Introduction
Mergers and Acquisitions (M&A) are key drivers of corporate strategy and economic growth. However, they are governed by a complex regulatory landscape that ensures transparency, market fairness, and protection of stakeholder interests.
This article explores the regulatory framework that governs M&A transactions in India with a focus on practical application, referencing the landmark transaction in which JSW Paints agreed to acquire a 74.8% stake in Akzo Nobel India for ₹89.9 billion.
Through this lens, the article demystifies the layered legal processes, the role of regulators, and the contemporary challenges in Indian M&A law.
In the corporate world, M&A deals are often seen as strategic moves to gain market share, acquire new capabilities, or restructure operations. However, for every boardroom handshake, there lies a deeper legal foundation that determines whether the deal can legally and practically succeed.
In India, this foundation is formed by a web of regulations, governed by agencies like the SEBI, CCI, RBI, and various sectoral regulators.
The recent JSW Paints acquisition of Akzo Nobel India has again brought regulatory compliance into sharp focus.
The Regulatory Ecosystem for M&A in India
Unlike jurisdictions with a single-window regulator, India’s M&A regulatory framework is shaped by multiple laws:
Companies Act, 2013
Sections 230-232 of the Companies Act, 2013 provide the statutory procedure for schemes of arrangement, including mergers, amalgamations, and demergers. The NCLT oversees and approves these schemes, ensuring that shareholder, creditor, and regulatory interests are protected.
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Code)
For listed companies, the SEBI Takeover Code ensures that when a significant stake is acquired, minority shareholders get a fair exit opportunity. Regulation 3(1) mandates an open offer when an acquirer crosses the 25% shareholding threshold.
In the JSW-Akzo deal, the acquisition of a 74.8% stake triggered an open offer to the public shareholders as per the SEBI mandate.
Competition Act, 2002
Section 5 and 6 of the Act make it mandatory for parties to seek pre-merger approval from the Competition Commission of India (CCI) for combinations that cross certain asset or turnover thresholds. The CCI reviews whether the transaction could adversely affect market competition.
Foreign Exchange Management Act (FEMA), 1999
When cross-border capital is involved, as is often the case in M&A, FEMA and RBI guidelines regulate the pricing, route, and sectoral caps for foreign investment. Inbound and outbound M&A deals must also comply with the Non-Debt Instrument Rules, 2019.
Sectoral Regulations
Sector-specific regulators like IRDAI (Insurance), TRAI (Telecom), and RBI (Banking) impose additional compliance requirements for M&A involving companies in regulated industries. For instance, mergers of insurance companies need IRDAI approval and may have specific solvency and policyholder protection requirements.
Tax and Stamp Duty Laws
M&A structures often aim at optimizing tax and stamp duty implications. Section 47 of the Income Tax Act provides exemptions for certain mergers and demergers. However, high stamp duty costs (especially in states like Maharashtra) can influence deal structuring.
Important Stages of a Regulated M&A Deal
Term Sheet and Confidentiality
The deal begins with a non-binding term sheet and a Non-Disclosure Agreement (NDA), allowing the acquirer to access confidential data.
Legal Due Diligence
The buyer’s legal team examines the target’s contracts, compliances, licenses, litigation, employment records, IP, and more. This helps assess potential legal risks that could affect valuation or structuring.
Structuring the Transaction
Based on due diligence findings, the transaction may be structured as:
- Asset Purchase
- Share Purchase
- Merger/Amalgamation (under Section 230-232)
The JSW-Akzo deal follows a share purchase route triggering the SEBI Takeover Code.
Regulatory Filings
- SEBI: Open offer filings, draft letter of offer to shareholders
- CCI: Combination approval (if applicable)
- Stock Exchanges: Disclosure under SEBI LODR regulations
- RBI: Pricing compliance and investment reporting (in case of foreign acquirers)
- NCLT: For merger/demerger schemes
Open Offer and Shareholder Process
Once approved, the acquirer launches an open offer to public shareholders at a specified price. The offer must remain open for 10 working days and include escrow arrangements.
Closing and Post-Merger Compliance
Upon completion, the acquirer must update shareholding patterns, complete post-closing regulatory filings, and, if needed, initiate integration steps (HR, IT, contracts).
Recent Trends in Indian M&A Regulation
Speedier CCI Approvals
The CCI has adopted an easier channel route for low-risk combinations. However, scrutiny has increased in digital and tech acquisitions.
ESG and Sustainability Scrutiny
Increasingly, private equity players and global investors are demanding ESG due diligence as part of compliance.
Press Note 3 and National Security
Following geopolitical tensions, India amended its FDI policy requiring prior approval for investments from countries sharing land borders. This affects M&A involving Chinese investors.
Role of Technology
Virtual Data Rooms, AI-enabled document review, and e-filings with SEBI/CCI have made the M&A process more tech-driven but also more traceable and transparent.
Practical Challenges and Ground Realities
While the framework is robust, practitioners face challenges such as:
- Overlapping jurisdiction of regulators
- Delays in approvals (especially from NCLT)
- Ambiguity in FDI rules
- Variation in state-level stamp duties
These hurdles often lead to innovative structuring and greater reliance on transaction counsel and regulatory experts.
Conclusion
Regulations are often seen as barriers, but in the world of M&A, they serve as guardians that enhance trust. For law students and future lawyers, understanding M&A regulation is not just about memorizing laws but appreciating how legal structure supports economic ambition.
The JSW-Akzo Nobel deal is not just a milestone for the paints industry but also a real-world case study of Indian regulatory rigor in action. As India aims to become a global M&A hub, mastering its regulatory framework is essential for every aspiring corporate lawyer.
References:
Key References:
- Economic Times Article – https://economictimes.indiatimes.com/industry/cons-products/paints/akzo-nobel-reveals-why-it-chose-jsw-paints-which-now-aims-to-take-on-indias-paint-industry-giants/articleshow/122178866.cms?from=mdr
- Companies Act, 2013 – Sections 230–232 – https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/acts.html?act=NTk2MQ==
- Mint News Article – https://www.livemint.com/companies/news/jsw-paints-akzo-nobel-india-acquisition-rs-9000-crore-deal-paints-industry-11751004269272.html
- SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 – https://www.sebi.gov.in/legal/regulations/may-2024/securities-and-exchange-board-of-india-substantial-acquisition-of-shares-and-takeovers-regulations-2011-last-amended-on-may-17-2024-_69218.html
- FEMA (Non-Debt Instruments) Rules, 2019 – https://enforcementdirectorate.gov.in/fema
- Competition Act, 2002 – Sections 5 & 6 – https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/acts.html?act=NjU2NQ==
- Nishith Desai Associates: Legal & Tax Due Diligence June 2025 – https://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/Mergers___Acquisitions_in_India.pdf
Written By: Chinmay Kadam, III-III GLC-Mumbai.
