The Confederation of Indian Industry (CII) has submitted a memorandum to the Department of Industrial Policy and Promotion, Government of India listing various factors that restrict the framework for overseas acquisitions by Indian companies.
CII believes that the future growth of Indian companies will be influenced by the share that they can garner in the world market. Not only do the country’s productive capacities need to be boosted, Indian companies also need to enhance their competitive strength and upgrade their global outreach.
In a memorandum to the Department of Industrial Policy and Promotion, CII has submitted that the growth of the Indian multinational is severely restricted by the regulatory framework for cross border transactions,
CII has highlighted that the process of mergers and acquisitions under the existing Companies Act is a long court-driven process. It does not allow for contractual mergers (i.e., without court intervention) or merger of an Indian company into a foreign company.
A provision is proposed in the Companies Bill 2009 that would restrict the number of step down subsidiaries. This would be a major impediment towards overseas acquisitions by Indian companies. Very often the foreign company to be acquired already has more than one level of subsidiaries and for effecting the acquisition, the Indian company may need to create a SPV which could be a subsidiary of a subsidiary. However, if the Companies Bill is enacted with this restriction, it would prove to be a major hurdle for aspiring Indian companies, which are planning overseas acquisitions.
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