & Advisor, Lets Learn Law (LLL)
This introduction is significant to keep check on deals that might otherwise evade scrutiny under “asset” or “turnover” thresholds. “M&A transactions were primarily assessed based on asset or turnover thresholds, implying that the deals involving companies with low asset or turnover values, particularly in sectors like digital or technology, often fell outside of CCI’s purview,” said
Nakul Batra, Partner, DSK Legal.
The new threshold will ensure to keep check of transactions in sectors where market valuations can be very high despite lower “book value” or revenues. “With the introduction of DVT of ₹ 2,000 crore – CCI approval will be compulsory if the transaction surpasses this value. The introduction of this deal value threshold ensures that transactions with significant market impact are scrutinized, irrespective of the asset or turnover values of the target company,” said Nakul Batra.
Unless the transaction is concluded as of September 10, M&As with a deal value exceeding ₹2,000 crore (whether paid directly or indirectly as part of the deal) will require a review by CCI if the target company has substantial business operations within India.Nakul Batra, Partner, DSK Legal
The new threshold will be expanding the oversight mechanism of the competition regulator. “The implementation of the DVT will greatly expand CCI’s oversight, with a focus on high-value transactions in the digital and technology sectors, where traditional thresholds may have missed potential anti-competitive concerns,” said Salil Seth, Partner, Khaitan & Khaitan (K&K).
In contrast, smaller transactions will gain from reduced regulatory requirements under the safe harbour rules, allowing startups and smaller businesses to pursue synergies more easily without the complications of undergoing CCI review.Salil Seth, Partner, Khaitan & Khaitan (K&K)
The MCA has also provided a safe harbour for combinations requiring approval from CCI. The notification states the minimum value of assets shall be rupees four hundred and fifty crore and turnover shall be rupees one thousand two hundred and fifty crore for the purpose to be “combination” under clause (e) of section 5 of the Competition Act, 2022. “If value of asset or turnover of the target is less than 450 cr or 1250 cr. respectively, it will automatically not be considered a combination,” said Akshat Pande, Managing Partner, Alpha Partners.
He adds, “The transactions below 450cr (for value of asset) / 1250cr (for value of turnover) criteria will not be required to be reported, giving it a statutory recognition.”
Value of transaction criteria will certainly increase the number of transactions to be reported to the CCI. Interestingly, transactions where transaction value is more than 2000 cr but asset/turnover is below any of the thresholds mentioned in earlier provisions as well as the new exemption will also have to be notified.Akshat Pande, Managing Partner, Alpha Partners
The key changes are introduction of DVT and providing safe harbours. “The DVT provision specifies that all forms of consideration—including cash, deferred payments, intellectual property rights, and even estimates for future payments—must be accounted for when determining the value of the transaction,” said Shashank Agarwal, Advocate, Delhi High Court
This change is specifically important for the digital and technology sectors, where high-value transactions might involve businesses with fewer physical assets but substantial market impact. However, The new rules offer exemptions for smaller transactions by providing a “safe harbour” for enterprises with assets under ₹450 crore or turnover under ₹1,250 crore, further simplifying the regulatory process for smaller entities.Shashank Agarwal, Advocate, Delhi High Court
This is a significant step for bringing ease in M&A activity. The safe harbour provision should be read with the deal value transactions as the exemptions provides flexibility for small enterprises while increasing scrutiny of high-value digital transactions. “The DVT provision fills a gap in the previous asset and turnover-based approach. High-value transactions, particularly in technology and digital markets, will now be subject to more rigorous oversight, even if the target company’s assets or turnover fall below traditional thresholds,” said Shashank Agarwal, Advocate, Delhi High Court.
He adds, “By exempting smaller deals from regulatory approval, the new rules will ease the compliance burden on businesses with fewer assets or lower turnover, encouraging more transactions in the small and mid-sized sector without requiring CCI involvement.”
The policy states a company to be a “substantial business operations in India” when there is turnover of more than Rs 500 crore or over 10 per cent of their global turnover in India in the previous financial year. “The significant shift that the amendment brings is the introduction of DVT (deal value threshold) which necessitates a prior approval from the Competition Commission of India (CCI) if the target entity has “substantial business operations” in India – and the deal value is over ₹2,000 crores,” said Shryeshth Ramesh Sharma, Partner, SKV Law Offices.
The concept of “substantial business operations,” has been brought in, which in turn expands the scope of CCIs review. Furthermore, new regulations concerning fees, exemptions for smaller transactions, and filing obligations based on market share have also been introduced.Shryeshth Ramesh Sharma, Partner, SKV Law Offices
He adds, “The change introduced by the recent notification adds the DVT criteria. Now, even if an entity’s asset or turnover values are below the threshold, the deal must be reported if the transaction value exceeds ₹2,000 crore, provided that the target company has substantial operations within India. Additionally, small transactions involving companies with assets under ₹450 crore and a turnover of less than ₹1,250 crore are exempt from CCI approval.”
K.K. Sharma, Partner, Singhania & Co. provides an insightful example for understanding the difference between the added benchmark and previous traditional threshold. “It is well known that way back in 2014, WhatsApp was acquired by Facebook at a reported figure of $19 billion but, in terms of the old assets/turnover thresholds, there was no obligation on the merging parties to notify the Commission and the merger was not filed for approval. It was in only possible because there was no provision for mandatory filing on the basis of Deal Value. If that merger was to happen today, it will require a compulsory filing before the Commission. These changes were necessary to plug-in the lacuna in the face of huge valuations of high-tech companies which could have hitherto escaped from filing,” said K.K. Sharma.
The changes would make combination filing before the Commission more up to date and in tune with the times and technology. The issue was also considered by the Committee on Digital Competition Law in its 2024 report. It will provide teeth to competition law watchdog to monitor the regulation of combination more carefully. Exempting filing for small target sizes is a step forward towards ‘Ease of Doing Business’.K.K. Sharma, Partner, Singhania & Co.
The new rules apply to deals that are signed or will be signed on or after September 10, 2024. This means that transactions that were signed or approved before September 10, 2024 but not yet fully completed may need to be re-assessed and may require CCI approval “if the deal is valued at over INR 2,000 crore and the target entity has substantial business operations in India,” said Kalpit Khandelwal, Partner, Aekom Legal
All the transactions ongoing (and signed but not closed as of September 10, 2024) will need to be reevaluated from the perspective of seeking prior approval of CCI or not from the deal value threshold criteria. If a transaction is expected to meet the deal value threshold criteria, then parties should exercise caution and comply with stand still obligations until CCI approval is obtained.Kalpit Khandelwal, Partner, Aekom Legal
These are significant changes as the transacting parties that were previously benefitting from the target exemption, will now have to seek a prior mandatory approval from the CCI if the value of their “deal” meets the twin DVT criteria (value threshold and the target having an SBO in India) which also providing safe harbour route to entities.
