DVT Compliance Checklist for Cross-Border Acquisitions

The introduction of the Deal Value Threshold (DVT) under the Competition (Amendment) Act, 2023 has fundamentally redrawn the jurisdictional map for merger control in India. By inserting Section 5(d) into the Competition Act, 2002, Parliament created an entirely new triggering criterion one untethered from the target’s asset base or domestic revenues. Under this provision, a transaction must be notified to the Competition Commission of India (CCI) where the aggregate value of the transaction exceeds INR 2,000 crore, provided the target has ‘substantial business operations in India’ (SBOA). For practitioners advising on cross-border acquisitions, the DVT represents a paradigm shift: valuations and digital footprints not balance sheets alone now dictate notification obligations.

Understanding the DVT Trigger

The DVT is calibrated to capture deals involving asset-light but commercially significant enterprises typically, high-value technology platforms, digital marketplaces, pharmaceutical innovators, or data-intensive businesses whose India-facing operations may not surface under traditional asset and turnover thresholds. Prior to the amendment, a target generating modest domestic revenues could evade merger scrutiny despite wielding substantial market influence. The DVT closes that gap.

The SBOA test remains the critical qualifier. The CCI is expected to prescribe, through regulations, the precise parameters for determining whether an enterprise has substantial business operations in India likely encompassing metrics such as the number of active users, volume of transactions with Indian counterparties, data sourced from Indian users, and value of assets deployed domestically. Until those regulations crystallise into settled precedent, practitioners must apply a conservative and evidence-based analysis to the SBOA question, erring on the side of notification rather than risking ex post scrutiny.

Pre-Signing Compliance: The Checklist

1. Transaction Value Determination: The first and most consequential step is arriving at the correct ‘value of the transaction’ for DVT purposes. This is not merely the headline enterprise value. The CCI’s framework is expected to encompass all forms of consideration, including deferred payments, earn-outs contingent on performance milestones, earnest money deposits, non-compete covenants, and the value of any ancillary agreements — licensing, data-sharing, or exclusivity arrangements — that form part of the commercial whole. Advisors must ensure that structuring decisions (e.g., bifurcating a deal into an asset purchase and a separate IP licence) do not artificially suppress the notifiable value, as the CCI retains discretion to aggregate related transactions.

2. SBOA Assessment: Mapping the target’s India-facing operations against the anticipated SBOA criteria is non-negotiable. Practitioners should conduct a structured audit covering: (a) number of registered and active Indian users or subscribers; (b) volume and value of transactions executed with Indian-domiciled counterparties over the preceding two to three financial years; (c) quantum of data collected, processed, or stored that originates from Indian residents; and (d) value of tangible and intangible assets deployed in India, including contractual rights, distribution agreements, and software licences. Contemporaneous documentation of this analysis is essential — both for the filing itself and as a defence against any subsequent CCI inquiry into the notification decision.

3. FEMA and RBI Compliance: In cross-border acquisitions, DVT compliance sits alongside a comprehensive suite of foreign exchange obligations. Inbound acquisitions must conform to sector-specific FDI caps and entry routes under the Foreign Direct Investment Policy and the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. Where the target operates in a sensitive sector insurance, banking, defence, telecommunications, space, or digital media the acquiring entity must identify the applicable sectoral regulator and factor in approval timelines, which can extend well beyond the CCI’s standard 30-working-day review period. Downstream investments, round-tripping structures, and entities domiciled in jurisdictions sharing land borders with India (triggering Press Note 3 scrutiny) require heightened analysis.

4. Multi-Jurisdictional Merger Filings: Cross-border acquisitions routinely trigger notification obligations across multiple competition regimes simultaneously. The European Commission, the UK CMA, the US Hart-Scott-Rodino regime, and various Asia-Pacific authorities each apply distinct thresholds and substantive review standards. A consolidated filing calendar one that aligns the CCI timeline with other mandatory filings is indispensable. Misalignment can result in a premature closing in one jurisdiction while the CCI review remains outstanding, thereby constituting gun-jumping under Indian law, which carries civil and criminal exposure.

5. Indirect Transfer and Tax Structuring: Cross-border transactions involving Indian assets attract the indirect transfer provisions under Section 9(1)(i) of the Income Tax Act, 1961, read with Explanation 5 thereto. Where the target derives more than 50% of its fair market value from Indian assets, the transfer of shares abroad may generate Indian capital gains tax liability. Acquirers must assess whether any Double Taxation Avoidance Agreement (DTAA) provides relief, bearing in mind that the Principal Purpose Test (PPT) introduced under the Multilateral Instrument (MLI) can deny treaty benefits where tax mitigation is a principal object of the structure. A robust, contemporaneous business purpose documentation exercise is therefore integral to the compliance checklist.

6. Data Privacy and Digital Regulation: The Digital Personal Data Protection Act, 2023 (DPDPA) imposes obligations on ‘data fiduciaries’ processing personal data of Indian residents. In acquisitions involving digital businesses, the due diligence exercise must assess whether the target’s data collection practices, consent frameworks, and cross-border data transfer mechanisms comply with the DPDPA’s requirements. A target with legacy non-compliant data practices represents both a regulatory liability and a post-acquisition integration cost that must be reflected in deal pricing and warranty negotiations.

7. Anti-Money Laundering and Beneficial Ownership: The Prevention of Money Laundering Act, 2002 and the Companies Act, 2013 requirements around significant beneficial ownership (SBO) disclosures impose additional obligations on both acquirer and target. Where acquisition financing involves offshore lenders or structured vehicles, advisors must trace ultimate beneficial ownership chains to ensure compliance and pre-empt any PMLA exposure.

Post-Signing Obligations

Filing with the CCI must occur within 30 calendar days of the ‘trigger date’ defined as the execution of binding transaction documents. The parties must observe standstill obligations during the pendency of the CCI review: no implementation of the transaction, whether in whole or in part, is permissible. The standstill obligation is interpreted broadly, and any gun-jumping including premature exchange of commercially sensitive information outside a properly constituted clean-team protocol exposes parties to penalties of up to 1% of total assets or turnover, whichever is higher.

Where the CCI proceeds to Phase II investigation, the acquirer should be prepared to offer structural or behavioural remedies. Identifying potential remedy packages at the diligence stage rather than waiting for a Statement of Objections allows for more calibrated negotiation and reduces the risk of a prohibition decision.

Conclusion

The DVT has transformed the compliance calculus for cross-border acquisitions involving India-facing businesses. Practitioners must now embed a rigorous, evidence-based DVT and SBOA analysis into the earliest stages of deal structuring well before signing. The cost of post-closing CCI scrutiny, let alone a finding of gun-jumping, far exceeds the investment of proactive and thorough pre-signing compliance work. In the current regulatory environment, merger control is not an afterthought; it is a transaction-critical workstream.