CS Professional · Corporate Restructuring, Valuation and Insolvency · Regulation of Combinations
Sunrise Bank, a scheduled bank, subscribes to shares of Kavya Textiles Ltd under a covenant in a loan agreement it signed with that company. Kavya's management asks whether a notice must be filed with the Competition Commission under section 6 of the Competition Act, 2002. What is the correct position?
No notice is required. Section 6 does not apply to a share subscription or financing facility by a bank, public financial institution, foreign portfolio investor or Category I AIF made under a covenant of a loan or investment agreement. The bank's subscription falls within this exclusion.
- ANotice is required, but only within 30 days of the subscription
- BNotice is required, because a bank is not an exempt category
- CNo notice under section 6 is required, as the section does not apply to such a subscription by a bank pursuant to a loan agreement covenantCorrect
- DNotice is required only if the subscription exceeds 25% of the shares
Explanation
Section 6(9) states that the section does not apply to share subscription, financing facility or acquisition by a public financial institution, FPI, bank or Category I AIF pursuant to a covenant of a loan agreement or investment agreement. Sunrise Bank is a bank and the subscription arises from a loan covenant, so no notice is needed. The 30-day option is wrong because the 30-day period was replaced and the section does not apply at all.
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