Mergers and acquisitions in India are structured under Sections 230-232 of the Companies Act, 2013 (NCLT-sanctioned schemes) or the faster Section 233 route for eligible small companies, subject to Competition Commission of India clearance where asset/turnover thresholds are crossed -- or, since a September 2024 amendment, where the deal value exceeds Rs. 2,000 crore and the target has substantial business operations in India.
Merger mechanisms under the Companies Act
Sections 230-232 of the Companies Act, 2013 set out the general scheme of compromise/arrangement/merger
process, which requires approval from the National Company Law Tribunal (NCLT) after creditor and shareholder
approval. Section 233 offers a faster, NCLT-bypassing “fast-track merger” route -- approved instead
by the Regional Director -- available to mergers between two or more small companies, a holding company and
its wholly-owned subsidiary, and certain other prescribed classes of companies including some startups.
Competition Commission of India (CCI) clearance
The Competition Act, 2002, Sections 5-6, requires combinations (mergers, acquisitions, amalgamations)
crossing specified asset or turnover thresholds to obtain CCI approval before taking effect. The Competition
(Amendment) Act, 2023 added a new deal-value threshold, effective from September 2024 -- a transaction where
the deal value exceeds ₹2,000 crore, and the target has “substantial business operations in
India” (assessed against India-specific user/turnover/GMV tests), now requires mandatory CCI notification
regardless of the target’s asset or turnover size. This specifically targets acquisitions of small or
pre-revenue digital-sector targets that previously escaped scrutiny under the old size-based thresholds
alone.
Fundraising routes
Public issues of securities are governed by SEBI (Issue of Capital and Disclosure Requirements) Regulations,
2018 (ICDR), which prescribe eligibility conditions, disclosure norms, and lock-in requirements for promoters
and pre-IPO investors. Private fundraising from institutional pools often goes through SEBI (Alternative
Investment Funds) Regulations, 2012 (covering VC and PE funds), which are themselves tiered into Category I,
II, and III AIFs with different investment-strategy and leverage rules. Foreign investment, including from
NRIs, is separately governed by FEMA and the FEMA (Non-Debt Instruments) Rules, 2019, alongside the
sector-specific FDI policy in force at the time of investment, with pricing guidelines under FEMA generally
requiring share issuances to non-residents to be priced at or above a fair-value floor determined under
internationally accepted valuation methodology.
Does every acquisition in India need CCI approval?
No -- only combinations that cross the asset/turnover thresholds under Sections 5-6 of the Competition Act,
2002 (subject to de minimis exemptions), or that meet the newer deal-value threshold (above ₹2,000 crore
with substantial India business operations) introduced by the 2023 amendment, require mandatory CCI
notification.
Why was the deal-value threshold added in 2023?
It was designed to close a gap where digital-sector acquisitions of small or pre-revenue but strategically
valuable targets (sometimes called “killer acquisitions”) escaped CCI review because the target’s
assets and turnover were too small to cross the older size-based thresholds, even though the deal value itself
was very large.
Can an NRI invest in an Indian company’s fundraising round?
Yes, subject to FEMA and the applicable FDI policy for the specific sector -- NRIs generally invest under
the FEMA (Non-Debt Instruments) Rules, 2019 framework, and sector-specific caps or conditions (automatic route
versus government approval route) depend on the industry the target company operates in.
