Corporate Law Newsletter: Competition Commission of India on Amending the Long Form – May 2022

The Competition Commission of India (“CCI”) vide notification dated March 31, 2022 notified the CCI (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2022) (“2022 Regulations”) to revise the existing Schedule II to the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (“2011 Regulations”).

Schedule II of the 2011 Regulations prescribes the long form format for submission of details related to mergers and acquisitions (Form – II). By virtue of the amendment, CCI has revised the content of information that are required to be filed under section 6(2) of the Competition Act, 2002 (“Act”) by parties to a reportable combination have a combined market share of over 15% (for horizontal combinations) or over 25% (for vertical combinations). Whereas transactions that do not breach the said thresholds of combined market share can be reported via Form I (short form).

The amendment to Form – II is one of the measures undertaken by CCI to promote ease of doing business, reduce compliance burden, and enhancing objectivity of assessment of combinations. Previously, CCI had also amended Form – I in August 2019, which is used to provide information while seeking CCI’s approval for a combination, where the combined market share post-merger is not significant. Although, through the amendment, Form – II has been streamlined, but there has been no compromise on the scope of relevant information to be disclosed for undertaking a comprehensive assessment of combinations. This is noticeable from the fact that the 2022 Regulations require disclosure of quantitative data for preceding 5 years as opposed to 1 year in the 2011 Regulations. The format of revised long form is based on the structure of short form to facilitate reduction of time and efforts required to move from the short form to the long form. As per the press release dated April 4, 2022 of the Press Information Bureau (Government of India), the revised long form is intended to strike a balance between facilitation and enforcement functions and create a culture of compliance.

Compliance Relaxations under Listing Obligations and Disclosure Requirements

All listed entities which have listed any of the designated securities stipulated under Regulation 3 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”) on a recognized stock exchange are required to ensure compliance with the LODR Regulations. Regulation 36 of the LODR Regulations requires the listed entities to inter alia send: (a) soft copies of full annual reports to those shareholders who have registered their email address with the listed entity or a depository; and (b) hard copy of the statement containing salient features of all documents prescribed under Section 136 of the Companies Act, 2013 or the rules made thereunder to those shareholders who have not registered their email address; and (c) hard copy of full annual reports to those shareholders, who request for the same.

SEBI, vide circular dated May 13, 2022, has provided relaxation to listed companies, until December 31, 2022, from the requirement of sending hard copies of annual reports to shareholders whose email address is not registered, as required under Regulation 36(1)(b) of the LODR Regulations. However, listed entities would still be required to send hard copies of full annual reports to those shareholders who request for the same. It has also been mandated that the notice of annual general meeting published in terms of Regulation 47 of the LODR Regulations shall contain a link to the annual report to enable shareholders to have access to it.

This comes against the backdrop of the extension of relaxations provided by the Ministry of Corporate Affairs vide circular dated May 5, 2022 from dispatching physical copies of the financial statements for the year 2022, till December 31, 2022. Following this, SEBI had received multiple representations from listed companies seeking exemption from the requirement of sending hard copies of annual reports to shareholders. This relaxation provided by SEBI was much awaited by the listed companies who were finding it difficult to dispatch physical copies in view of the prevalent situation owing to the pandemic. This is also aligned with the overall transition to electronic means of correspondence and exchange of information resulting from growing digital penetration in India.

Master circular on Real Estate Investment Trust and Infrastructure Investment Trust

The Securities and Exchange Board of India (“SEBI”) issued Master Circular for Real Estate Investment Trusts (“REITs”) and Master Circular on Infrastructure Investment Trusts (“InvITs”), on April 26, 2022. SEBI has been issuing various circulars for effective regulation of REITs, from time to time. The master circulars facilitate the stakeholders and other persons in terms of convenience of access to consolidated regulations applicable to REITs and InvITs. The master circulars are a compilation of relevant circulars issued by SEBI up to March 31, 2022 which are operational as on April 26, 2022.

It has been expressly clarified by SEBI that the said master circulars do not include circulars that were issued to provide temporary relaxations relating to compliance requirements owing to the Covid-19 pandemic. It has also been clarified that in case of any conflict between the master circulars and the applicable circulars, the contents of the relevant circular will prevail.

Previously, SEBI had issued master circulars for REITs and InvITs on November 29, 2021. In addition to the regulations compiled in the previous master circulars issued on November 29, 2021, the new master circulars issued on April 26, 2022 include regulations relating to: (a) investor charter and disclosure of investor complaints by merchant bankers for (i) public offers by REITs and InvITs and (ii) private placement of units; (b) conversion of private unlisted InvIT into private listed InvIT; and (c) framework for conversion of private listed InvIT into public InvIT.

Amendments to the Companies (Prospectus and Allotment of Securities) Rules, 2014

The Ministry of Corporate Affairs (“MCA”) vide notification dated May 5, 2022 notified the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2022 (“Amendment Rules”) to amend the Companies (Prospectus and Allotment of Securities) Rules, 2014 (“PAS Rules 2014”). Through the Amendment Rules, MCA has introduced a proviso to Rule 14 of the PAS Rules 2014 which provides that an offer or invitation of any securities shall not be made to a body corporate incorporated in, or a national of, a country which shares land borders with India, unless such entity/person has obtained government approval required under Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (“NDI Rules 2019”). The government approval is also required to be attached with the private placement offer cum application letter (Form PAS-4). Further, a checkbox has been inserted in Part B of Form PAS-4 for the applicant to notify whether such applicant is required to obtain government approval under the NDI Rules 2019 or not. The Amendment Rules are in consonance with the changes introduced to the foreign direct investment laws in India in 2020 vide Press Note No. 3 (2020 Series), whereby the Government of India imposed restrictions on investments by entities/citizens of countries sharing land borders with India, with a view to curb opportunistic takeovers/acquisitions of Indian companies due to the Covid-19 pandemic.