Public mergers and acquisitions in India:

overview
A Q&A guide to public mergers and acquisitions law in India.

The country-specific Q&A looks at current market activity; the regulation of recommended
and hostile bids; pre-bid formalities, including due diligence, stakebuilding and agreements;
procedures for announcing and making an offer (including documentation and mandatory
offers); consideration; post-bid considerations (including squeeze-out and de-listing
procedures); defending hostile bids; tax issues; other regulatory requirements and
restrictions; as well as any proposals for reform.

To compare answers across multiple jurisdictions visit the Country Q&A tool. This Q&A is
part of the Practical Law Public Mergers and Acquisitions Global Guide. For a full list of
jurisdictional Q&As visit [Link]/acquisitions-guide.

M&A activity
1. What is the current status of the M&A market in your jurisdiction?

The public M&A market in India has been active. The sectors that have attracted the most
attention during the last year include telecom, financial services and infrastructure.
However, other sectors such as consumer products and pharmaceuticals have also shown
healthy levels of M&A activity. The number of domestic deals has been higher than inbound
deals in the previous year.
In the last year, the following major public M&A transactions were announced in India. They
are all negotiated transactions (hostile takeovers are rare):
 Oil and Natural Gas Corporation's acquisition of a 51% stake in Hindustan Petroleum
Corporation.
 The merger of Cairn India and Vedanta.
 The merger of Vodafone India and Idea Cellular.
 The open offer by Blackstone Capital Partners to the public shareholders of Mphasis,
pursuant to the acquisition of substantial shares from EDS Worldwide Corporation.
 The open offer by Bayer AG to the public shareholders of Monsanto India, pursuant to
the proposed global acquisition of Monsanto by Bayer.
 The demerger of the wireless business of Reliance Communications into Aircel.
 The merger of IDFC Limited and Shriram Capital.
 The acquisition of control in Sona Koyo Steering Systems by JTEKT Corporation.
 The acquisition of a 24.92% stake in Balaji Telefilms by Reliance Industries.
A significant rise in M&A transactions is expected to take place in the infrastructure sector in
the coming months. This is due to high levels of stressed assets in infrastructure companies
and the exemptions granted by the Securities and Exchange Board of India (SEBI) (see
box, The regulatory authorities) to acquirers of companies with stressed assets.
Given the over capacities in the manufacturing sector, inorganic growth will be the preferred
method of expansion, leading to more M&A transactions.
M&A transactions will also be boosted in the coming years due to factors such as:
 Increased liberalisation in Indian's foreign direct investment (FDI) policy in sectors such
as defence, insurance, cable networks, civil aviation and pharmaceuticals.
 The introduction of the goods and service tax.
 The new Bankruptcy Code.
In terms of deal volume and deal size, the Indian public M&A market is relatively small
compared to international markets. Unlike in Western jurisdictions, where the independent
board drives M&A transactions, in India, it is the promoters/selling shareholders that drive
public M&A transactions. Public M&A transactions involve higher compliances under the
securities laws and take longer to close.
2. What are the main means of obtaining control of a public company?

Public companies in India are governed by the Companies Act 2013 and, to the extent to
which the provisions continue to remain applicable, certain provisions of the Companies Act
1956.
Public companies are also governed by regulations issued by the Securities and Exchange
Board of India (SEBI). These include:
 SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (Listing
Regulations).
 SEBI (Substantial Acquisition of Shares and Takeover) Regulations 2011 (Takeover
Regulations).
 SEBI (Prohibition of Insider Trading) Regulations 2015 (Insider Trading Regulations).
See also Question 4.
The Companies Act 2013 and the Takeover Regulations define control in an identical
manner to include "the right to appoint majority of the directors or control the management
or policy decisions exercisable by a person or persons acting individually or in concert,
directly or indirectly, including by virtue of their shareholding or management rights or
shareholders agreements or voting agreements or in any other manner".
Some of the methods of obtaining control include:
 The acquisition of substantial shares (through negotiated secondary or primary
transactions) thereby gaining majority control.
 Mergers.
 Consolidation offers/voluntary offers to the public shareholders by existing promoter
shareholders.
 Acting in concert or entering into a voting arrangement with existing shareholders in
order to gain control.
 Indirect acquisition of control, by acquiring shares of existing promoters who may be
resident in India or abroad.
 Hostile takeover of control.
Hostile bids
3. Are hostile bids allowed? If so, are they common?

Hostile bids are allowed, but are not common.

The Takeover Regulations set out extensive provisions on hostile/competitive bids in
relation to (among other things):
 The timing of its public announcement.
 The minimum acquisition thresholds.
 The right of the original bidder to revise the terms of its open offer to counter such
hostile bids.
However, hostile bids are not common, as they involve a protracted process with no deal
certainty. There are a number of listed companies in India where the majority shareholder
holds less than 50% but is firmly in control of the company. Hostile raiders are generally not
perceived as a threat in the Indian market. The acquisitions of listed companies are
generally carried out through friendly means, though there have been a few failed attempts
at hostile takeovers. The acquisition of Raasi Cements by India Cements in 1998 is
probably one of the few successful hostile takeovers. Hostile takeovers are difficult, as
promoters/founders own a significant stake and are supported by institutional shareholders,
which leaves little headroom for a hostile bidder to acquire majority control. The bidder also
faces commercial risks, as it will be relying on publicly-available information and cannot
expect the co-operation of the target for further due diligence.

Regulation and regulatory bodies

4. How are public takeovers and mergers regulated, and by whom?

Public takeovers and mergers are regulated through the following laws:
 Companies Act 2013 (and any Rules framed under this law). Compliance with the
Companies Act is regulated by the Ministry of Corporate Affairs, the Registrar of
Companies, the Regional Directors and the National Company Law Tribunal (for
mergers and amalgamations).
 Securities and Exchange Board of India Act 1992 (SEBI Act) (and any regulations
framed under this law). Compliance with the SEBI Act is regulated and administered by
the Securities and Exchange Board of India (SEBI).
 Securities Contracts (Regulation) Act 1956 (and the Rules and Circulars framed under
this law). Compliance with this law is regulated and administered by SEBI.
 Takeover Regulations. Compliance is regulated and administered by SEBI and
the stock exchanges.
 Insider Trading Regulations. These are regulated and administered by SEBI and the
stock exchanges.
 Listing Regulations. Compliance is regulated and administered by SEBI and the stock
exchanges.
 Competition Act 2002. This is regulated and administered by the Competition
Commission of India.
 Foreign Exchange Management Act 1999 (including the rules, regulations, notifications
and circulars issued under this law, specifically the Consolidated Foreign Direct
 Investment Policy read the with Foreign Exchange Management (Transfer or Issue of
any Foreign Security) Regulations 2004). This is regulated by the Reserve Bank of
India and the Department of Industrial Policy and Promotion.
 Income Tax Act 1961. This is regulated by the income tax authorities.
 Indian Stamp Act 1899, as amended in various states. This is regulated by the state
specific stamp authorities.

Pre-bid
Due diligence
5. What due diligence enquiries does a bidder generally make before making a
recommended bid and a hostile bid? What information is in the public domain?

