Any acquisition, merger or amalgamation that meets the following jurisdictional thresholds, as provided in Section 5 of the Competition Act, 2002 (“Act”), is a “combination” for the purpose of the Act. The thresholds relate to the assets and turnover of the parties to the combination, i.e., target enterprise and acquirer (or acquirer group) / merging parties (or the group to which merged entity would belong).

At present, thresholds prescribed under the Act (as enhanced by the Central Government vide its Notification No. S.O. 675(E) dated March 4, 2016) are as under:

In case of an acquisition of assets, shares, voting rights or control, the value of assets and turnover of the acquirer (group to which the enterprise would belong, for calculating group-level thresholds) and the enterprise whose assets, shares, voting rights or control have been acquired or are being acquired, are required to be taken into account for calculating jurisdictional thresholds. (See Section 5(a) of the Act)

In this regard, where a portion of an enterprise or division or business is being acquired, taken control of, the value of assets and turnover of the said portion or division or business attributable to it and the value of assets and turnover of the acquirer, is to be taken into account for the purpose of calculating the jurisdictional thresholds. [See GoI Notification no. S.O. 988 (E) published on 29th March, 2017]

In case of acquisition of control by a person over an enterprise when such person already has direct or indirect control over another enterprise engaged in production, distribution or trading of a similar or identical or substitutable goods or provision of a similar or identical or substitutable service, the value of assets and turnover of the portion of an enterprise or division or business (target business) or the enterprise whose control is being acquired (or group to which the enterprise would belong, for calculating group-level thresholds) along with the enterprise over which the acquirer already has direct or indirect control, are required to be taken into account for calculating jurisdictional thresholds.(See Section 5(b) of the Act)

In case of mergers / amalgamations, the value of assets and turnover of the merged or amalgamated entities (or group, for calculating group-level thresholds) should be taken into account for calculating jurisdictional thresholds. (See Section 5(c) of the Act)

Where a portion of an enterprise or division or business is being merged or amalgamated with another enterprise, the value of assets and turnover of the said portion or division or business and or attributable to it and value of assets and turnover of another enterprise, shall be taken into account for the purpose of calculating the thresholds under section 5 of the Act. [See GoI Notification no. S.O. 988 (E) published on 29th March, 2017]

In terms of the provisions of Act, the value of assets is determined by taking into account the book value of assets shown in the audited books of accounts of the enterprise for the financial year immediately preceding the financial year in which (a) the proposal relating to merger/amalgamation was approved by the Board of Directors of the enterprises concerned; or (b) any agreement or other document for acquisition was executed (See sub-section (2) of Section 6 read with Explanation (c) to Section 5 of the Act)

Value of turnover is also determined by applying the same principle.

In terms of GoI notification no. S.O. 988 (E) published on 29th March, 2017, the value of assets is determined by taking the book value of the assets as shown, in the audited books of accounts of the enterprise or as per statutory auditor’s report where the financial statement have not yet become due to be filed, in the financial year immediately preceding the financial year in which the date of the proposed combination falls.

The turnover of the said portion or division or business shall be as certified by the statutory auditor on the basis of the last available audited accounts of the company.