INDIA Law and Practice Contributed by: Anand Lakra, Shivpriya Nanda, Zain Pandit and Ami Shah, JSA Advocates & Solicitors
In the case of: (i) an acquisition requiring CCI approval, the obligation is on the acquirer to file the notification form and disclose the transaction to the CCI; and (ii) mergers and amalgamations, the obligation is on the merging/amalgamating parties to file the notification form and disclose the transaction to the CCI. Such notification is usually made after the execution of the binding transaction documents. For mergers or amalga - mations, board approval of the proposal relat - ing to a merger/amalgamation is construed as a binding transaction document. In acquisitions, the execution of any agreement or “other docu- ment” is considered as a binding transaction document. “Other document” means any document con - veying an agreement or decision to acquire control, shares, voting rights or assets including (i) any document executed by the acquirer in a hostile acquisition; and (ii) a public announce - ment made in accordance with the Takeover Regulations. The CCI has, through its decisional practice, widened the scope of the term “other docu- ments” to include binding term sheets, resolu - tion plans (limited to cases falling within the pur - view of Insolvency and Bankruptcy Code) and Market practice on timing of disclosure does not differ from legal requirements. As set out in 5.1 Requirement to Disclose a Deal , listed entities make the relevant disclosures when the binding agreements are executed. 5.3 Scope of Due Diligence Investors usually conduct detailed due diligence to identify any “red flags” for potential investors. memorandum of understanding. 5.2 Market Practice on Timing
Vendor due diligence is common in bidding situations while buy-side diligence is common in bilateral deals. In bidding situations, where a vendor due diligence is already provided, the investors usually only have the chance to conduct “top up” due diligence and review the material agreements/licences. The scope of review will also depend on whether the investor proposes to procure a warranty and indemnity insurance, which is becoming increasingly com - mon in India. Investors conduct legal, financial and taxa - tion diligence upon potential targets. Further, depending upon the industry or sector to which the target belongs, investors may undertake operational due diligence. In certain cases, envi - ronmental due diligence, or cybersecurity due diligence is also undertaken to ascertain industry specific risks. 5.4 Standstills or Exclusivity It is common to see standstill and exclusiv - ity clauses in transaction documents entered between parties to M&A deals. Exclusivity clauses are usually seen in term sheets and set out actions that are restricted before the signing of definitive agreements. From a sellers’ perspective, shorter exclusivity periods and the right to terminate the term sheet in the case of unreasonable delays on the part of the buyers are demanded. It should be noted that in bidding situations, it is not uncommon for the sellers to not provide exclusivity and continue to liaise with multiple bidders till the execution of the definitive documents. Standstill obligations come in at the definitive agreements stage. Definitive agreements com - monly set out the restricted activities and obliga - tions of a company/seller for the interim period
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