Recommended bid
The Takeover Regulations do not envisage the concept of a "recommended bid". Under
Indian laws, the target company's executive board does not recommend to its shareholders
whether to accept or reject any bid that is made by the bidder.
In India, once an open offer is made and the Detailed Public Statement is received by the
target, the target's board of directors (board) must constitute a committee of independent
directors to provide reasoned recommendations on the open offer. This recommendation:
 Must be published by the target company at least two working days before the
commencement of the tendering period.
 Is limited to evaluating whether the offer price is reasonable and in accordance with the
Takeover Regulations.
However, it should be noted that the shares of a public company are freely transferable and
the board of directors does not have control over a potential takeover.
Typically, prior to any public acquisition, the bidder undertakes due diligence under the
following broad heads:
 Financial due diligence. This is information in relation to the target's
audited/unaudited financial statements, assets/liabilities, indebtedness, customer
revenues, vendors, and so on.
 Business due diligence. This is information in relation to the company's assets,
products, markets, operations, customer base, environment and so on.
 Legal due diligence. This is information in relation to charter documents,
compliances/regulatory approvals/consents, public filings, commercial contracts, third
party consent requirements, anti-trust, intellectual property, insurance, real estate and
so on.
Whether or not a transaction entails an open offer obligation, access to unpublished price
sensitive information (UPSI) is governed by the Insider Trading Regulations. UPSI can be
provided in connection with a transaction that entails an obligation to make an open offer
under the Takeover Regulations, provided the target's board is of the informed opinion that
the proposed transaction is in the target's best interests (Insider Trading Regulations). If the
transaction does not entail an open offer, but the board is of the informed opinion that the
proposed transaction is in the target's best interests, UPSI can be shared, provided the
UPSI is made generally available at least two trading days prior to the proposed transaction
being effected (in such case, the parties are further required to execute the necessary
agreements for confidentiality and standstill obligations). This is in contrast with the previous
insider trading laws, which prohibited the sharing of UPSI and did not provide the target's
board with the flexibility of evaluating the benefits of a potential transaction, and therefore
denying the bidder an ability to undertake effective due diligence on the target.

Hostile bid
In the case of hostile bids, due diligence would be undertaken based on publicly available
information (see below, Public domain), as the management of the target company may not
be willing to share any form of UPSI or other information with a hostile bidder.

Public domain
In the case of listed companies, substantial information is publicly available, as the
Companies Act 2013 and Listing Regulations require such companies to make regular
disclosures on a variety of matters, including financial information, policies, board decisions
(in specific cases), shareholder resolutions, board and shareholder compositions and
material information (based on guidelines of materiality provided in the Listing Regulations).
The sources where such information can be accessed include:
 The target company's website is the chief source of such public information. Indian law
requires listed companies to maintain a website and periodically update it with all
relevant policies and information. Investors also hold discussions with management
and undertake site visits. At the appropriate juncture, they may also speak to
customers and other stakeholders.
 Ministry of Corporate Affairs (see [Link]). The Ministry hosts information with
regard to incorporation documents, charges, board and shareholder resolutions (for
specific matters), annual reports, financial statements, information on the appointment
and removal of directors and so on.
 Stock exchanges (see [Link]; [Link]). Stock exchanges host
information with regard to filings made by the company with stock exchanges as
required under the Listing Regulations, Takeover Regulations and Insider Trading
Regulations, such as board and shareholder resolutions, material information,
shareholding levels, acquisitions/divestitures (above certain thresholds) and so on.
 Office of the Controller General of Patents, Designs & Trade Marks, Department of
Industrial Policy & Promotion (see [Link]). This hosts information with
regard to trade marks, patents and designs.

Secrecy
6. Are there any rules on maintaining secrecy until the bid is made?

There are no specific rules on maintaining secrecy until the bid is made. However, all
parties and their representatives involved in a negotiated public M&A transaction will
generally enter into the appropriate non-disclosure and standstill agreements. Information
for evaluation is shared only on a need-to-know basis. Any premature announcement of the
transaction may lead to speculation or amount to a violation of the SEBI (Prohibition of
Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations 2003,
which prohibit market manipulation and the disclosure of misleading information.

Agreements with shareholders

7. Is it common to obtain a memorandum of understanding or undertaking from key
shareholders to sell their shares? If so, are there any disclosure requirements or other
restrictions on the nature or terms of the agreement?

The majority of the public M&A transactions in India involve an agreement with the promoter
shareholders to sell their shares to the bidder. The execution of such an agreement for
substantial shares triggers an open offer (see Question 8). In some cases, parties to
large/complex transactions enter into a non-binding term sheet or memorandum of
understanding. This term sheet/memorandum of understanding does not require disclosure
if it is not binding on the parties. Once the negotiations are complete and the definitive
documents are executed, the bidder must immediately announce the transaction in the
manner prescribed by law. There are several disclosure requirements on the parties during
the execution and closing stages of the transaction (see Question 12).

Stakebuilding
8. If the bidder decides to build a stake in the target (either through a direct shareholding
or by using derivatives) before announcing the bid, what disclosure requirements,
restrictions or timetables apply?

The obligation on the bidder to make a public announcement of an open offer is only
triggered upon reaching certain specific thresholds, that is, by acquiring 25% or more of the
voting rights in the company, and subsequently, any acquisition exceeding 5% in a financial
year.
However, prior to reaching the 25% threshold, the bidder must make disclosures of its stake
build-up, depending on the extent of acquisition at each level. Under the Takeover
Regulations, any acquisition of 5% or more shareholding requires the bidder to make a
disclosure of its aggregate shareholding. Disclosures are also necessary if there is any
subsequent change in shareholding or voting rights of 2% or more, as compared to the level
of shareholding at the time when the last disclosure was made. Such disclosures must be
made to the stock exchanges and to the target company within two working days of receipt
of allotment (in case of subscriptions) or acquisition of shares or voting rights. For the
purpose of disclosures, any acquisition of convertible securities will be considered an
acquisition of shares and the appropriate disclosures will therefore be necessary.
In order to compute the extent of shareholding of the bidder, the shares or voting rights of
persons acting in concert (PACs) are included. PACs mean persons, who with a common
objective or purpose of acquisition of shares or voting rights in, or exercising control over,
the target company, pursuant to an agreement or understanding (whether formal or
informal) directly or indirectly co-operate for the acquisition of shares or voting rights in, or
exercise of control over, the target. The Takeover Regulations set out certain categories of
persons who are deemed to be PACs, unless the contrary is established.
For the purpose of this article, any reference to the shareholding or thresholds of an
acquisition by a bidder will also include the shareholding and acquisitions of PACs.

Agreements in recommended bids

9. If the board of the target company recommends a bid, is it common to have a formal
agreement between the bidder and target? If so, what are the main issues that are likely
to be covered in the agreement? To what extent can a target board agree not to solicit or
recommend other offers?

