Legal bodies and acts

1. Dr Raju IndukooriMERGER REGULATORS –
LEGAL BODIES AND ACTS

2. A. Regulating Laws and Acts
B. Regulating bodies
MERGER REGULATORS
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3. 1. Approvals from respective Authorities
 Reserve Bank of India (RBI)
 Securities Exchange Board of India (SEBI)
 Insurance Regulatory and Development Authority (IRDA)
 Forward Markets Commission (FMC)
2. State High Court: Permissions from the State High
Courts
3. State Government : Stamp Duty
4. Ministry of Corporate Affairs (MCA)
A. MERGER REGULATING BODIES
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4. 1. The Companies Act, 1956
2. The Indian Income Tax (ITA) Act, 1961
3. Monopolies and Restrictive Trade Practices (MRTP) Act, 1969
4. Foreign Exchange Management (FEMA) Act, 1999
5. Securities Exchange Board of India (SEBI) Take Over Code, 1994
6. The Competition Act 2002
7. Intellectual Property Law
8. Copy Rights Act
9. Trade Mark Act
10. Patents Act
B. MERGER REGULATING LAWS AND ACTS
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5. 1. Section 390 to 395 of Companies Act, 1956 deal with
arrangements, amalgamations, mergers and the procedure to
be followed for getting the arrangement, compromise or the
scheme of amalgamation approved.
2. Though, section 391 deals with the issue of compromise or
arrangement which is different from the issue of
amalgamation as deal with under section 394, as section 394
too refers to the procedure under section 391 etc., all the
section are to be seen together while understanding the
procedure of getting the scheme of amalgamation approved.
3. Again, it is true that while the procedure to be followed in case
of amalgamation of two companies is wider than the scheme
of compromise or arrangement though there exist substantial
overlapping.
1.THE COMPANIES ACT, 1956
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6.  Merger has not been defined under the ITA but has been
covered under the term 'amalgamation' as defined in section
2(1B) of the Act.
 To encourage restructuring, merger and demerger has been
given a special treatment in the Income-tax Act since the
beginning. The Finance Act, 1999 clarified many issues
relating to Business Reorganizations thereby facilitating and
making business restructuring tax neutral.
 As per Finance Minister this has been done to accelerate
internal liberalization.
 Certain provisions applicable to mergers/demergers are as
under: Definition of Amalgamation/Merger — Section 2(1B).
2.THE INDIAN INCOME TAX (ITA) ACT, 1961
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7. 3.MONOPOLIES AND RESTRICTIVE TRADE PRACTICES (MRTP)
ACT, 1969
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8.  The foreign exchange laws relating to issuance and allotment
of shares to foreign entities are contained in The Foreign
Exchange Management (Transfer or Issue of Security by a
person residing out of India) Regulation, 2000 issued by RBI
vide GSR no. 406(E) dated 3rd May, 2000.
 These regulations provide general guidelines on issuance of
shares or securities by an Indian entity to a person residing
outside India or recording in its books any transfer of security
from or to such person. RBI has issued detailed guidelines on
foreign investment in India vide “Foreign Direct Investment
Scheme” contained in Schedule 1 of said regulation.
4.FOREIGN EXCHANGE MANAGEMENT
ACT,1999
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9.  SEBI Takeover Regulations permit consolidation of shares or
voting rights beyond 15% up to 55%, provided the acquirer does
not acquire more than 5% of shares or voting rights of the target
company in any financial year. [Regulation 11(1) of the SEBI
Takeover Regulations] However, acquisition of shares or voting
rights beyond 26% would apparently attract the notification
procedure under the Act.
 It should be clarified that notification to CCI will not be required
for consolidation of shares or voting rights permitted under the
SEBI Takeover Regulations.
 Similarly the acquirer who has already acquired control of a
company (say a listed company), after adhering to all
requirements of SEBI Takeover Regulations and also the Act,
should be exempted from the Act for further acquisition of
shares or voting rights in the same company.
5.SEBI TAKE OVER CODE 1994
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10.  Section 5 of the Competition Act, 2002 deals with “Combinations” which defines
combination by reference to assets and turnover for exclusively in India and in India
and outside India.
 For example, an Indian company with turnover of Rs. 3000 crores cannot acquire
another Indian company without prior notification and approval of the Competition
Commission. On the other hand, a foreign company with turnover outside India of
more than USD 1.5 billion (or in excess of Rs. 4500 crores) may acquire a company
in India with sales just short of Rs. 1500 crores without any notification to (or
approval of) the Competition Commission being required.
