Sebi takeover & insider trading reg 230712 final


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Sebi takeover & insider trading reg 230712 final

  1. 1. An Overview of SEBI Takeover Regulations, 2011 &SEBI Insider Trading Regulations, 1992
  3. 3. Need of SEBI Takeover RegulationsAnnouncement of Policy of Globalisation• Opportunity for Overseas Investors Change in India Capital Market Scenario • Need for some regulations to protect the interest of Investors 1994 • Enactment of SEBI (SAST) Regulations, 1994 1997 • Enactment of SEBI (SAST) Regulations, 1997 2011 • Enactment of SEBI (SAST) Regulations, 2011
  4. 4. ON TARGET SEBI Takeover Regulations, 2011 Chapter II – Substantial Chapter V - Chapter Chapter III - Chapter IV - Chapter I – Acquisition of Disclosure of VI - Open Offer Other Preliminary Shares, Voting Shareholding Miscellane Process Obligations Rights or and Control ous Control Provides Deals with Deals with Obligations of Provides threshold limit power of Key Concepts Acquirer, TC, limits for for open offers the Board Definitions related to Merchant making and to issue open offer Banker disclosure exemptions directions Regulation Regulation Regulation Regulation Regulation Regulation 1-2 3 - 11 12 - 23 24 - 27 28 - 31 32 - 35
  6. 6. ON TARGET The Takeover Regulations are applicable on the acquisition of Voting Rights or Control over the Listed Company
  7. 7. ON TARGET Shares Voting Control Rights
  9. 9. ON TARGET ACQUIRER Who Directly Or Indirectly Acquires Or Agrees to Acquire Whether Or through By Himself With PACs Or with Shares Or Voting rights Or Control Over Target Company
  10. 10. ON TARGET ACQUISITION means Directly OR Indirectly OR Agreeing to Acquiring Acquire Shares OR Voting Rights OR Control Target Company
  11. 11. ON TARGET CONTROL Director or officer of Target Company shall not be considered to be in control over target company merely by virtue of holding such position
  12. 12. ON TARGET UNANSWERED ISSUE Meaning of Term Negative Control and the applicability of SEBI Takeover Regulations on the same? Exemption Rejected in the matter of acquisition of shares of Daikaffil Chemicals India Limited (Order dated 14.02.2007) • Acquirer Proposes to acquire 25.10% voting rights through Preferential Allotment. • Increase in shareholding from Nil to 25.10%. • Exemption Rejected as the acquirer will acquire Negative Control over the Company.
  13. 13. ON TARGET SHARES • Equity Share capital carrying Means voting rights • Security which entitles the holder to exercise voting rights Includes • Depository receipts carrying an entitlement to exercise voting rights
  14. 14. ON TARGET FREQUENTLY TRADED SHARES • 10% • 12 calendar months preceding Trading the calendar month in which the Turnover PA is made For instance: Month of PA: July 2012 Trading Turnover: July 2011 to June 2012
  15. 15. ON TARGET IDENTIFIED DATE Identified Date A date falling on the 10th business day prior to tendering period
  16. 16. ON TARGET IMPORTANT EVENTS Offer Period Identified Te n d e r i n g Date Period Date of Date of payment acquisition of 10 working days 10th working day to shareholders shares/control within which prior to or withdrawal triggering PA shareholders commencement tender their of tendering shares Period
  17. 17. ON TARGET PERSON ACTING IN CONCERT Persons who for a common objective acquire shares or voting rights or control over Target Company, pursuant to an agreement or understanding, formal or informal, directly or indirectly co-operate for acquisition of shares or voting rights or control over the Target Company.
