Part V: CCI Filing in India – The De Minimis Check & Control Clarity

In today’s high-stakes M&A environment, regulatory clearances are not a post-closing checklist item – they’re a strategic priority. Nowhere is this more evident than with the Competition Commission of India (CCI), where even minority acquisitions or offshore transactions can trigger a mandatory filing. The question is: when exactly does this obligation arise?

This is Part V in our series on “CCI Filing in India: The De Minimis Check & Control Clarity” where we dive into one of the most nuanced exemptions in Indian competition law: the De Minimis Exemption.

We build on Part I – CCI approval for minority PIPE deals – to file or not to file?; Part II – Deal Value Trigger and CCI Approval – How does it affect dealmaking?, Part III: Inter-Connected Transactions – CCI’s Recent Penalty Order In Matrix Pharma’s Case, and Part IV: CCI’s Recent Penalty Order Against Goldman Sachs: Are Any Minority Protection Rights Filing Immune? turning the spotlight now to De Minimis Exemption.

When must you file?

Section 5 lays out the law on combinations, or ‘merger control’ as we commonly understand. Effectively, any acquisition of shares, control, voting rights, or assets by a person could qualify as a ‘combination’, if it exceeds the given thresholds, requiring prior CCI approval. Whilst the CCI has seldom rejected a combination application, the practical challenge that dealmakers face are two-fold – first, computing the thresholds under Section 5 (which can often get complex, given the expansive definitions of ‘enterprise’, ‘group’ etc.), and second, the time it may take to wait for the CCI approval (note that an approval is deemed given if you do not hear from the CCI within 150 days of filing).

If the thresholds are crossed and you don’t file, you risk gun-jumping, which is a serious contravention under Indian competition law. The CCI can impose penalties (causing financial, but more importantly, reputational loss), and in recent years, the regulator has not shied away from using that power.

To that end, the preference for dealmakers is to look for exemptions that obviate the need for such filing – either fall below prescribed thresholds and do not qualify as a ‘combination’ in the first place (De Minimis Exemption), and if not, at least qualify as a combination that doesn’t need a filing as listed in Competition (Criteria for Exemption of Combination) Rules, 2024 (Exempt Combinations).

Currently, transactions qualify for De Minimis Exemption if the target enterprise’s assets are below INR 450 crores (~ USD 52 million), or its turnover is below INR 1,250 crores (~ USD 143 million). Note that ‘turnover’ for the purposes of ‘combination’, excludes intra-group sales, revenue from customers outside India, indirect taxes and trade discounts; and assets include intangible assets.

CCI’s May 2025 FAQs reiterate the principle on exclusion of intra-group turnover - to avoid double counting. This exclusion applies when the acquisition covers all group entities, but not when only a single entity is acquired. Intra-group exclusions are warranted only if the revenue from further sales is already counted in India, ensuring the same value isn’t included twice.Both the transaction’s scope (which entities are acquired) and the location of sales (India or overseas) must be carefully considered to apply the exclusions correctly. Net-net, if the value is getting consolidated in the holding company for instance, then naturally, individual values should not be considered.

De-Minimis Exemption: The Nuances

Until recently, the De Minimis Exemption was granted through notifications issued by the Ministry of Corporate Affairs (MCA). However, it was formally incorporated into the Competition Act, 2002 (Act) through an amendment effective from September 9, 2024.

“Notwithstanding anything contained in clause (a) or clause (b) or clause (c), where either the value of assets or turnover of the enterprise being acquired, taken control of, merged or amalgamated in India is not more than such value as may be prescribed, such acquisition, control, merger or amalgamation shall not constitute a combination under Section 5.”

On a plain reading, the provision seems to suggest that the De Minimis Exemption would only apply if the enterprise being acquired were in India. But the term ‘acquisition’ includes both direct and ‘indirect’ acquisition of shares, voting rights, or assets of any enterprise, or control over management or assets of any enterprise.

In that light, it’s important to understand the terms ‘indirect’ acquisition and ‘control’¹ .

Decoding Indirect Acquisitions – Ownership or Control?

The term ‘indirect’ acquisition is ambiguous in itself and needs to be interpreted in line with the scheme of the Act. For instance, should an investment in an offshore holding company be seen as an investment in the Indian subsidiary on a pro-rated basis irrespective of control (as in the case in the insurance sector), or should it be a function of ‘control’? Net-net, is the term ‘indirect’ acquisition a function of economic interest, or ‘control’, or both?

Let’s take a simple example. If Company A acquires 5% shares in Company B, and Company B holds 51% shares in Company C, then what would be Company A’s indirect holding in Company C? If one were to apply the control test, the holding would be zero (since A does not exercise control over B, it can have no indirect influence over C) (the “Control Test”). However, if one were to apply the proportionate test or the ownership test, then Company’s indirect holding in Company C would be 2.55% (5% of 51%) (the “Pro-Rata Test”).

Several combinations leading to indirect acquisition approved by CCI suggest application of the Control Test. For instance, Veolia/Suez² ; Titan International U.S./Titan Europe³ ; TPG Manta/Thoma Bravo⁴ .

In fact, most legislations such as the Takeover Code, Exchange Control Regulations etc., and also several concession agreements like NHAI apply the Control Test for determining indirect holding or indirect acquisitions. Pro-Rata Test is a rarity.

