Exemption of Combination

REGD. No . D. L. -33004/99 EXTRAORDINARY PART II —Section 3 —Sub-section ( i) PUBLISHED BY AUTHORIT Y No. 507] NEW DELHI, MON DAY , SEPTEMBER 9, 2024 / BHADRA 18, 1946 CG-DL-E-09092024-257009 MINISTRY OF CORPORATE AFFAIRS NOTIFICATION New Delhi, th e 9th September , 2024 G.S.R. 549(E).– In exercise of the powers conferred by clause (ad) of sub-section (2) of section 63 of the Competi tion Act, 2002 (12 of 2003 ), the Central Government hereby mak es the following rules, nam ely:–– 1. Short title and commencement.–– (1) These rules may be called the Competi tion (Criteria for Exemption of Comb inations) Rules, 2024. (2) They shall come into fo rce with effect from the 10th day September, 2024. 2. Definitio ns.–– (1) In the se rules, unl ess the context othe rwise requires, (i) "Act" means the Competi tion A ct, 2002 (12 of 2003); (ii) “Schedule” means the schedule appended to these rules. (2) The words and expressions used in these rules but not defined, shall have the same me anings, respectively assigned to them in the Act. 3. Criteria for exemption of categories of Combinations . –– the categories of comb inations whi ch ful fil the criteria mentioned in the Schedule sh all be exempted from the requirement to comply wi th sub-sections (2 ), (2A) and (4) of section 6 of the Act. SCHEDULE Criteria for exemption [see rule 3] 1. An acquisition of sh ares of an enterprise in ordin ary course of business wh ere the said transaction is – (a) an acquisition of unsubsc ribed shares upon devolvement as per covenant of an und erwriting agreement by any p erson registered with the Securities and Ex change Board of India established under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or other similar authority establi shed under any law for the t ime being in force outside India, as an underwriter, in so far as the total shares or vot ing rights held by the acquirer, directly or indirectly, does not entitle the acquirer to hold more than twenty-five per cent. of the total shares or voting rights of the company, o f which shares are being acquired; or (b) an acquisition of shares as a stock broker registered with the Securities and Ex change Board of India, or other similar authority establi shed under any law for the t ime being in force outside India, in so far as the total shares or voting rights held by the acquirer, directly or indirectly, does not entitle the acquirer to hold more than twenty-five per cent. of the total shares or voting rights of the company, of which shares are being acquired; or (c) an acquisition of shares as a mutual fund registered with the Securities and Ex change Board of India, or other similar authority establi shed under any law for the t ime being in force outside India, in so far as the total shares or voting rights held by the acquirer, directly or indirectly, does not entitle the acquirer to hold more than ten per cent. of the total shares or voting rights of the company, of whi ch shares are being acquired. 2. An acquisition of shares or voting rights solely as an investm ent in so f ar as the to tal shares or voting rights held by the acquirer, directly or indir ectly, do es not entitle the acquirer to hold more than twenty-five per cent. of the total shares or voting rights of the company, of which shares or voting rights are being acquired, not leadi ng to acquisition of control of the enterprise whose shares or voting rights are being acquired. Explanation: - In Rule 2, the acquisition of shares or voting rights of an enterprise shall be treated as solely as an investment wh ere –– (a) pursu ant to the said acquisition, the acquirer does not gain a right or ability to have a r epresentation on the board of di rectors of any enterprise either as a director or as an obs erver; (b) pursu ant to the said acquisition, the acquirer does not gain a right or ability to access comme rcially sensitive in formation of any enterprise; (c) the acquirer or its group entities and their affiliat es are not en gaged in–– (i) any activity relating to prod uction of si milar or identical or subs titutable prod uct or service as offered by the target or its downstream group entities and their affiliates; (ii) any activity relating to produ ction, supply, distribution, storage, sale and service or trade in product or provision of service which are at different stages or level of produ ction chain to the activities of t he target or of its downstream group entities and their affiliat es; or (iii) any activity relating to produ ction, supply, distribution, storage, sale and service or trade in product or provision of service which are comp lement ary to the activities of the target or any of its downstream group entities or th eir affiliat es: Provid ed, where the acquirer or its group entities or their affiliates are engaged in any of the aforesaid activities menti oned in this clause, the acquisition shall be considered to be solely as an investm ent if such acquisition does not result in the acquirer holding ten per cent. or mo re shares or voting rights after the acquisition. 