  18. 18. ON TARGET PERSON ACTING IN CONCERT In general Promoters of the Company are Person acting in Concert (PAC) subject to the existence of element of shared common objective. [SAT Order in the matter of Nikhil Mansukhani (MAN Industries (India) Limited) v SEBI (2012)] [Bombay High Court order in the matter of K. K. Modi vs SAT (2003)]
  19. 19. ON TARGET ENTERPRISE VALUE means value calculated as Market Capitalization of a Company Minority Preferred Debt Interest shares Cash Total Cash Equivalents
  20. 20. ON TARGET ENTERPRISE VALUE Minority Interest A significant but non-controlling ownership of less than 50% of a companys voting shares by either an investor or another company. Cash equivalent Investment securities that are short-term, have high credit quality and are highly liquid. Preferred stock Capital stock which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation. E.g. Preference Shares
  21. 21. ON TARGET ENTERPRISE VALUE Paid up capital (No. of shares) (1) 10,000 Closing Price of preceding day (2) 10 Market Capitalization (3=1*2) 1,00,000 Debt (4) 5,000 Minority Interest (5) 25% (2500*10) 25,000 Preferred shares (1000*10) (6) 10,000 Cash and Cash equivalents (7) 4,000 Enterprise Value (3+4+5+6-7) 1,36,000
  22. 22. ON TARGET VOLUME WEIGHTED AVERAGE MARKET PRICE “Volume weighted average market price” means the product of the number of equity shares traded on a stock exchange and the price of each equity share divided by the total number of equity shares traded on the stock exchange; Number of shares traded on the Stock Exchange on a particular day: X Market Price: Y X1*Y1+X2*Y2+X3*Y3……… Volume weighted Average Market Price = X1+X2+X3……………..
  23. 23. ON TARGET SEBI SEBI Takeover Regulations,2011 Takeover Regulations, 1997 Weeks Quantity Average of Traded Quantity A (X) B= WAP Traded weekly high Price Traded C (C/B) and low of (A) (B) closing prices 1 100 10 10 100 1000 11.67 1 500 12 12 500 6000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 26 500 15 15 500 7500 13.85 26 150 10 10 150 1500 47 1150 16000 25.51 Offer Price/WAP 6.25 12.76
  24. 24. ON TARGET VOLUME WEIGHTED AVERAGE PRICE “Volume weighted average price” means the product of the number of equity shares bought and price of each such equity share divided by the total number of equity shares bought; Number of shares bought on a particular day: A Market Price: B A1*B1+A2*B2+A3*B3……… Volume weighted Average Price = A1+A2+A3……………..
  25. 25. ON TARGET WEIGHTED AVERAGE NUMBER OF TOTAL SHARES (WAN) “Weighted average number of total shares” means the number of shares at the beginning of a period, adjusted for shares cancelled, bought back or issued during the aforesaid period, multiplied by a time-weighing factor; Preferential Reduction of share allotment of 20 capital shares 10 shares 01.04.2011 01.06.2011 01.10.2011 As on Date Capital 100 120 90 90 100*61/365 120*122/365 90*182/365 WAN 16.71 40.11 44.88 101.70
  27. 27. ON TARGET TYPES OF OFFER OPEN OFFER MANDATORY/ VOLUNTARY TRIGGERED OFFER OFFER Initial Creeping Change in Indirect Threshold Acquisition Control acquisition
  28. 28. ON TARGET INITIAL THRESHOLD Acquirer along with PAC • 25% or more shares or voting rights
  29. 29. ON TARGET CREEPING ACQUISITION ZONE Acquirer with PAC holding 25% - 75% • Creeping Acquisition - 5% in each F.Y. KEY POINTS No Netting off Allowed* Individual shareholding to be considered for Open Offer
  30. 30. ON TARGET NO NETTING OFF ALLOWED Dates Shares /Voting Rights No. of shares held as on 01.04.2012 35% Shares acquired on 22.05.2012 4% Shares sold on 10.10.2012 2% No. of shares that can be acquired under 1% the Creeping Acquisition during the financial year 2011-12
  31. 31. ON TARGET INCREMENTAL VOTING RIGHTS IN FRESH ISSUE Particulars Pre shareholding Shares to be allotted Post shareholding Changes pursuant to preferential allotment No. of %* No. of %^ No. of %^ No. of % shares shares shares shares Promoters 70 58.33 16 11.99 86 63.33 16 5 Non 50 41.67 50 36.67 0 (5) promoters Total 120 (X) 100 136 (Y) 100 16 0.00 * - No. of shares / X * 100 ^ - No. of shares / Y * 100 In the present case, the incremental increase in voting right is 5%, although the fresh allotment constitutes 11.99% of the expanded capital of the Company. Accordingly, the incremental increase in voting rights is within the creeping acquisition limit.