Indian laws do not recognise the concept of a recommended bid (see Question 5).
No formal agreement is entered into by the bidder and the target where the transaction is
for secondary purchase of shares or voting rights between the promoter/selling shareholder
and the bidder. In some cases, the target may be a mere confirming party to such
agreements.
However, a formal agreement will be entered into by the bidder with the target when the
acquisition is through a fresh primary issuance of shares or convertibles. This agreement
will cover all key clauses that are customary for a transaction of this nature, such as (among
others):
 Subscription securities.
 Considerations.
 Representations and warranties.
 Closing conditions.
 Closing procedures.
 Dispute resolution procedures.
A formal agreement is also entered into by the bidder with the target when the acquisition is
to be performed by way of a court-based merger or amalgamation of the bidder and target.
This agreement will include (among other things):
 A description of the transferred undertaking.
 The assumed and retained assets and liabilities.
 A determination of the share swap ratio.
 The process for filing the scheme of amalgamation.
 Accounting treatment.

Break fees
10. Is it common on a recommended bid for the target, or the bidder, to agree to pay a
break fee if the bid is not successful?

It is not uncommon for the bidder and the selling shareholder to enter into an agreement for
the payment of a break fee where the underlying transaction which triggers the open offer
does not go through. If the transaction is called off by the bidder voluntarily or due to its
default, the bidder must pay the break fee. There is no restriction on the size of such
payment, however, where the payment is to be made to a non-resident bidder, prior
approval from the Reserve Bank of India is required.
Committed funding
11. Is committed funding required before announcing an offer?

Under the Takeover Regulations, before making a public announcement of an open offer,
the bidder must have firm financial arrangements in place for fulfilling the payment
obligations under the open offer, and the merchant banker must ensure the same through
verifiable means.
The Takeover Regulations further require the bidder to open an escrow account no later
than two working days before the date of the Detailed Public Statement, towards security for
performance of its obligations under the Takeover Regulations. The escrow account must
be funded for an amount equal to:
 25% of the consideration for the first INR5 billion.
 10% of the remaining consideration.
For offers conditional on a minimum level of acceptance, the escrow amount must be equal
to 100% of the consideration payable in respect of the minimum level of acceptance or 50%
of the consideration payable under the open offer (whichever is higher). If there is an
upward revision of the offer price or offer size, the escrow amount must be increased
accordingly.
The escrow amount can be in the form of:
 Cash deposited with a scheduled commercial bank.
 Bank guarantee in favour of the manager of the open offer from a scheduled
commercial bank.
 Deposit of frequently traded and freely transferable shares or securities with the
appropriate margin (along with a minimum of 1% cash deposit).

Announcing and making the offer

Making the bid public
12. How (and when) is a bid made public? Is the timetable altered if there is a competing
bid?

Requirement to make an announcement

The time the bid must be made public depends on the underlying transaction that triggers
the open offer. For the various underlying transactions, the date of public announcement of
the open offer is as follows:
 For a direct acquisition of shares, voting rights or control, the date of announcement
depends on whether the acquisition is:
 by way of a primary subscription: this must be the date the target's board
authorises the primary subscription;
 by way of a secondary transaction: this must be the date of agreeing to acquire the
shares or voting rights or control.
 For an indirect acquisition of shares, voting rights or control, the date of announcement
depends on whether the acquisition is:
  deemed to be a direct acquisition: the announcement date must be the earlier of
either the date the primary acquisition was contracted or date the intention or
decision to make the primary acquisition was publicly announced;
 not deemed to be a direct acquisition: the announcement date must be within four
working days of the earlier of either the date the primary acquisition was
contracted or date when the intention or decision to make the primary acquisition
was publicly announced.
 For voluntary open offers, the date of announcement must be the date the bidder took
the decision to voluntarily make a public announcement of an open offer for acquiring
the shares of the target.
 For acquisitions where the specific date on which the title to shares, voting rights or
control is acquired is beyond the control of the bidder, the date of announcement must
be no later than two working days from the date of receiving notice of having acquired
such title, voting rights or control.
 For an acquisition of shares, voting rights or control by way of conversion of convertible
securities, the date of announcement depends on whether the acquisition is:
 without a fixed date of conversion: the announcement date must be the date of
exercise of the option to convert the securities into shares of the target;
 with a fixed date of conversion: the announcement date must be the second
working day before the scheduled date of conversion.
 For a direct acquisition of shares, voting rights or control through a secondary
transaction coupled with acquisitions in any other form described above (indirect,
primary and so on), the announcement date must be the date of the first acquisition,
provided the bidder discloses the details of the proposed subsequent acquisition in the
public announcement.
The public announcement is followed by a Detailed Public Statement (DPS), which must be
published no later than five working days from the date of the public announcement (with
the exception of indirect acquisitions (that do not qualify to be a deemed direct acquisition)
for which the DPS can be made no later than five working days from the date of completion
of the primary acquisition). The DPS must be published in certain specified newspapers,
with copies also sent to the Securities and Exchange Board of India (SEBI), the stock
exchanges and the target.

Offer timetable
A brief timetable for an open offer (for direct and indirect offers) is given below. All days
listed below are working days (WDs):
 Day (X). Signing of the underlying transaction document. Public announcement to be
made to all the stock exchanges on which the shares of the target are listed. (For
indirect offers, the public announcement may be made up to X + 4 WD.)
 X + 1 WD. Copy of the public announcement to be sent to SEBI and the target. (For
indirect offers, this can be sent within X + 5 WDs.)
 In the case of indirect offers, "X" as used in the timelines below should be read as "Y",
where Y is the date of closing of the underlying transaction documents.
 X + 3 WDs. The bidder must open an escrow account.
 X + 5 WDs. Publication of the DPS through the manager of the open offer (Manager) in
newspapers (English, Hindi and regional language daily with wide circulation).
Submission of one copy of the DPS to:
  SEBI, through the Manager;
 all stock exchanges where the target is listed;
 the target (at its registered office).
 X + 10 WDs. Draft letter of offer to be filed with (and prescribed non-refundable fee to
be paid to) SEBI along with the Manager's due diligence certificate through the
Manager and copy sent to:
 the target at its registered office; and
 the stock exchanges where the target's shares are listed.
 X + 15 WDs. On receipt of the DPS, the target's board must constitute a committee of
independent directors to provide reasoned recommendations on the open offer.
 X + 40 WDs. SEBI to provide its comments on the draft letter of offer (if any) within 15
working days from the filing of the draft letter of offer with the SEBI (as specified above)
and if SEBI specifies any changes, the Manager and the bidder will incorporate these
before dispatching the draft to the shareholders as specified below. (Although the
statutory period is 15 WDs, this step may take 30 WDs or less than 15 WDs to
complete.)
 X + 44 WDs. The target will furnish to the bidder a list of shareholders as per the
register of members of the target within two working days from the Identified Date.
 X + 47 WDs. Dispatch of offer letter to the shareholders (whose names appear on the
register of members of the target company on the Identified Date).
 X + 48 WDs. Publication of comments on open offer by the independent directors of
the target company.
 X + 51 WDs. Issue of advertisement in a specified format announcing the schedule of
activities for open offer, status of statutory and other approvals and the procedure for
tendering acceptances.
 X + 52 WDs. Offer opens for tender of shares.
 X + 62 WDs. Offer closes for tender of shares.
 X + 67 WDs. Bidder to issue a post offer advertisement within five working days from
the offer period, giving details including aggregate number of shares tendered,
accepted, date of payment of consideration.
 X + 72 WDs. Bidder to open a special escrow account with a banker and complete
payment of consideration to all the shareholders who have tendered shares. Closure of
the underlying transaction.

