Cross-Border M&A in India: FDI Routes, FEMA Clearances, and CCI Filings

Cross-border mergers and acquisitions involving Indian targets have increased sharply since 2022, driven by India's consumption story, the PLI schemes, and a maturing startup ecosystem. Yet foreign acquirers consistently underestimate the regulatory complexity. A transaction that closes in six weeks in Singapore or London can take six months in India if the deal team arrives without a clear-eyed understanding of FEMA 1999, CCI merger control, and SEBI requirements for listed targets. ## Choosing the Right FDI Route The first structural question is whether the acquisition proceeds through the automatic route or the government approval route under the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (the NDI Rules). **Automatic route** covers most sectors — the acquirer simply reports the transaction to the Reserve Bank of India (RBI) through an authorised dealer bank after closing. No prior approval is needed. The reporting timeline is important: the Form FC-GPR (for equity issuance) or Form FC-TRS (for secondary transfer) must be filed within 60 days of the transaction date. **Government approval route** applies to sectors that are either restricted or carry FDI conditions — defence manufacturing (above 74%), print media, multi-brand retail, insurance (above 74% triggers approval requirements), and any sector not clearly covered by the automatic route. Approval is channelled through the Foreign Investment Facilitation Portal (FIFP) and is processed by the competent ministry. Timelines vary from eight to twelve weeks in straightforward cases. **Prohibited sectors** are a hard stop: lottery business, gambling, chit funds, Nidhi companies, real estate business (as opposed to real estate construction development), manufacturing of tobacco products, and activities covered under foreign technology agreements. Structuring around these prohibitions is a regulatory landmine. ## FEMA Pricing Rules: The Constraint Foreign Acquirers Miss Under the NDI Rules, shares of an Indian unlisted company cannot be transferred to a non-resident at a price below fair market value determined in accordance with any internationally accepted pricing methodology (the Rule 21 standard). For listed companies, the floor is the SEBI-prescribed price under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the Takeover Code). What this means in practice: a foreign acquirer cannot structure a below-FMV acquisition to shift value outside the transaction price — a common structuring technique in other jurisdictions. The valuation certificate must be from a SEBI-registered merchant banker (for unlisted companies) or a chartered accountant, and it becomes an RBI filing document. For outbound transactions where an Indian company acquires a foreign entity, the Overseas Direct Investment (ODI) regulations under FEMA apply. The RBI circular on ODI (November 2022) significantly liberalised outbound structuring, but financial commitment caps and reporting obligations remain. ## CCI Merger Notification: When It Triggers The Competition Act 2002 (amended by the Competition (Amendment) Act 2023) requires prior notification to the Competition Commission of India (CCI) for transactions crossing the prescribed thresholds. As of January 2024, the thresholds are: - Combined assets in India exceeding ₹2,500 crore, or combined turnover in India exceeding ₹7,500 crore; or - Combined worldwide assets exceeding USD 1 billion with Indian assets exceeding ₹1,000 crore, or combined worldwide turnover exceeding USD 3 billion with Indian turnover exceeding ₹3,000 crore. The 2023 Amendment introduced a **deal value threshold**: transactions with a deal value exceeding ₹2,000 crore where either party has substantial business operations in India now require notification even if the turnover/asset thresholds are not met. This catches acqui-hires and technology acquisitions where the target has minimal revenue but high strategic value. CCI operates a **Green Channel** for transactions where the parties are not horizontally, vertically, or complementarily related. Green Channel notifications are deemed approved on filing. For transactions with competitive overlaps, CCI has a 30-working-day Phase I review and a further 90-working-day Phase II review. Closing before CCI clearance is a criminal offence under Section 43A of the Competition Act, attracting penalties up to 1% of combined assets or turnover. ## SEBI Requirements for Listed Targets If the Indian target is a listed company, the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Code) applies from the moment the acquirer crosses 5% shareholding. The key thresholds are: - **Disclosure at 5% and every 2% increment thereafter** — filed with the stock exchanges within two trading days - **Open offer obligation at 25%** — any acquisition that takes the acquirer's shareholding to or beyond 25% triggers a mandatory open offer to acquire at least 26% of the total shares from public shareholders at the CCI-cleared price or the prescribed reference price, whichever is higher The open offer creates a significant funding obligation that must be factored into deal economics from day one. Escrow arrangements for open offer funding must be in place before the public announcement. ## Structuring the Deal: Shares vs. Slump Sale vs. NCLT Merger Cross-border acquirers have three primary structural options: **Share purchase** is the default. The acquirer buys shares from existing shareholders (secondary) or subscribes to new shares issued by the company (primary). It is the cleanest for speed but the acquirer inherits all historical liabilities. **Slump sale** (sale of a business undertaking as a going concern for a lump sum under Section 50B of the Income Tax Act 1961) allows cherry-picking assets and liabilities but is treated as a transfer under income tax and can attract significant capital gains. **Cross-border merger under Sections 234 and 232 of the Companies Act 2013** — this allows an Indian company to merge with a foreign company incorporated in a FATF-compliant jurisdiction, with RBI approval. NCLT Delhi would have jurisdiction for companies registered in Delhi NCR. The NCLT route is more certain on tax neutrality under Section 47 of the Income Tax Act (subject to conditions) but carries a 6-12 month process timeline. ## Post-Acquisition Integration: The Regulatory Checklist Once the transaction closes, integration work triggers another set of regulatory requirements: - **ROC filings**: intimation of change in shareholding pattern within 30 days (Form MGT-6 for substantial beneficial owners under Section 90) - **Director appointments**: Form DIR-12 for any new directors; foreign directors need a DIN and DSC - **Registered office changes**: if the registered office moves, Form INC-22 within 30 days - **Statutory registers**: the register of members, register of directors, and register of significant beneficial owners must be updated - **FEMA annual return**: Form FLA (Foreign Liabilities and Assets) is due every July 15 for companies with foreign investment - **Transfer pricing**: intercompany transactions with the foreign acquirer post-acquisition are international transactions under Section 92B of the Income Tax Act and require transfer pricing documentation ## Common Mistakes That Delay or Kill Deals The most common errors in cross-border M&A in India are: failing to validate the cap table (undocumented convertible instruments, pledged shares, and ESOP pools cause pricing disputes); ignoring legacy FEMA violations in the target (the acquirer inherits the liability risk); underestimating CCI deal value threshold applicability; and proceeding with the share purchase agreement before obtaining the FEMA valuation certificate. Corpus Juris Legal advises MNCs and PE funds on cross-border acquisitions of Indian companies from our Connaught Place office, with a practice that spans FEMA structuring, CCI filings, SEBI Takeover Code compliance, and NCLT merger proceedings. If you are evaluating an Indian acquisition, early regulatory scoping will protect your deal timeline.