  32. 32. ON TARGET INDIVIDUAL SHAREHOLDING OF ACQUIRER TO BE CONSIDERED FOR OPEN OFFER Promoter Pre Holding Creeping Post Applicability of SEBI Acquisition Holding Takeover Regulations, 2011 A 23% 3% 26% Open Offer Obligations B 7% 2% 9% - Total 30% 5% 35% - • Increase in total promoter shareholding- within the creeping acquisition limit. • However, A’s shareholding has goes beyond 25%, resulting into triggering of Open Offer obligation.
  33. 33. ON TARGET A.O. ORDER IN THE MATTER OF S KUMARS.COM LTD Particulars Pre shareholding Shares to be Post shareholding Change allotted in % pursuant to preferential allotment No. of shares % No. of % shares Promoters- 9,447,814 36.62 2,825,000 12,272,814 42.87 6.25 Allotee Other 3,353,196 13.00 3,353,196 11.72 Promoters Total 12,801,010 49.62 2,825,000 15, 626,010 54.59 4.97  A. O. held that since the shareholding of the individual promoter increased by 6.25%, thus he had violated the provision of Regulation 11(1) of the SEBI (SAST) Regulations, 1997.  Although the increase in total promoter shareholding is within the creeping acquisition limit. The important point to be noted here that the consideration of individual shareholding of the promoter was not prescribed in the SEBI Takeover Regulations, 1997.
  34. 34. ON TARGET CHANGE IN CONTROL • Through • Through Shareholder Shareholder Approval Approval SEBI (SAST) SEBI (SAST) Regulations, 2 Regulations, 011 1997 Through Open offer Only Irrespective of acquisition of shares or voting rights
  35. 35. ON TARGET INDIRECT ACQUISITION Acquisition of Voting Rights or control over other entity that enable the Acquirer to exercise of such percentage of voting or control over Target Company Global Offer Control Acquirer B UK Ltd. Target Company 100% 72.93% Indirect acquistion of 72.93% of the Target Company Trigger Open Offer
  36. 36. ON TARGET VOLUNTARY OPEN OFFER • Prior holding of atleast 25% or more shares; Eligibility • No acquisition during the preceding 52 weeks without attracting the obligation to make a public announcement. • The aggregate shareholding not exceeds the Condition maximum permissible non-public shareholding. • No further acquisition of shares for a period of six months after completion of the open offer Restriction except by way of another voluntary open offer or competing offer.