(2) Section 6 of the Competition Act, 2002 states that, no person or enterprise
shall enter into a combination which causes or is likely to cause an appreciable
adverse effect on competition within the relevant market in India and such a
combination shall be void.
 All types of intra-group combinations, mergers, demergers, reorganizations and
other similar transactions should be specifically exempted from the notification
procedure and appropriate clauses should be incorporated in sub-regulation 5(2) of
the Regulations. These transactions do not have any competitive impact on the
market for assessment under the Competition Act, Section 6.
6.THE COMPETITION ACT ,2002
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11. A. Copy Right Act, 1957
B. Trade Marks Act, 1958
C. Patents Act 1970
D. The Designs Act , 2000
E. The Geographical Indication of Goods (Registration and
Protection) Act, 1999
7. INTELLECTUAL PROPERTY LAW
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12.  Copyright protection in India is available for any literary, dramatic,
musical, sound recording and artistic work. The Copyright Act 1957
provides for registration of such works. Although an author’s copyright in a
work is recognised even without registration, it is advisable to get the
same registered since it furnishes prima facie evidence of copyright in a
court of law.
 Infringement of copyright entitles the owner to remedies of injunction,
damages and accounts.
 Copyright in a literary, dramatic, musical or artistic work (other than a
photograph) published within the lifetime of the author subsists for fifty
years from the lifetime of the author. An Amendment Bill is on the anvil to
extend the term in favour of performers1 (at present twenty five years) to
fifty years (in order to bring it in accord with the TRIPS Agreement). The
amendment also aims to bring original works relating to satellite
broadcasting, computer software and digital technology under copyright
protection. With the issuance of the International Copyright Order,
1999,the provisions of Copyright Act have been extended to nationals of all
World Trade Organization (WTO) Member countries.
8.COPY RIGHT ACT, 1957
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13.  The law relating to registration of trade marks is governed by
the Trade and Merchandise Marks Act, 1958. A distinctive
mark (as defined) can be registered under the said Act. In
case of infringement of registered trademarks, the statutory
remedies of injunction, damages, accounts and delivery up of
infringing labels and marks are available. An action for
"passing-off" would lie in relation to an unregistered mark
under certain circumstances.
 In order to simplify the law and meet India’s international
obligations under the TRIPS, a new law called the Trade Marks
Act, 1999 has been passed but has not yet been brought into
force.
9.TRADE MARKS ACT, 1958
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14.  The subject is covered by the Patents Act, 1970. India recognises
product patent protection for a period of 14 years. However, in
three areas: food, chemicals and pharmaceuticals, it recognises
only a process patent for a period of 7 years. With the signing of
the GATT Agreement, the Patents Act, 1970 has been amended
by the Patents (Amendment) Act, 1999 to bring it in line with the
Trade TRIPS Agreement. The amended law would allow the filing
of all product patents with a regulatory authority. It also contains
provision for granting Exclusive Marketing Rights (EMRs) for five
years or till the patent is granted or rejected whichever is earlier.
 The Patents (Second Amendment) Act 2002 recently passed by
the Parliament provides protection for new micro organisms and
proposes a uniform 20 year term from filing date for all patents
granted after commencement of the Act. It also provides for
publication of all patent applications within 18 months of filing
or priority date, whichever is earlier.
10.PATENTS ACT 1970
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15.  The Designs Act, 2000 protects certain designs. The features
of shape, configuration, pattern, ornament or composition of
lines or colours applied to any ‘article’ whether in two or three
dimensional forms (or both), by an industrial process which
appeals to the eye can be registered under the said Act. The
Designs Act 2000 brought into force in May 2001 entitles an
applicant to apply for registration in more than one class.
However, registration is granted for only one class.
Furthermore detailed classification of designs has been
incorporated conforming to the international regime.
 Copyright in the design under the 2000 Act would be
protected for a period of 10 years from the date of
registration.
11.THE DESIGNS ACT, 200
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16.  The Geographical Indication of Goods (Registration and
Protection) Act, 1999
 The Geographical Indication of Goods (Registration and
Protection) Act, 1999, was enacted to register and protect
geographical indicia of goods that originate from or are
manufactured in a particular territory, region or even locality.
These goods include agricultural, natural or manufactured
goods that are distinct from similar products due to quality,
reputation or any other characteristic that is essentially
attributable to their geographical origin.
 Under the Act, such distinctive geographical indicia can be
protected by registration. The Act thus facilitates promotion of
Indian goods when exported overseas and in turn protects
consumers from deception.
12.REGISTRATION AND PROTECTION ACT,
1999
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