Cross Border Mergers: The Indian Perspective

Abstract

Mergers and Acquisitions play a significant role in the expansion of any business. They have numerous advantages such as economies of scale, augmentation of revenue, diversification of products, access to resources and market monopoly. In India, the regulatory framework for mergers and acquisitions is governed by the Companies Act, 2013. Cross border mergers hold peculiar significance as they entail governance of regulations in different jurisdictions. On 13th April 2017, the Ministry of Corporate Affairs notified Section 234 of the Companies Act, 2013, paving way for inbound as well as outbound cross border mergers in India. Subsequently, rule 25A was inserted in the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and draft regulations were released by the Reserve Bank of India. Under the previous legal regime, outbound mergers were not permitted. Notification of Section 234 has numerous consequences. Various factors such as tax neutrality, competition law issues involving cross-jurisdictional nuances, cumbersome foreign exchange management regulations and stringent securities law requirements have to be considered. This paper presents a brief analysis of the cross border merger regime in India in the light of the recent corporate law developments. This paper details on the legal provisions governing cross border mergers in India as well as the impact of the same on various sectors such as company law, taxation law, competition law as well as the foreign exchange law. The paper concludes on a positive note regarding the effectiveness of cross border merger related provisions in the long run.