Until recently, whilst it was possible for a foreign company to merge with an Indian company, it was not possible for an Indian company to merge with a foreign company within the court sanctioned merger framework set out under Indian corporate law. This finally changed in April 2017, when the company law provisions that govern cross border mergers were brought into force. In the same month, the Reserve Bank of India (RBI) also issued draft regulations setting out the conditions for obtaining ‘deemed’ approval from the RBI for cross border mergers. Now, companies in India desirous of merging with a foreign company may do so in specified jurisdictions.
Following are some of the key highlights of the recent regulations governing cross border mergers:
- Jurisdiction Test
The eligible jurisdictions are: (a) those whose securities market regulator is a signatory to the Multilateral Memorandum of Understanding of the International Organisation of Securities Commission or to the Bilateral Memorandum of Understanding with the Securities and Exchange Board of India; or (b) jurisdictions whose central bank is a member of the Bank of International Settlements; and jurisdictions not identified in the public statement of the Financial Action Task Force (FATF) for deficiencies relating to anti-money laundering or combating terrorism financing or jurisdictions without an action plan developed with the FATF to address the deficiencies. Key countries like the USA, UK, Russia, Germany, France, Japan, China, Singapore, Mauritius, etc. will fall within the definition of eligible jurisdictions.