Regulations to Facilitate Overseas Acquisitions: CII

The Confederation of Indian Industry ("CII") has urged the Government of India to bring forth regulatory changes which would facilitate Overseas Acquisitions. In a memorandum submitted to the DIPP, CII has submitted that the regulatory framework in India hinders Indian Multinationals to pursue global acquisitions. Some of the concerns and suggestions put forth by the CII, in this regard, are:

"A provision is proposed in the Companies Bill 2009 that would restrict the number of step down subsidiaries. This would be a major impediment towards overseas acquisitions by Indian companies. Very often the foreign company to be acquired already has more than one level of subsidiaries and for effecting the acquisition, the Indian company may need to create a SPV which could be a subsidiary of a subsidiary. However, if the Companies Bill is enacted with this restriction, it would prove to be a major hurdle for aspiring Indian companies, which are planning overseas acquisitions."(emphasis mine)

"For investing in the target company, in excess of 60% of its net worth or 100% of its free reserves, the company requires prior shareholders approval. This necessitates disclosure of vital details about the proposed acquisition company to the shareholders, including the price being paid. As a result, sensitive and confidential information, which could be of critical importance to competing bidders, becomes available in the public domain even prior to submitting a bid to the target company."(emphasis mine)

"The Competition Act, 2002 also mandates merger regulation. While the relevant provisions of the Act have not yet been notified; once the process is initiated, the process would conflict with provisions under Companies Act, SEBI’s Preferential Allotment Guidelines, the Takeover Code and the Guidelines issued by DoT for the Telcom sector. This would result in unnecessary references to the Regulator and/or Govt and in some case, litigations. These aspects should be carefully considered before notification of the sections relation to merger regulation by CCI."

The full contents of the memorandum is available here.