The Competition (Criteria for Exemption of Combinations) Rules, 2024

Not every transaction that crosses the thresholds needs to be examined. Some involve no change in the structure of competition at all: an increase in a shareholding that already carries control, a bonus issue, a purchase made purely as an investment, a reorganisation within a group. These rules, notified on 9 September 2024 and effective from 10 September 2024, list the categories exempt from the obligation to notify. They replace the list formerly contained in Schedule I to the Combination Regulations of 2011, and moving it into rules made by the Government gives it a firmer legal basis.

1. The Principal Categories

1. Investment acquisitions. An acquisition of shares or voting rights made solely as an investment or in the ordinary course of business, where it does not exceed twenty-five per cent of the total shares or voting rights and does not result in the acquisition of control. The rules set out what will and will not be treated as solely an investment, the acquisition of board rights or of rights beyond those available to an ordinary shareholder being inconsistent with that characterisation.
2. Consolidation within a band. An acquisition of additional shares or voting rights by a person who already holds at least twenty-five per cent and less than fifty per cent, where it does not result in a change of control.
3. Acquisition by a majority holder. An acquisition by a person already holding fifty per cent or more, unless the acquisition results in a change of control, as where it moves the acquirer from joint to sole control.
4. Asset acquisitions in the ordinary course. An acquisition of assets not directly related to the business activity of the acquirer, or made solely as an investment or in the ordinary course of business, and not leading to control, subject to the qualifications the rules state for assets that constitute a substantial business operation.
5. Corporate actions. Acquisitions pursuant to a bonus issue, a stock split, a buy-back or a rights issue, to the extent that they do not increase the acquirer's proportionate holding.
6. Intra-group transactions. Acquisitions and mergers within a group where the ultimate control does not change, on the footing that no new combination of independent businesses occurs.
7. Acquisitions by financial institutions and similar entities. Section 6(9), as it stands after the amendment of 2023, provides that the provisions of the section do not apply to a share subscription, financing facility or acquisition by a public financial institution, a foreign portfolio investor, a bank or a Category I alternative investment fund pursuant to a covenant of a loan or investment agreement.
8. Acquisitions in the ordinary course of business by an underwriter or a stock broker on behalf of clients.

2. How the Exemptions Work

• They are exemptions from notification, not from the Act. A transaction within a category need not be notified, but if it in fact causes an appreciable adverse effect it remains within Section 6(1), and conduct after the transaction remains subject to Sections 3 and 4.
• Change of control defeats every category. The recurring qualification is that the exemption is lost where the transaction results in the acquisition of control, and after the amendment of 2023 control means the ability to exercise material influence, which is a low threshold.
• Characterisation is examined on substance. Whether an acquisition is solely as an investment is judged by the rights acquired and the conduct of the acquirer, not by the label in the agreement.
• They operate alongside the other exemptions, principally the small target exemption in the Competition (Minimum Value of Assets or Turnover) Rules, 2024, which is a separate rule resting on the size of the target rather than on the character of the transaction.

3. Related Topics and Provisions