  37. 37. ON TARGET CAN PERSON HOLDING <25% MAKE VOLUNTARY OFFER Yes. But the advantage of minimum offer size of 10% is not available and The minimum offer size should be of 26%
  39. 39. ON TARGET MINIMUM OFFER SIZE Mandatory Voluntary Offer - Offer - 26% 10%
  40. 40. ON TARGET OFFER PRICE Offer Price – Specific Criteria for Direct Indirect Acquisition Acquisition Frequently Infrequently Traded Shares Traded Shares
  41. 41. ON TARGET OFFER PRICE – Direct Acquisition – Frequently Traded shares Highest Price paid per share under the Agreement Volume-weighted average price for acquisition made during 52 weeks preceding date of PA Highest price paid for acquisition made during 26 weeks preceding date of PA Volume-weighted average market price for 60 trading days preceding date of PA
  42. 42. ON TARGET Volume-weighted average price for acquisition made during 52 weeks preceding date of PA Date of Price per share No. of shares Consideration acquisition (1) acquired (2) (3=1*2) 10.06.2011 26.04 500 13020 22.08.2011 15.63 200 3126 06.01.2012 14.58 100 1458 05.02.2012 24.62 400 9848 16.03.2012 16.96 200 3392 Total 1400 30844 Volume-Weighted Average Price 22.03 (Total of 3/Total of 2)
  43. 43. ON TARGET Highest price paid for acquisition made during 26 weeks preceding date of PA Date of acquisition Price per share No. of shares acquired 11.11.2011 16.98 200 20.12.2011 15.60 100 14.02.2012 20.00 400 19.03.2012 24.92 200 Highest Price Paid 24.92
  44. 44. ON TARGET Volume-weighted average market price for 60 trading days preceding date of PA Date WAP - - - - - - 04.06.2012 20.12 05.06.2012 22.68 06.06.2012 21.11 07.06.2012 22.00 Total of WAP 1230 Volume-weighted average 20.5 market price (WAP/60)
  45. 45. ON TARGET OFFER PRICE – Direct Acquisition – Frequently Traded shares Minimum Offer Price shall be highest of Price Highest Price paid per share under the Rs. 24 Agreement Volume-weighted average price for acquisition Rs. 22.03 made during 52 weeks preceding date of PA Highest price paid for acquisition made during Rs. 24.92 26 weeks preceding date of PA Volume-weighted average market price for 60 Rs. 20.5 trading days preceding date of PA MINIMUM OFFER PRICE RS. 24.92
  46. 46. ON TARGET OFFER PRICE – Direct Acquisition – Infrequently Traded shares Highest Price paid per share under the Agreement Volume-weighted average market price for acquisition made during 52 weeks Highest price paid for acquisition made during 26 weeks Other Valuation Parameters - Book Value, Comparable trading multiples, Earning per share and other parameters
  47. 47. ON TARGET OFFER PRICE – Indirect Acquisition  Highest Price paid per share under the Agreement  Volume-weighted average price for acquisition made during 52 weeks preceding earlier of • Date of the primary acquisition • Date on which the intention or the decision to make the primary acquisition is announced  Highest price paid for acquisition made during 26 weeks preceding earlier of • Date of the primary acquisition • Date on which the intention or the decision to make the primary acquisition is announced
  48. 48. ON TARGET OFFER PRICE – Indirect Acquisition  Highest price paid for acquisition between the earlier of • Date of the primary acquisition • Date on which the intention or the decision to make the primary acquisition is announced and the date of the Public Announcement  Volume-weighted average market price for 60 trading days preceding date of PA preceding earlier of • date of the primary acquisition • date on which the intention or the decision to make the primary acquisition is announced
  49. 49. ON TARGET NON COMPETE FEES Control Premium / Non- Compete Fees To be included in the Offer Price
  50. 50. ON TARGET ESCROW ACCOUNT Opening of Escrow Account – Not later than two working days prior to the date of DPS Amount of Escrow Deposit On first Rs. 500 Crores 25% of the consideration On balance amount Additional 10% of balance consideration Forms of Escrow Account  Cash  Bank Guarantee  Freely transferable equity shares or securities
  51. 51. ON TARGET Mode of Payment Shares of Secured Convertible Cash acquirer debt Combinatio debt n of A, B, C (A) company instrument securities or D (B) (C) (D) (E)
