INDIA Law and Practice Contributed by: Raj Ramachandran and Krutamana Pisipati, JSA
7.7 Currency Control/Central Bank Approval The RBI is the Indian central bank. For certain transactions, such as inbound mergers, the approval of the RBI is required. Other transac- tions will need to comply with conditions like pricing to fall within the purview of transactions under the automatic route. 8. Recent Legal Developments 8.1 Significant Court Decisions or Legal Developments Some key legal developments in relation to tech- nology M&A are as follows. • Foreign Exchange Management (Non-debt Instruments) Rules, 2019: the transfer of equi- ty instruments of an Indian company between a resident and non-resident may be effected by way of any of the following two swaps: (a) a swap of equity instruments of another Indian company; and (b) a swap of equity capital of a foreign com- pany in compliance with the Overseas Investments Rules. • SEBI (Delisting of Equity Shares) (Amend- ment) Regulations, 2024: the Regulations stipulate that when delisting is proposed upon acquisition, the acquirer will open an interest bearing escrow account with a scheduled commercial bank, no later than seven working days from the date of obtain- ing the shareholders’ approval, and deposit an amount equivalent to 25% of the total consideration in that account. This is calcu- lated depending on the manner in which the delisting is proposed. The Regulations also stipulate that before making the detailed pub- lic announcement, the acquirer will deposit
the remaining 75% of the total consideration amount in the escrow account. • Competition (Amendment) Act, 2023: This legislation modifies the definition of control to include “material influence” in addition to de facto and de jure control and has been inter- preted as having factors present that enable an entity to influence the affairs and manage- ment of another enterprise. These factors include majority shareholding, veto rights (attached to minority shareholding), board representation, contractual covenants, etc. The Act further stipulates an additional condi- tion for a transaction which is not notifiable to the CCI on the basis of existing thresholds (asset and turnover criteria), but would be notifiable if: (a) the value of the transaction exceeds INR2,000 crore (approximately USD240 million); and (b) the target enterprise has “substantial business operations in India”. 9. Due Diligence/Data Privacy 9.1 Technology Company Due Diligence Due diligence information is provided to enable the acquirer to verify and satisfy itself of the business of the company as represented to the acquirer. Robust non-disclosure agreements are executed to ensure confidentiality. Technology due diligence may cover the technology assets, the licences, ownership and registration status, contracts executed for use or when acquiring the assets and IT infrastructure and processes, including security protocols. 9.2 Data Privacy The Information Technology Act, 2002 is the pri- mary data privacy legislation in India. Elsewhere, the Indian Digital Personal Data Protection Act,
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