Competing offers
A competitive offer (by way of making a public announcement) can be made within 15
working days of the date the DPS is made by the bidder. Upon a competitive offer being
made, the bidder who made the first public announcement can revise the terms of its open
offer (provided they are more favourable to the shareholders of the target). Both the
competing bidders can make upward revisions of the offer price at any time, up to three
working days prior to the commencement of the tendering period.
The schedule of activities and the tendering period for all competing offers will be carried
out with identical timelines, and the last date for tendering shares in acceptance of all offers
must coincide.
Offer conditions
13. What conditions are usually attached to a takeover offer? Can an offer be made
subject to the satisfaction of pre-conditions (and, if so, are there any restrictions on the
content of these pre-conditions)?

An open offer can be made subject to certain pre-conditions.

The Takeover Regulations permit the bidder to make an open offer conditional upon a
minimum level of acceptance (subject to certain specific amounts of consideration being
kept in the escrow account). If there is an agreement pursuant to which the open offer has
been made, the agreement must contain a condition that in the event of the desired level of
acceptance not being received, the bidder will not be obligated to acquire any shares and in
such a case the agreement will stand rescinded. In such cases, the bidder can also indicate
a lower price (which is not less than the floor price determined under the Takeover
Regulations), for acquiring all the acceptances despite the acceptance falling short of the
indicated minimum level of acceptance, in the event that the open offer does not receive the
minimum acceptance.
An open offer can be made subject to receipt of all statutory approvals required for
completing the open offer. It is the responsibility of the bidder to pursue all statutory
approvals without any default, neglect or delay, provided that if he/she is unable to make
payment to the shareholders who have accepted the offer due to non-receipt of statutory
approvals, the Securities Exchange Board of India (SEBI) may, if satisfied that the non-
receipt was not attributable to any wilful default, failure or neglect on the part of the bidder to
diligently pursue such approvals, grant an extension of time for making payments, subject to
the bidder paying interest. The bidder can withdraw an open offer if the statutory approvals
for making the open offer or effecting the acquisitions attracting the obligation to make the
open offer have been finally refused (provided that the approvals were specifically disclosed
in the Detailed Public Statement (DPS) and the offer letter).
The Takeover Regulations also permit an open offer to be withdrawn if any condition
stipulated in the agreement for acquisition (which attracts the obligation to make an open
offer) is not met for reasons outside the reasonable control of the bidder and such
agreement will be rescinded, provided the condition for rescinding is specifically disclosed in
the DPS and the offer letter. However, once an open offer is triggered, it must be completed
within the timelines set out in the Takeover Regulations, irrespective of whether the express
conditions are satisfied. If the conditions are not satisfied prior to completion of the open
offer, the bidder can make an application to SEBI to seek an extension of time for
completion of the open offer. SEBI may, at its discretion, grant an extension of time, subject
to such conditions it deems fit to impose.

Bid documents
14. What documents do the target's shareholders receive on a recommended and hostile
bid?

The documents to be received by the target's shareholders are uniform, irrespective of

whether it is a voluntary, mandatory or hostile offer. The following documents must be made
available to the shareholders (the first ten items below must be made available for
inspection of the shareholders; items five and six are published in newspapers; the eleventh
item is despatched to the shareholders):
 Certificate of incorporation, memorandum of association, articles of association
(articles)/incorporation documents of the target.
 Certificate issued by an independent chartered accountant certifying adequacy of
financial resources of the bidder to fulfil the open offer obligations.
 Certificate from the Securities Exchange Board of India (SEBI)-registered merchant
banker or independent chartered accountant certifying the fair value of equity shares of
the target.
 Audited annual reports of the target for the last three years.
 Copy of recommendation by the target's committee of independent directors.
 Copy of public announcement and Detail Public Statement.
 Copy of letter issued by a scheduled commercial bank confirming details of amount
kept in an escrow account by the bidder.
 Copy of memorandum of understanding or share purchase agreement entered into
between bidder and seller.
 Copy of agreement/documentation regarding opening of special depository account
and the escrow arrangement with the escrow agent.
 Copy of SEBI observation letter on the draft letter of offer.
 Letter of offer.

Employee consultation
15. Are there any requirements for a target's board to inform or consult its employees
about the offer?

There is no requirement for the target's board to inform or consult its employees about the
offer. However, the bidder must disclose its future plans for the target company in the
Detailed Public Statement and offer letter. Any intention to down size/restructure the
workforce should be disclosed in the offer documents.

Mandatory offers
16. Is there a requirement to make a mandatory offer?

Mandatory offers must be made in the following cases:

 Any acquisition of shares/voting rights which entitles the bidder to exercise 25% or
more of the voting rights of the target company (directly or indirectly).
 Where the bidder, who has already acquired 25% or more of the voting rights of a
target, acquires further shares exceeding 5% of the voting rights of the target company
in any financial year, whether directly or indirectly (gross acquisitions).
 Where the bidder acquires control (directly or indirectly) over the target.

Consideration
17. What form of consideration is commonly offered on a public takeover?

The Takeover Regulations permit consideration for the open offer to be paid in the following
forms:
  Cash.
 Issue, exchange or transfer of listed shares of the bidder.
 Issue, exchange or transfer of listed secured debt instruments issued by the bidder with
certain minimum ratings.
 Issue, exchange or transfer of convertible debt securities entitling the holder thereof to
acquire listed shares of the bidder.
 A combination of the above.
If the bidder acquires or agrees to acquire shares during the 52-week period prior to the
public announcement of the open offer constituting more than 10% of the voting rights in the
target, and the consideration is paid in cash, the open offer must provide an option to the
tendering shareholders to receive payment in cash.
The most common form of consideration offered is cash.
18. Are there any regulations that provide for a minimum level of consideration?

