Attempted to make provisions for deal value calculation more predictable: Jayant Sinha

BJP MP Jayant Sinha on Friday said Parliamentary Standing Committee on Finance has attempted to make the provisions for deal value calculation more predictable so that companies would have a very clear set of rules which they could follow.

Sinha said Parliamentary Standing Committee on Finance has suggested a few refinements to the deal value threshold, which will enable companies to have more clarity on exactly how this will be applied.

"Control was another important amendment. When you acquire control of a company, you have to be very clear as to what is defined as control. There are really two broad standards globally. One standard is what is called decisive influence. In decisive influence, if you acquire let's say 51 percent of the company, you have decisive control over the company through board seats, through voting rights and you can set the business model and the policies that the company is going to follow, that standard is called the decisive influence standard," he said.

"There is a second standard which is a weaker standard and that is called material influence. In material influence, you can have control over the company once you start to exercise material control and material control can be defined in many different ways. For example, if you have a board seat in a company, then maybe you have material control. If you acquire 26 percent of a company, then you might have material control as well. So that material influence standard is in fact the standard that has largely been practised in India," the MP said.

Sinha said he cannot give the exact recommendations till the report gets tabled in Parliament but the goal was to be able to get even more specific on exactly what is meant by control.

"So companies that are facing this kind of scrutiny from the CCI would know exactly what standard is being applied and how it is being applied and how it pertains to their particular combination of the merger," he added.