  52. 52. ON TARGET INCREASE IN SHAREHOLDING BEYOND MAXIMUM PERMISSIBLE NON PUBLIC SHAREHOLDING AFTER THE OPEN OFFER Ineligibility to make voluntary delisting offer Obligation to bring down for a period of 12 months the shareholding from the completion of Offer Period
  53. 53. ON TARGET ACQUISITION AFTER THE TENDERING PERIOD Payment of Acquisition during difference At a price higher 26 weeks after between highest than offer price Tendering Period price and offer price To the shareholders Within 60 days whose shares are from such accepted in the acquisition offer
  54. 54. ON TARGET TIMING OF MAKING OPEN OFFER Public Detailed Public Announcement Statement • On the same day or • Within 5 working as specified under days from PA the Regulation 13
  55. 55. ON TARGET TIMING OF PUBLIC ANNOUNCEMENT (PA) Triggering Event Time Agreement On the same day Market Purchase of shares Prior to the placement of purchase order with the stock broker. Conversion of securities without On the same day of exercise of option fixed date of conversion
  56. 56. ON TARGET TIMING OF PUBLIC ANNOUNCEMENT (PA) Triggering Event Time Conversion of securities with Second working day preceding the fixed date of conversion date of conversion Disinvestment On the same day of executing the agreement Preferential Allotment Date of passing Special Resolution
  57. 57. ON TARGET TIMING OF PUBLIC ANNOUNCEMENT (PA) Triggering Event Time Buy-back not qualifying for Not later than 90th day from the date exemption under Regulation 10 of increase in voting rights. Acquisition of shares and Not later than 2 working days from control beyond the control of receipt of intimation having acquired acquirer such control Voluntary Offer On the same day when the Acquirer decides to make Voluntary Offer
  58. 58. ON TARGET OPEN OFFER FOR ANDHRA CEMENTS LIMITED SSSPA dated 15.11.2011 Acquisition from Preferential allotment promoters of TC Legal trigger date Legal trigger date Date of passing Date of SPA Special Resolution Actual Date of PA 15.11.2011 (Date of SPA) Recalculation of offer Offer Size price considering date of 26% of expanded capital passing SR
  59. 59. ON TARGET COMPLETION OF ACQUISITION UNDER THE AGREEMENT Regulation 22(1) • Completion of acquisition of shares, voting rights or control NOT ALLOWED until the expiry of offer period.
  60. 60. ON TARGET EXCEPTION TO REGULATION 22(1) Informal Guidance in Regulation 22(2) matter of R System International Ltd. After a period of 21 working days from PA Completion of Acquisition under Market Purchase Deposit of 100% allowed consideration in the Escrow Account
  61. 61. ON TARGET RECOMMENDATION ON THE OFFER BY BOARD Recommendation on Offer by the Committee of • Mandatory Independent Directors  Constitution of Committee of Independent Directors (IDC).  Recommendation on the Open offer, as to whether the offer , is or is not, fair and reasonable.  Publication of the recommendations in newspapers at least two working days before the commencement of the tendering period.
  62. 62. ON TARGET KEY POINT Once a shareholder has tendered his shares in the open offer made by the Acquirer, than he/ she CANNOT WITHDRAW or REVISE his/her request.
  63. 63. ON TARGET COMPETING OFFER Open Offer by any other person (Competitor Acquirer) after an offer has already been given by an acquirer to the shareholders of the Target Company. Existing Holding of Existing Holding of First Competitive Acquirer Acquirer along with PAC’s + + Number of shares Shall atleast proposed to be acquired equal to under the offer Number of shares to be acquired through + Competitive Offer Underlying Agreement for Competitive Offer the acquisition of shares Competitive Acquirer
  64. 64. ON TARGET TIMING UNDER COMPETING OFFERS Public Announcement Within 15 Working days of the date of DPS issued by the first acquirer
  65. 65. ON TARGET WITHDRAWAL OF OPEN OFFER Offer once made cannot be withdrawn EXCEPT in the following circumstances Statutory Approvals required have been refused. Acquirer, being natural person, has died. Any condition in the agreement is not met for reasons outside the reasonable control of the acquirer Circumstances as in the opinion of the Board, merit withdrawal