3. An acquisition of additional shares or voting rights of an enterprise by the acquirer or i ts group entities, where the acquirer or its group entities, prior to acquisition, holds shares or voting rights of the enterprise, but does not hold m ore than twenty -five per cent. of the shares or voting rights of the enterprise, either prior to or after such acq uisition: Provided that –– (i) such acquisition does not result in acquisition of control of such enterprise by the acquirer or its group; (ii) pursuant to the acquisition, the acquirer or its group entities do not gain a right or ability to have a represe ntation o n the board of directors of any enterprise either as a director or as an observer for the first time; (iii) pursuant to the acquisition, the acqui rer or its group entities do not gain a right or ability to access commercially sensitive information of an y enterpr ise for the first time except where the acquirer or its group entities already have right or ability to have a representation on the board o f directors of any enterprise as a director; (iv) in case the activities of the acquirer or its group entities a nd their affiliates exhibit horizontal or vertical or complementary linkages with the activities of target or its downstream group entities and their affiliates, the incremental shareholding or voting rights acquired by a single acquisition or a series of smaller i nter-connected acquisitions does not exceed five per cent. and such acquisition does not result in the shareholding or voting rights o f the acquirer or its group entities increasing from less than ten per cent. to ten per cent. or more. 4. An ac quisition of additional shares or voting rights of an enterprise by the acquirer or its group entities, where the acquirer or its group entiti es, prior to acquisition, holds more than twenty -five per cent. shares or voting rights of the enterprise, but do es not ho ld more than fifty per cent. of the shares or voting rights of the enterprise, either prior to or after such acquisition: Provided t hat such acquisition does not result in change in control of such enterprise. 5. An acquisition of shares or voting rights, where the acquirer or its group entities, prior to acquisition, has more than fifty per cent. shares or voting rights in the enterp rise whose shares or voting rights are being acquired, except in the cases where the transaction results in change i n control of such enterprise. 6. An acquisition of assets of an enterprise in ordinary course of business. –– The acquisition of assets of an enterprise shall be treated as in ordinary course of business provided that said acquisition involves acquisit ion of stock-in-trade, raw materials, stores and spares, trade receivables o r other similar current assets that do not constitute business. 7. An acquisition of assets, not directly related to the business activity of the party acquiring the asset or mad e solely as an investment, not leading to control of the enterprise whose a ssets are being acquired except where the assets being acquired represent substantial business operations in a particular location or for a particular product or service of the ente rprise, o f which assets are being acquired, irrespective of whether such as sets are organised as a separate legal entity or not. 8. An acquisition of shares pursuant to a bonus issue or stock splits or consolidation of face value of shares or buy back of s hares or subscription to rights issue of shares, not leading to a change i n control. 9. An acquisition of assets by one person or enterprise, of another person or enterprise within the same group, except in cases where there is change in control over a ssets bei ng acquired. 10. A merger or amalgamation of enterprises within the same group provided that the transaction does not result in change in control. 11. Acquisition of shares, control, voting rights or assets by a purchaser approved by the Competit ion Commi ssion of India pursuant to and in accordance with its order un der section 31 of the Act. 12. Demerger of a company and issue of shares by resulting company, in consideration of demerger, either to the demerged company or to the shareholders of th e demerge d company in the proportion of their shareholding in the deme rged company prior to the demerger, except for discharge of consideration for fractional shares. 13. For the purpose of this schedule, –– (1) The acquirer and its group entities mean the ultimate controlling person of the acquirer and other entities for ming part of the same group. (2) An entity is considered to be an affiliate of another enterprise if that another enterprise has–– (i) ten per cent. or more of the shareholding or voting ri ghts of t he enterprise; or (ii) right or ability to have a r epresentation on the board of directors of the enterprise either as a director or as an observer; or (iii) right or ability to access commercially sensitive information of the enterprise. [F. No. Comp -05/4/2023 -Comp -MCA] MANOJ PANDEY , Addl. Secy. Uploaded by Dte. of Printing at Government of India Press, Ring R oad, Mayapuri, New Delhi -110064 and Published by the Controller of Publications, Delhi -110054.