The International Comparative Legal Guide to:
Mergers and Acquisitions 2008
A practical insight to cross-border Mergers and Acquisitions
Published by Global Legal Group with contributions from:
Allen & Gledhill Andreas Sofocleous & Co. Arthur Cox Bae, Kim & Lee Bech-Bruun Bell Gully Camilleri Preziosi CHSH Cerha Hempel Spiegelfeld Hlawati De Brauw Blackstone Westbroek Dittmar & Indrenius Edward Nathan Sonnenbergs ELIG Elvinger Hoss & Prussen Eubelius Freshfields Bruckhaus Deringer Goodrich, Riquelme y Asociados Grimaldi e Associati Kelemenis & Co. Lejins, Torgans & Partners Lenz & Staehelin Mannheimer Swartling Meitar Liquornik Geva & Leshem Brandwein, Law Offices Mitrani Caballero & Ojam Abogados Nishimura & Asahi Pachiu & Associates Premnath Rai Associates Saladzius & Partners v
Schönherr Skadden, Arps, Slate, Meagher & Flom LLP Slaughter & May Squire Sanders & Dempsey Stikeman Elliott Tamme & Otsmann TozziniFreire Advogados Udo Udoma & Belo-Osagie Weinhold Legal Wikborg Rein Zuric i Partneri v
Premnath Rai Associates
P Srinivasan .
1 Relevant Authorities and Legislation
1.1 What regulates M&A?
it is of the opinion that a merger or combination has or is likely to have an ‘appreciable adverse effect’ on competition in India. Other relevant sources of laws that regulate merger or acquisition transactions are the Income-tax Act, 1961, governing M&A transactions, and the Accounting Standard -14 which provides for Accounting for amalgamations. 1.2 Are there different rules for different types of public company?
M&A transactions are primarily regulated by the Companies Act, 1956 (‘Companies Act’). Sections 391 to 396 of the Companies Act govern schemes of arrangement and mergers etc. Section 494 of said Act provides for an alternative form of reconstruction where a liquidator is empowered to receive shares etc. in lieu of cash for the transfer of the whole/part of any undertaking. Certain restrictions on the acquisition/transfer of shares are also found in Section 108A to 108I involving undertakings which produce, supply or control 25% or more of the total quantity of relevant goods or services produced or rendered in India. Special norms for Producer Companies (i.e. companies having objects involving farmers’ produce) have also been stipulated. The Companies Act stipulates inter alia that in the case of transaction involving merger of companies, the transferee company should be a company incorporated under the Companies Act. In other words, the transferor company could be a company incorporated in India or outside of India, but the transferee company should be a company incorporated in India. The Securities and Exchange Board of India (‘SEBI’) Act, 1992, and the guidelines/rules/regulations made thereunder govern M&A transactions involving public companies listed on a recognised stock exchange. In particular, the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, (‘Takeover Code’) regulates transactions involving acquisition of shares that are traded over the stock market (but exempts schemes of amalgamation approved under the provisions of the Companies Act). The Listing Agreement that companies enter into with recognised stock exchanges are relevant in M&A transactions in case of a merger of a company listed on the stock exchange(s). The Listing Agreement requires inter alia filing of the scheme of arrangement with the Stock Exchange prior to filing application with the High Court for seeking approval of the scheme of arrangement. The conditions applicable for continued listing stipulate inter alia norms for a minimum level of public shareholding and prior approvals of the Stock Exchange. Anti-trust issues are regulated by the Monopolies and Restrictive Trade Practices Act, 1969 (‘MRTPA’) which at present does not require pre-merger clearances. However, the Competition Act, 2002, which is soon to be fully operational,...
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