  66. 66. ON TARGET TIMELINE OF OPEN OFFER Particulars Timeline (Legal) Public Announcement through notice to Stock Exchange X Opening of Bank Escrow & Securities Escrow X+2 Working Days Deposit of Escrow Amount in Escrow A/c Detailed Public Statement in newspapers X+5 Working Days Draft letter of offer to be submitted to SEBI and sent to Target Company X+10 Working Days Receipt of comments from SEBI on draft letter of offer X+25 Working Days Identified date for determining name of shareholders to whom the Letter of Offer X+27 Working Days should be sent Dispatch of the Letter of Offer to shareholders X+32 Working Days Upward revision in offer X+33 Working Days Comments on the offer by independent directors of target company X+34 Working Days Issue of advertisement announcing the schedule of activities for open offer X+36 Working Days Date of opening of offer X+37 Working Days Date of closing of offer X+46 Working Days Payment of Consideration X+56 Working Days Filing of report to SEBI by Merchant Banker X+61 Working Days
  67. 67. ON TARGET NO APPOINTMENT OF ACQUIRER ON THE BOARD OF TARGET COMPANY Offer Period x No induction of representative on Company Acquirer or his Board of Target Exception: • After 15 working days from DPS, and • Deposit 100% consideration in the Escrow Account
  69. 69. ON TARGET EXEMPTION FROM OPEN OFFER Exemptions from Open Offer/ Procedural Requirements relating to Open Offer Regulation 11- Regulation 10- Exemptions by the Automatic Exemption Board Regulation 11(2) Regulation 11(1) Relaxation from Exemption from the Open Procedural Offer obligations Requirements of Open Offer
  70. 70. ON TARGET OPEN OFFER REQUIREMENT • Open Offer on crossing initial Reg. 3 (1) threshold, i.e. 25%. • Open offer for crossing Reg. 3 (2) creeping acquisition limit, i.e. 5% • Change in Control Reg. 4
  71. 71. ON TARGET AUTOMATIC EXEMPTIONS FROM OPEN OFFER Reg 3 & 4 Reg 3 Reg 3 (1) Reg 3(2) Buy Back under CDR Scheme Right Issue Inter-se-transfer Regulation 3(1) Acquisition in the Buy Back ordinary course of business Acquisition in exchange Disinvestment of shares agreement Acquisition from state- BIFR and Merger level financial Schemes institutions SARFAESI , Delisting Acquisition from a venture capital fund or Transmission, a foreign venture succession or capital investor inheritance Section 87(2) of Companies Act, 1956
  72. 72. ON TARGET Inter-se transfer amongst Immediate Relatives • Immediate Relative Immediate Relative Means Includes Person Person Person Person and Persons Parents / Brother/ Sister/ Spouse Spouse Spouse Spouse Spouse Child Parents Brother Sister
  73. 73. ON TARGET Inter-se transfer amongst Promoters Persons shown as Promoters Atleast 3 years Listing SEBI Takeover Agreement Regulations
  74. 74. ON TARGET Inter-se transfer amongst Qualifying Parties being
  75. 75. ON TARGET Inter-se transfer amongst PAC Persons acting in concert for minimum 3 years prior to the proposed acquisition, and disclosed as such pursuant to filings under the listing agreement.
  76. 76. ON TARGET Inter-se transfer amongst Shareholders of Target Company Target Company PAC PAC Shareholder 1 Shareholder 2 Shareholder 3 100% capital in same ratio as their shareholding in Target Company Company A
  77. 77. ON TARGET Acquisition in ordinary course of business Scheme of Merchant Banker Safety Net under or investor in Underwriter Stock Broker Reg 44 of SEBI market making (ICDR) Reg, process 2009 Scheduled Merchant Banker acting Invocation of Commercial as Stabilisation Agent pledge by SCB Bank
  78. 78. ON TARGET Acquisition pursuant to agreement of disinvestment Acquisition at different stages. Open offer is required only once; provided Acquirer had made disclosures Acquirer and the seller are the same at regarding all the stages of acquisitions, all the stages of acquisition if any, in the public announcement and letter of offer
  79. 79. ON TARGET ACQUISITION PURSUANT TO Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 SEBI Delisting Regulations, 2009 Transmission, succession or inheritance Voting Rights or of preference shares carrying voting rights under Section 87(2) of the Companies Act, 1956
  80. 80. ON TARGET ACQUISITION-CORPORATE DEBT RESTRUCTURING Conditions No change in control Shareholders’ Approval by way of Special Resolution passed by Postal Ballot.