The Takeover Regulations set out detailed methods of computation of the minimum price
that should be offered in an open offer (Regulation 8). These methods vary depending on
whether it is a direct acquisition (including deemed direct acquisition) or an indirect
acquisition of shares.
Typically, for direct acquisitions of shares or voting rights in or control over the target and
indirect acquisitions (which are deemed to be direct acquisitions), the minimum offer price
must be the highest of:
 The negotiated price per share for acquisitions under the agreement attracting the
obligation to make the open offer.
 The volume weighted average price paid or payable for acquisitions by the bidder
during the 52 weeks prior to the date of the public announcement.
 The highest price paid or payable for any acquisition by the bidder during the 26 weeks
prior to the date of the public announcement.
 The volume weighted average market price of the shares for a period of 60 trading
days immediately prior to the date of the public announcement (for frequently traded
shares).
 For infrequently traded shares, the price determined by the bidder and the manager to
the open offer taking into account valuation parameters, including book value,
comparable trading multiples and so on.
 The per share value of the target company taken into account for an indirect acquisition
of the target (in cases of indirect acquisitions which are deemed direct acquisitions), if
applicable.
Furthermore, consideration paid in the form of a control premium or non-compete fees or
otherwise will also be factored in when determining the open offer price.
The price can also be revised to a higher amount in cases where any acquisitions by the
bidder are undertaken at a higher price during the offer period or within 26 weeks after the
tendering period.
19. Are there additional restrictions or requirements on the consideration that a foreign
bidder can offer to shareholders?
The Takeover Regulations do not make a distinction between a domestic bidder and a
foreign bidder in relation to the consideration to be paid to the selling shareholders in the
open offer. From an exchange control law perspective, the consideration paid for acquisition
of shares pursuant to an open offer will require compliance with the pricing guidelines set
out in the Takeover Regulations.
However, a transfer of shares by a non-resident Indian to a foreign bidder (who is not a non-
resident Indian) will require prior approval of the Reserve Bank of India.

Post-bid
Compulsory purchase of minority shareholdings
20. Can a bidder compulsorily purchase the shares of remaining minority shareholders?

Under the Takeover Regulations, once the bidder publicly announces a mandatory open
offer, he/she can simultaneously make an offer for de-listing the shares of the target by
making an offer to acquire 100% of its public shareholding, provided the intention to de-list
is disclosed at the time of making the Detailed Public Statement. If the de-listing offer is
unsuccessful, the bidder will have to:
 Make a public announcement to that effect.
 Continue with its open mandatory open offer.
 Enhance the offer price for the lapse in time in the manner prescribed by law.

Restrictions on new offers

21. If a bidder fails to obtain control of the target, are there any restrictions on it
launching a new offer or buying shares in the target?

If the bidder fails to obtain control of the target, there is no restriction on him/her launching a
new offer or buying shares in the target.
However, if the bidder has completed an acquisition of shares under the open offer, any
further acquisition of shares within 26 weeks of the completion date of the tendering period
for a price higher than that offered under the open offer will require the bidder to pay the
difference in price to all shareholders who had tendered their shares in the open offer.
Further, in any subsequent mandatory open offer, if the bidder acquires a number of shares
which takes its shareholding to over 75%, the bidder will be required to divest its
shareholding to bring it to 75% within a period of one year and cannot acquire any further
shares during this period.

De-listing
22. What action is required to de-list a company?

De-listing of a company from the stock exchanges is governed by the SEBI (Delisting of
Equity Shares) Regulations 2009 (Delisting Regulations). De-listing of a company can be
performed by way of:
 Voluntary de-listing (from all or some of the stock exchanges).
  Compulsory de-listing by the stock exchanges.
Companies can be voluntarily de-listed from all recognised stock exchanges or only some
of them. If after voluntary de-listing, the shares continue to remain listed on any recognised
stock exchange with a nationwide trading terminal, an exit opportunity does not need to be
given to the public shareholders. Otherwise, all public shareholders will have to be provided
an exit opportunity.
If no exit opportunity is required, the company's board must:
 Pass a resolution to such effect.
 Publish a public notice of the proposed de-listing in specified newspapers (including the
names of stock exchanges from which it proposes to be de-listed and those on which it
will remain listed, the reasons for the de-listing and so on).
 Apply to the concerned stock exchanges from which the de-listing is sought (which
must be disposed of by the stock exchange within 30 days).
 Disclose the fact of de-listing in the ensuing annual report.
In cases where an exit opportunity must be provided to the public shareholders, the
following broad process must be followed:
 Pass a board resolution approving the de-listing and appointing a merchant banker and
other intermediaries.
 Pass special resolution of the shareholders through postal ballot (with votes in favour of
the resolution being at least two times the votes cast against it).
 Apply to the stock exchanges for in-principle approval and receipt of the de-listing
request.
 Compute the floor price in accordance with the Delisting Regulations and deposit the
aggregate amount to be paid to the public shareholders based on the floor price into an
escrow account (either by cash or bank guarantee, or a combination of both).
 The promoters must make a public announcement of the de-listing followed by a
despatch of letters of offer to the public shareholders.
 Opening and closing of the de-listing offer.
 The de-listing offer can proceed if the minimum bid is received (that is, the number of
shares offered at the discovered price takes the promoter shareholding above 90%
(including at least 25% public shareholders holding shares in dematerialised form
having tendered their shares, if certain conditions are not fulfilled)).
 The promoter may or may not accept the discovered price.
 If the discovered price is not accepted by the promoters, the de-listing offer fails.
 If the discovered price is accepted by the promoters (or the promoters choose to pay a
higher amount), the promoters must:
 make a public announcement to this effect;
 deposit additional money into the escrow account based on the final accepted
price; and
 make payment to all shareholders who tendered their shares at a price higher than
the discovered price.
Subsequently, an application must be made to the stock exchanges for de-listing the shares
of the company. The remaining shareholders of the company will be entitled to tender their
shares to the promoter for a period of one year at the final accepted price.
Target's response
23. What actions can a target's board take to defend a hostile bid (pre- and post-bid)?

Pre-bid
Where the target or its promoters are of the view that a hostile bid is imminent, various
defensive mechanisms can be adopted, such as:
 Poison pill or scorched earth tactics.
 Contractual provisions restricting change of control or use of trade marks.
 Change in control compensation to key managerial persons.
These tactics are naturally subject to receiving the necessary corporate approvals that may
be required to adopt such defences.

Post bid
In a post-bid situation, the defences available to the target are limited. The Takeover
Regulations require the target's board to ensure that during the offer period, the business of
the target is conducted in the ordinary course consistent with past practice. Furthermore,
without approval of the shareholders by way of a special resolution through postal ballot, the
target's board of directors or its subsidiaries cannot (among other things):
 Alienate any material assets (whether by way of sale, lease, encumbrance or
otherwise) or enter into any agreement outside the ordinary course of business.
 Effect any material borrowings outside the ordinary course of business.
 Issue or allot any authorised but unissued securities entitling the holder to voting rights.
 Implement any buyback of shares or effect any other change to the capital structure of
the target.
 Enter into, amend or terminate any material contracts to which the target or any of its
subsidiaries is a party, outside the ordinary course of business.
Therefore, some of the typical pre-bid defences can be difficult to implement in a post-bid
situation. In such cases, the available defences could be to increase the promoter stake or
solicit a friendly takeover offer from another company.

Tax
24. Are any transfer duties payable on the sale of shares in a company that is
incorporated and/or listed in the jurisdiction? Can payment of transfer duties be
avoided?

Securities transaction tax (STT) and stamp duty must be paid on the sale or purchase of
securities listed on stock exchanges in India. STT is levied at 0.1% of the value of the
transaction.
Stamp duty is payable on the agreement effecting the transfer of shares. The amount of
stamp duty to be paid varies depending on the state of India and would be payable in
accordance with the stamp duty laws of the state in which the agreement is executed.
In addition, if the shares are held in physical form, stamp duty is payable on the share
transfer form required for effecting the transfer of shares. A uniform stamp duty of 0.25% is
payable on share transfer forms across all states in India.
No stamp duty is payable on the transfer of shares if the shares are held in dematerialised
form (except on the agreement as mentioned above).

