REGULATIONS PERTAINING TO MERGER AND

ACQUISITION IN INDIA
Cross border merger and acquisition can be explained as the Merger and Acquisition, which
occurs between the companies registered in different home countries. With the increase in
globalization of economic world, narrowing down of the domestic markets and increasing
trend of the inorganic growth, in the last two decades market has seen an enormous trend of
increasing cross border merger and acquisition.

According to OECD, Cross Border M&A is divided into two parts1:

1. Inward Cross border M&A- Cases of M&A, where there is inward capital movement
through the sale of domestic units to the foreign firms are called inward cross border
M&A. These are mostly common in the developing countries. Around 27% of the
inward M&A occurred in developing countries till 1998.2

2. Outward Cross border M&A- And where there is outward movement of capital
through the purchase of the unit and assets of foreign firms are called outward cross
border M&A. Developed countries are most commonly involved in the outward
M&A. 87%of these were there in developed countries till the year 1998.3

Indian government after the independence was not very keen in allowing the foreign
investment in India, because of the various political reasons and the economic situation
prevailing at that time. There was logic behind such restrictions, that the domestic market of
India would be hampered and not be able to be well developed, as India was still to bring
industrialization in its market. This attitude was carried forward for another 30-40 years and
only after 1990, India began to open its market and started to allow foreign investments.

1 Kang, N. and S. Johansson , 'Cross-Border Mergers and Acquisitions: Their Role in Industrial
Globalisation' (OECD Science, Technology and Industry Working Papers, 2000) <http://www.oecd-
ilibrary.org/docserver/download/5lgsjhvj7mxx.pdf?
expires=1433129748&id=id&accname=guest&checksum=6B08B09DB7319035EC505C17394F470
C> accessed April 2015

2 ibid

3 ibid
Slowly and gradually market started to develop and many Indian companies became world
giants in their own sector.

In India there are no such specified laws for the regulating Cross Border Merger and
Acquisition, unlike United Kingdom which has Companies (Cross-Border Mergers)
Regulations 2007. In spite of that India has many laws which collectively regulate cross
border merger and acquisition, like The Foreign Exchange and Management Act of 1999, The
Competition Act of 2002, SEBI Regulations, ICDR 2009, The FDI Policy, The Income Tax
Act of 1961, The Indian Stamp Act.4

4 Ca shefali goradi and Kalpesh desai, 'Cross Border Mergers' [2010] SS VII (21) Income Tax
Review 29-27< http://www.bmradvisors.com/upload/documents/Article_Cross%20Border
%20Mergers_Shefali%20Goradia_25%20Oct1288343470.pdf> accessed on May 2015.