  81. 81. ON TARGET ACQUISITION-BUY BACK Pre Holding Pre Holding <25% between 25-75% Exemption Shareholders Resolution/Board Resolution, as the case may be. (Subject to Acquirer Reducing Its Shareholding Below Acquirer not voted in favor of resolution the threshold within a period of Ninety Days from the date of such increase) No change in control.
  82. 82. ON TARGET ACQUISITION-PREFERENCE SHARES CARRYING VOTING RIGHTS Preference Acquisition of shares carrying Voting Rights voting rights In terms of Section 87(2) of the Companies Act, 1956 Similar view was also given by Hon’ble SAT in the matter of Weizmann Ltd. and PACs vs. SEBI wherein voting rights have been accrued on preference shares on account of non payment of dividend in terms of Section 87 of the Companies Act, 1956.
  83. 83. ON TARGET COMPLIANCES FOR EXEMPTION Regulation 10(5) – Acquirer shall give advance intimation to the stock exchange atleast 4 working days prior to the proposed acquisition Regulation 10(6) – Any acquirer seeking exemption shall file a report with the stock exchanges not later than four working days from the acquisition. Regulation 10(7) - The Acquirer shall file a report to SEBI within 21 working days of the date of acquisition along with supporting documents to the Board giving all details in respect of acquisitions and fee of Rs 25,000
  84. 84. ON TARGET COMPLIANCES DETAILS – 10(5) Acquisition from Inter se transfer of State Level Financial shares Institution Acquisition from VCF or a foreign venture capital investor
  85. 85. ON TARGET COMPLIANCES DETAILS – 10(6) All the automatic exemptions from the open offer as specified under Regulation 10
  86. 86. ON TARGET COMPLIANCES DETAILS – 10(7) Inter se transfer of shares Scheme of Arrangement not directly involving Target Company Acquisition of voting rights or of preference shares carrying voting rights Acquisition through CDR scheme Buy Back of shares Acquisition through Right Issue Acquisition from VCF or a foreign venture capital investor
  88. 88. ON TARGET DISCLOSURE LIMITS Event Based Disclosure Acquisition of ≥5% Change of ≥ 2% after the 5% Continual Disclosures Persons holding ≥25% Every Promoter Encumbered Shares On the encumbrance, Invocation or release of encumbrance No obligation on the Target Company to give the disclosure to Stock Exchange.
  89. 89. ON TARGET KEY POINT Acquisition and Holding of any convertible security shall also be regarded as shares and disclosures of such acquisitions and holdings shall be made accordingly.
  90. 90. ON TARGET FOR EXAMPLE Company A 100 equity 50 PCDs 10 GDRs Total Total Voting Disclosure shares Shares: 160 Rights: 110 B holding in 8 Shares 7 PCDs 1 GDR 16 Shares 9 Voting Company A (10%) Rights (8%) Scenario I “B” Acquires 2 Shares 2 PCDs - 4 Shares 2 Voting Disclosure (2.5%) Rights under (1.8%) regulation 29(2). Scenario II “B” Acquires - 20 PCDs - 20 Shares - Disclosure (12.5%) under regulation 29(2) Scenario III “B” Acquires 2 Shares - - 2 Shares 2 Voting No (1.25%) Rights Disclosure (1.8%) under regulation 29(2).
  91. 91. ON TARGET KEY POINT “Encumbrance” shall include a pledge, lien or any such transaction, by whatever name called.” In other words, those encumbrances which entail a risk of the shares held by promoters being appropriated or sold by a third party, directly or indirectly, are required to be disclosed to the stock exchanges in terms of the Takeover Regulations, 2011.