Other regulatory restrictions

25. Are any other regulatory approvals required, such as merger control and banking? If
so, what is the effect of obtaining these approvals on the public offer timetable?

Regulatory approvals may be required for acquisitions leading to an open offer. Examples
of certain regulatory approvals that may be necessary include:
 Approval from the Competition Commission of India, when certain financial thresholds
are reached.
 Approval from the relevant administrative ministry or the Department of Industrial Policy
and Promotion (as applicable) if the sector in which the acquisition is being made
requires prior government approval or the relevant sectoral cap is breached under the
extant foreign direct investment policy.
 Approval from the relevant sectoral regulator (for example, the Reserve Bank of India
(RBI) for non-banking finance companies and the Insurance Regulatory and
Development Authority for insurance companies), if necessary.
 Approval from the RBI, if payments are to be made by a non-resident bidder to an
individual who is a non-resident Indian.
Seeking such approvals may delay the open offer process.
If there is a delay in receiving any statutory approval, the Securities Exchange Board of
India can grant an extension of time for the payment of consideration, subject to the bidder
agreeing to pay interest for the delayed payment (provided it is satisfied that the non-receipt
was not attributable to any wilful default, failure or neglect of the bidder to pursue the
approvals).
Applications for statutory approvals are typically made immediately after execution of the
underlying transaction documents which trigger the open offer, so that there is sufficient
time to receive the necessary approvals before the bidder is obligated to make payments as
per timelines specified under the Takeover Regulations.
26. Are there restrictions on the foreign ownership of shares (generally and/or in specific
sectors)? If so, what approvals are required for foreign ownership and from whom are
they obtained?

There is no general restriction on the foreign ownership of shares and any restriction on
foreign ownership will depend on the sector in which the target operates.
Foreign ownership in a majority of the sectors has been liberalised by the Government of
India and is under the "automatic route" (except in certain sectors where there is absolute
prohibition).
Foreign ownership which crosses the relevant sectoral cap or requires the prior approval of
the government must be approved by either the Department of Industrial Policy and
Promotion or the relevant administrative ministry/department in which the target company
operates (as applicable).
For example, the following sectoral caps on foreign investment are applicable in India:
 The mining sector (for titanium bearing minerals and ores) has a 100% cap on foreign
investment and any foreign ownership must have government approval.
 The single brand retail trading sector has a 100% cap on foreign investment and any
foreign ownership above 49% must have government approval.
 The multi-brand retail trading sector has a 51% cap on foreign investment and any
foreign ownership must have government approval.
 The defence sector has a 100% cap on foreign investment and any foreign entity
seeking to own a stake beyond 49% must have government approval.
 The print media sector (publishing of newspapers and periodicals including foreign
magazines which deal with news and current affairs) has a 26% cap on foreign
investment and any foreign investment must have government approval.
 Investment in airlines (domestic scheduled passenger airline) from foreign entities has
a 100% cap on foreign investment and any foreign entity seeking to own a stake
beyond 49% must have government approval.
 Telecom services have a 100% cap on foreign investment and any foreign entity
seeking to own a stake beyond 49% must have government approval.
 Pharmaceuticals have a 100% cap on foreign investment and any foreign entity
seeking to own a stake beyond 74% (through brownfield investment) must have
government approval.
27. Are there any restrictions on repatriation of profits or exchange control rules for
foreign companies?

Foreign investment in Indian companies is freely repatriable (subject to the payment of the
relevant taxes). However, repatriation is not possible if:
 The investment was made on a non-repatriation basis (for example, for investments by
a non-resident Indian under certain specific schemes).
 The sector does not allow for repatriation or places certain restrictions on repatriation
(for example, in relation to real estate).
Furthermore, dividends (net of applicable taxes) on foreign investments can be remitted
outside India through an authorised dealer bank.
28. Following the announcement of the offer, are there any restrictions or disclosure
requirements imposed on persons (whether or not parties to the bid or their associates)
who deal in securities of the parties to the bid?

There are no restrictions imposed on any person to deal in securities of the parties to the
open offer (that is, of the bidder or seller).

Reform
29. Are there any proposals for the reform of takeover regulation in your jurisdiction?

There are presently no proposals to further reform the Takeover Regulations.

The regulatory authorities
Securities and Exchange Board of India
W [Link]
Main area of responsibility. Regulation of the securities market.

BSE Limited and National Stock Exchange of India Limited

W [Link] and [Link]
Main area of responsibility. Regulation of the entities listed on the respective stock
exchanges.

Ministry of Corporate Affairs

W [Link]
Main area of responsibility. Regulating the functioning of the corporate sector in
accordance with applicable law.

Department of Industrial Policy and Promotion

W [Link]
Main area of responsibility. Facilitating investment and technology flows and monitoring
industrial development, formulation and implementation of industrial policy and strategies,
foreign direct investment policy and promotion.

Competition Commission of India

W [Link]
Main area of responsibility. Regulating anti-trust activities.

Reserve Bank of India

W [Link]
Main area of responsibility. Central bank of India which formulates India's monetary policy
(including foreign exchange policy).

Online resources
Securities and Exchange Board of India (SEBI)
W [Link]
Description. Maintained by SEBI. Contains all SEBI-related rules, regulations, circulars,
clarifications and so on. Information is typically up to date.

BSE Limited and National Stock Exchange of India Limited

W [Link]
W [Link]
Description. Maintained by the respective stock exchanges. Information available with
regard to filings made by companies with stock exchanges. Information is typically up to
date.

Ministry of Corporate Affairs

W [Link]
Description. Maintained by the Ministry of Corporate Affairs. Provides information on the
Companies Act 2013 and Rules thereunder and filings made with the Registrar of
Companies. Information is typically up to date.

Department of Industrial Policy and Promotion (DIPP)

W [Link]
Description. Maintained by the DIPP. Information available on foreign direct investment
policy of India. Information is typically up to date.