While the applicability of the Pro-Rata Test cannot be entirely dismissed and will depend on the specific facts and interpretation of each case, the Control Test appears to be the more appropriate benchmark, as the CCI’s primary concern is whether an acquisition grants any form of control – rather than merely an economic interest – over an Indian entity.

So, what is ‘control’? Could director or observer appointment qualify as ‘control’?

The regulator has given stakeholders a gradient by calling out rights that are clearly noncontrolling (like tag-along and information rights), to those that are likely control-conferring (like vetoes over business plans or senior management), with a nuanced grey zone in between that depends on context, structure, and ability to ‘materially influence’.

For a start, the FAQs say an observer seat does not imply material influence. However, in our view, if the observer has the ability to impede or influence ‘operational dynamics’, then even an observer seat could amount to control. For instance, if without the observer presence, no board meetings can be held at all.

Interestingly, FAQs clarify that mere director seat or seats would not amount to control, per se, unless material influence can be established. For instance, a director could be seen as exercising material influence basis the stature, expertise and status, which could have the potential to influence board decisions.

From a shareholder perspective, pure investor protection rights (like anti-dilution, liquidation preference or information rights) won’t trigger control. However, other contractual rights (for instance ability to veto business plans, budgets etc.) could amount to control if they interfere with the operational dynamics or influence the strategic commercial decisions.

With respect to mere participation rights or consultation rights, FAQs clarify that, these will need to be analysed in light of their potential influence on strategic commercial decisions. However, such de facto control, if at all, is not a matter of presumption, but a matter of determination.

However, on an entirely separate note, if information rights give access to commercially sensitive information, it will result in denial of ‘solely as an investment’ exemption; thus, triggering a filing even in the absence of control. (For a detailed analysis on “control”, please refer to our paper here).

What about fund management activities?

CCI’s recent FAQ reiterates the principle laid down in some of its earlier orders – that if the manager controls the fund and the fund controls the portfolio companies, then the asset and turnover of controlled portfolio entities of a fund should be attributed to the investment manager. For instance, if Company A has “control” over Company B and B has multiple SPVs below it. The question is – for determining De Minimis Exemption, would you test the thresholds for each entity individually, or aggregate the assets and turnovers of all entities, and then check the de minimis thresholds? The answer is the latter – you may need to see the direct and indirect acquisitions as one composite transaction.

What about giving up of rights?

Certain statutory rights cannot be given up at all (for instance, right to vote on shares etc). Contractual rights can be given up – however, if the right has not been given up, it does not matter whether the right has been exercised or not (for instance you have the right to appoint a director, but you are not appointing a director – from a CCI perspective, it might be difficult to establish complete alienation from such rights).

Look at the entire scheme, and not just a step – interconnected principle

The concept of “inter-connected transactions” serves as a general exception to all exemptions. Under this principle, various legs or stages of a transaction, even if executed separately at different times, are treated as parts of a single composite transaction. Therefore, exemptions must be evaluated collectively at the outset, provided at least one leg meets the notification thresholds. Conversely, deliberately structuring a transaction into multiple smaller steps – each individually below notification thresholds – may be viewed by the CCI as an attempt to circumvent notification requirements, potentially attracting penalties under Regulation 9(5) of the Combination Regulations. However, as an anti-abuse measure, this provision is not intended to impact genuine commercial transactions. (Read our detailed paper on “inter-connected” principle here).

DVT Trumping

Another exception to the De Minimis Exemption is the recently announced DVT Thresholds. Effective Sep 9, 2024, if the target meets the De Minimis Exemption thresholds but the value of the transaction exceeds INR 2000 crore + the target has substantial business operations in India, the exemption won’t be applicable. Please see our earlier DVT paper here. (We’ll take a closer look at the DVT guidance in May 2025 FAQs in our follow-up piece)

Conclusion

The De Minimis Exemption remains a critical tool for dealmakers navigating Indian merger control, but its application is far from mechanical. While it streamlines smaller transactions by exempting them from CCI scrutiny, the exemption’s scope hinges on nuanced assessments of control, material influence, and the aggregation of assets and turnover.

Further, the key consideration, in our view, should not simply be the percentage of shares acquired but whether the transaction results in control. Besides being more aligned to the intent of the law – assess transactions which can cause appreciable adverse effects on competition, the Control Test offers a more reliable basis for determining whether an indirect acquisition qualifies for De Minimis Exemption.

This control-centric approach ensures that transactions with the potential to impact Indian markets – regardless of how they are structured – do not escape regulatory scrutiny by focusing on the substance of influence rather than the form of ownership.

That said, the De Minimis Exemption can expedite deals and reduce regulatory friction, but only if parties conduct rigorous early-stage diligence and avoid structuring aimed at circumventing notification requirements.

¹ “Control” under the Act has been expansively defined (under Section 5)to mean “…the ability to exercise material influence, in any manner whatsoever, over the management or affairs or strategic commercial decisions by –(i) one or more enterprises, either jointly or singly, over another enterprise or group; or(ii) one or more groups, either jointly or singly, over another group or enterprise”;
² Veolia/ Suez.
³ Titan International/Titan Europe.
⁴ TPGManta/Thoma Bravo.