MERGERS & ACQUISITION LAWS IN INDIA-

FREQUENTLY ASKED QUESTIONS
1. What are the key laws and regulations that govern mergers and acquisitions in
your jurisdiction?
Mergers and acquisitions in India are governed by the following main legislation:
a. The Companies Act 2013
b. The Competition Act 2002
c. The Foreign Exchange Management Act 1999 (In case of cross border merger).
d. SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011.
e. The Income Tax Act 1961
f. Indian Stamp Act 1899
2. What are the government regulators and agencies that play key roles in
mergers and acquisitions?
Following government regulators and agencies play key roles in the process of merger
and acquisition in India:
a. Registrar of Companies and Regional Director under Ministry of Corporate Affairs
b. National Company Law Tribunal (NCLT)
c. Competition Commission of India (CCI)
d. Securities and Exchange Board of India (SEBI)
e. Reserve Bank of India (RBI)
f. The Income Tax Department (ITD)
3. Are hostile bids permitted? If so, are they common in your jurisdiction?
A bid from an acquirer is considered to be hostile when the promoter does not wish to
sell off its shares, voting rights and control to the acquirer whilst the acquirer is still
making all the possible efforts to purchase the shares and the rights attached to the
same. The above situation relating to takeovers in India is governed by the Securities
and Exchange Board of India (Substantial Acquisition of Shares and Takeovers)
Regulations 2011 which mandates the acquirer to make several disclosures at various
stages of acquisition of shares, voting rights and control of the listed company. Hostile
bids are possible but the person acquiring shares will also have to comply with the
aforesaid Regulations. Hostile bids are rare in our jurisdiction.
4. What laws may restrict or regulate certain takeovers and mergers, if any? (For
example, anti-monopoly or national security legislation).
A transaction that causes appreciable adverse effect on competition is void under the
Competition Act 2002 (“Act”). Any acquirer entering into a transaction above a specified
threshold is required to give a notice to the Competition Commission of India (‘CCI’)
disclosing the details of such transaction. If the CCI is of the view that the transaction
might cause an appreciable adverse effect on competition, it will direct that the
transaction not to take effect. Where the CCI feels that certain modifications in the
transaction might prevent an appreciable adverse effect on the competition, it shall
direct the acquirer to make such modifications. The acquirer may accept the
modification or make amendments which will have to be approved by the CCI. Further,
the CCI has power to make inquiries in case of certain agreements, abuse of dominant
position or any combination thereof. Additionally, the CCI has the power to impose
penalties in case of any offence under the Act.
5. What documentation is required to implement these transactions?
Documentation will depend on the nature of transaction. However, generally the
following documentation will be required:
a. Documents for obtaining approval from the Board of Directors and Shareholders of
both the acquirer and target company, wherever applicable
b. Scheme/Petition to be filed before the concerned authority
c. Notices to the shareholders and creditors
d. Consent from the shareholders and creditors
e. Notice to be published in newspaper
f. Public Announcement in case of acquisition of shares of a listed company
g. Various affidavits, declarations and other documents
h. Share subscription/ purchase agreement
i. Share Transfer form and
j. Reporting to stock exchanges in a prescribed format in case of a listed company, as
applicable
6. What government charges or fees apply to these transactions?
The following government charges/ fees shall apply, as applicable:
i. Fee for filing merger petition before NCLT
ii. Share transfer stamp duty on consideration for acquisition of shares where shares are
held in physical form
iii. Fee payable to the Regional Director/ Registrar of Companies on filings the forms/
application
iv. Stamp duty on Share Purchase/Subscription agreement, Affidavits, merger order,
etc. as applicable
v. Fee payable to notary for notarisation of affidavits/ undertakings
7. Do shareholders have consent or approval rights in connection with a deal?
In case of a scheme of merger, approval from the shareholders of respective companies
shall be required. However, where written consent of the shareholders has already been
filed along with the merger petition before the NCLT, the NCLT may dispense with the
requirement of convening a shareholders meeting at its discretion. In case of acquisition
of shares, the Indian acquirer company may be required to obtain approval of the
shareholders where its total investment is in excess of the threshold provided under
Indian laws in this regard. Where the acquirer is a foreign company, the requirement of
shareholders’ approval shall be governed by the laws of its overseas jurisdiction.
8. Do directors and controlling shareholders owe a duty to the stakeholders in
connection with a deal?
The Companies Act 2013, casts a fiduciary duty on the directors of a company to act for
the benefit of its members as a whole, and in the best interests of the company, its
employees, the shareholders, the community and for the protection of environment.
Directors are required to exercise their duties with due and reasonable care, skill and
diligence and to exercise independent judgment. At the time of placing a deal for the
approval of the shareholders, the directors are required to inform the shareholders of
the company about the rationale, benefits and risks of the deal, to enable the
shareholders to take a considered decision. Further, the directors are responsible for
ensuring that the deal is in the best interest of the company as well as the stakeholders.
Additionally, the Securities and Exchange Board of India (Substantial Acquisition of
Shares and Takeovers) Regulations 2011, requires the board of directors of a listed
company to constitute a committee of independent directors to provide reasoned
recommendations on each offer, which are required to be published by the company.
Further, the code for independent directors detailed under the Companies Act 2013
imposes an obligation on an independent director to safeguard the interest of all
stakeholders, balance the conflicting interests of the stakeholders and acting within his
authority, assist in protecting the legitimate interests of the company, shareholders and
its employees.
The law imposes no obligation on the controlling shareholders of the company towards
the stakeholders. However, balancing provisions have been provided for the minority
shareholders to challenge the deal if the same is prejudicial to their interests.
9. In what circumstances are break-up fees payable by the target company?
Although break fees are not provided for under the law, they can be contractually
agreed between the parties. The Indian Contract Act 1872, allows damages to the non-
breaching party to a contract to the extent of losses as may be reasonably foreseeable
as a natural consequence from the non-performance of the contract by the breaching
party. The commonly agreed instances under which the obligation to pay break-up fees
is triggered are as follows:
a. Break-up of the negotiations by one of the parties
b. A seller choosing a different buyer than the one named preliminary agreement
c. When a seller opts to open the investment opportunity to the public instead of the
private investor named in the agreement
and
d. If a defect is discovered in the target company that had not been previously
disclosed. In most cases, the party breaching the letter of intent or memorandum of
understanding is required to reimburse the expenses incurred by the other party in
connection with the transaction
10. Can conditions be attached to an offer in connection with a deal?
In India, it is open for the parties entering into a deal to negotiate and agree upon the
terms and conditions of the deal. Some of the common conditions attached to an offer in
connection with a deal are the fulfilment of the conditions precedent and subsequent
(findings of the comprehensive due diligence exercise), lock-in period of the securities,
restriction on transfer of shares and affirmative voting rights to be provided to the
investor. In case of acquisition of a listed company, the Securities and Exchange Board
of India (Substantial Acquisition of Shares and Takeovers) Regulations 2011, requires
the acquirer to make an open offer conditional as to the minimum level of acceptance.
11. How is financing dealt with in the transaction document? Are there
regulations that require a minimum level of financing?
Mergers are generally different from acquisitions in the way they are financed. Mergers
are generally cashless and involve share swaps. In case of acquisition of an unlisted
company, the law is silent on the level of financing by the purchaser and the acquisition
agreement records the terms of financing by the purchaser therein.
In the case of acquisition of a listed company where the acquisition triggers a
mandatory public offer under the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations 2011, the said regulations contains
provisions for securing the acquirer’s performance of the financial obligations. The
acquirer is required to deposit a part of the consideration (as prescribed under the said
regulation) payable under the open offer in an escrow account not later than 2 (two)
working days prior to the date of the detailed public statement of the open offer for
acquiring shares. The escrow account may be created by way of a cash deposit, a bank
guarantee issued in favour of the manager to the open offer by any scheduled
commercial bank, or a deposit of frequently traded and freely transferable equity shares
or other freely transferable securities with an appropriate margin.
12. Can minority shareholders be squeezed out? If so, what procedures must be
observed?
The Companies Act 2013, contains provisions for squeezing out of minority
shareholders form the company.
The Act requires an acquirer holding 90% (ninety percent) or more of the issued equity
shares in a company, to make an offer to the minority shareholders to buy the equity
shares held by such minority shareholders in the company and the minority
shareholders may sell their equity shares to the majority shareholders at the price
determined on the basis of valuation by a registered valuer.
The procedure for the same has been detailed here under:
a. The acquirer holding at least 90% (ninety percent) of the shares will be required to
notify the company of their intention to buy the minority shares
b. The majority shareholders will have to make an offer to the minority shareholders to
buy their equity shares at the price determined on the basis of valuation by a registered
valuer
c. The majority shareholders will have to deposit an amount equal to the value of the
equity shares to be acquired by them, in a separate bank account to be operated by the
company for payment to the minority shareholder
d. The payment is required to be disbursed to the minority shareholders by the company
within a period of 60 (sixty) days which will be continued to be made to the minority
shareholders who have not received the payment, for a period of 1 (one) year and
e. The company will be required to deliver the equity shares to the majority
shareholders upon receipt of the same
Further, the said Act also gives a right to the minority shareholders to make an offer to
the majority shareholders to purchase their shares.
13. What is the waiting or notification period that must be observed before
completing a business combination?
For the purposes of business combinations, the Competition Act 2002 prescribes the
following timelines for various actions to be undertaken by the applicant and the
Competition Commission of India:

Activity Timeline

Notification to the Within 30 (thirty) days of approval of the proposal relating to the mer
Competition Commission of amalgamation by the board of directors of the enterprise concerned,
India by the party proposing any agreement or other documents for acquisition of shares, assets,
to enter into a combination control, as the case may be.

Order or directions to be
Within a period of 210 (two hundred and ten) days from the date of f
issued by the Competition
with the Competition Commission of India.
Commission of India

14. Are there any industry-specific rules that apply to the company being
acquired?
The industry specific rules that apply to the company being acquired depends on the
particular sector to which the company falls. Typically, the said rules apply to highly
regulated sectors or sectors of strategic importance, such as banking, financial services,
insurance, media, telecommunications, defence, civil aviation, electricity etc.
Accordingly, sector-specific regulators have been established to regulate some of the
aforesaid industries, e.g. the Telecom Regulatory Authority of India and the Department
of Telecommunications regulate the telecommunications sector, the Directorate General
of Civil Aviation regulates civil aviation, the Reserve Bank of India regulates the banking
and financial services sectors, the Insurance Regulatory and Development Authority
regulates the insurance sector, and the Ministry of Information and Broadcasting
regulates the electronic media sector.
Further, the Foreign Direct Investment Policy, the Foreign Exchange Management Act
1999 and its regulations contain industry specific rules such as the permissible limit of
foreign investment, entry routes etc.
15. Are cross-border transactions subject to certain special legal requirements?
The Companies Act 2013 contains provisions pertaining to inbound and outbound
mergers and amalgamations. The provision envisages a scheme of amalgamation
providing for, amongst other things, payment of consideration, including by way of cash
or depository receipts or a combination of both.
The Foreign Direct Investment Policy provides that foreign investment in India can be
made either with or without the approval of the Reserve bank of India. Further, the rules
and regulations framed by the Reserve Bank of India under the Foreign Exchange
Management Act 1999 will be applicable to cross border transactions in India.
The Foreign Direct Investment Policy prescribes certain conditions for making
investments in India in different sectors, such as maximum permissible limits on
investment by a foreign party, pricing guidelines to be adhered to for making the
investments, lock-in requirements of such foreign investment, etc.
16. How will the labour regulations in your jurisdiction affect the new employment
relationships?
Where the ownership or management of an undertaking is transferred, every workman
who has been in continuous employment for not less than 1 (one) year in that
undertaking immediately before such transfer must be given a notice of transfer. Also,
every such workman is entitled to 1 (one) month written notice or salary in lieu of notice
and retrenchment compensation in accordance with the provisions of the Industrial
Disputes Act 1947. Retrenchment compensation shall be an average pay of 15 (fifteen)
days for every completed year of continuous service and a notice has to be served in
the prescribed manner on the appropriate government or such authority as specified by
the appropriate government.
No such compensation shall be payable by the employer to a workman in any case
there has been a change of employer by reason of the transfer, if
a. the service of the workman has not been interrupted by such transfer
b. the terms and conditions of service applicable to the workman after such transfer are
not in any way less favourable to the workman than those applicable to him immediately
before the transfer and
c. the new employer is, under the terms of such transfer or otherwise, legally liable to
pay to the workman, in the event of his retrenchment, compensation on the basis that
his service has been continuous and has not been interrupted by the transfer
17. Have there been any recent proposals for reforms or regulatory changes that
will impact M&A activity?
Foreign Exchange Management (Cross Border Merger) Regulations 2018 (“Merger
Regulation”) was notified by the Reserve Bank of India on 20th March, 2018 which
regulates the cross-border mergers in India. Cross border mergers are categorised as:
a. ‘In bound merger’ when an Indian company (“IC”) acquires assets and liabilities of a
foreign company. Some of the essentials of an Inbound Merger are
i. Merger Regulations allow transfer of securities to a foreign shareholder, subject to
compliances applicable to a foreign investor under the foreign direct investment
regulations (“FDI Regulations”)
ii. Where the cross border merger results in transfer of securities of a joint venture (“JV”)
or a wholly owned subsidiary (“WOS”) of an IC, situated in a foreign jurisdiction, the
same is subject to compliance, such as pricing of shares in a specified manner, any
outstanding’s owed to the IC being cleared prior to such transfer, etc. set out under the
Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations
2004)
iii. If the cross-border merger results in acquisition of a step-down subsidiary (situated in
a foreign jurisdiction) of the JV/WOS, by an IC, then certain additional conditions laid
down in the Foreign Exchange Management (Transfer or issue of any foreign security)
Regulations 2004 will have to be complied with
iv. The IC has to ensure that the overseas borrowings of the foreign company, proposed
to be taken over by it, are compliant with the provisions of the overseas borrowing
Regulations (“Overseas Borrowing Reg.”) under Indian law within a period of 2 (Two)
years from the date of sanction of the scheme pertaining to such cross-border merger
by the relevant authority. However, the IC cannot remit any monies from India for
repayment of such overseas borrowings
v. Further, it is to be noted that the Overseas Borrowing Reg. inter-alia stipulates
specified interest rates, maturity, end use restrictions, on borrowings, from overseas, by
an IC (however, end use restrictions are not applicable to an IC per the Merger
Regulations)
b. ‘Outbound Merger’ when a foreign company (“FC”) acquires assets and liabilities of
an IC. Some of the essentials of an Outbound Mergers are
i. In such cases the law applicable in the jurisdiction where the FC is situated will
regulate such cross-border merger
ii. Merger Regulations also stipulate certain conditions by which guarantees that
outstanding borrowings of the IC shall, as a result of such cross-border merger, become
guarantees or borrowings of the FC. This however is subject to the FC not acquiring any
such guarantee or outstanding borrowing, in rupees payable to Indian lenders, non-
compliant with the relevant foreign exchange law in India