  92. 92. ON TARGET TAKEOVER OFFERS Total Open Offers 43* Mandatory Voluntary Open Open Offer – Offer – 38 5 *In terms of SEBI (SAST) Regulations, 2011
  93. 93. ON TARGET IMPACT • Beneficial for Private Equity Players and Investors. • More protection for the small shareholders. • Simplification in the provisions. • More transparency and removal of ambiguity. • At par with Global Practices prevalent for M&As. 93 1/25/2013
  94. 94. ON TARGET ISSUES UNADDRESSED • Negative Control • No Transitional Provision for person holding less than 25% shares • Applicability of regulations on acquisition of partly paid up shares • Exemption from open offer on account of forfeiture of Shares 94 1/25/2013
  95. 95. ON TARGET For any clarification on SEBI Takeover Regulations Log on to Write to
  96. 96. ON TARGET
  97. 97. ON TARGET Highlights of TAKEOVERCODE.COM  Download completely filled Public Announcement in minutes  Know your compliances and downloaded completely filled disclosure documents.  Online calculators for calculation of offer size, escrow account deposit, timeline for open offer, fee calculator, tentative cost of offer  On-line Takeover Audit from the year 1997 till date.  Online advisory on intricacies of SEBI Takeover Code from a team of experts.  Brief and summarizing synopsis of all legal judgments of Takeover Code up-to-the- minute.  Up-to-the minute inventory of all open offers with concise synopsis  Advanced search engines to facilitate you a variety of search options.  24X7 discussion forum on all topics related to takeovers & acquisitions.  Customized section to feed your distinctive needs
  99. 99. ON TARGET Agenda Key Terms Prohibition on dealing, communicating or counseling Investigation Procedure for Investigation Direction by SEBI Disclosures to be made Action in case of Default Model Code of Conduct
  100. 100. ON TARGET WHAT IS INSIDER TRADING???? INSIDER TRADING means dealing in the securities by a Insider, who has the knowledge of material “inside” information of the company which is not available in the Public domain.
  101. 101. Who Is an INSIDER ?????
  102. 102. ON TARGET INSIDER - REGULATION 2(e) Any Person Who (i) OR is was connected with the company, OR deemed to have been connected with the company AND is expected to have access to UNPUBLISHED PRICE SENSITIVE INFORMATION OR (ii) Has Received OR Has Had Access TO UNPUBLISHED PRICE SENSITIVE INFORMATION
  103. 103. ON TARGET CONNECTED PERSON Any Person Who is a director under section 2(13) of the Companies Act, 1956, or deemed to be a director of that company under section 307(10) of the Act OR Holds the position Involving or or Professional Business an officer an employee relationship relationship Whether TEMPORARY or PERMANENT AND may reasonably to have an access to Unpublished Price Sensitive Information
  104. 104. ON TARGET PERSON DEEMED TO BE CONNECTED - REGULATION 2(h) Company under the same Management/ Group/Subsidiary; Intermediary, IC, TC, AMC, or employee or director or official of Stock Exchange or Clearing House; MB, STA, RTA, DT, Broker, sub-broker, PM, IA, IC, or employee; Member of the Board of MF or member of BOD of the AMC of a MF or is an employee who have a fiduciary relationship with the company; Member of Board of Directors or employee of PFI;
  105. 105. ON TARGET PERSON DEEMED TO BE CONNECTED - REGULATION 2(h) Official or an employee of a Self-regulatory Organization; Relative of any of the aforementioned persons; Banker of the company; Relatives of the connected person; Any Concern / Firm / trust / HUF/ Company / AOP in which connected person or person mentioned in clause (vi), (vii) or (viii) of this clause Have More than 10% of the holding or Interest
  106. 106. What Is Price Sensitive Information ?????
  107. 107. ON TARGET PRICE SENSITIVE INFORMATION- REGULATION 2(ha) Price Sensitive Information means: information which relates directly or indirectly to a company AND which if published is likely to materially affect the price of securities of company.
  108. 108. ON TARGET DEEMED PRICE SENSITIVE INFORMATION Periodical financial results of the company; Intended declaration of dividend; Issue of securities or buy back of securities; Major expansion plan OR Execution of new projects; Amalgamations, merger, takeovers; Disposal of whole or substantial part of the undertaking; Changes in policies, plans or operations
  109. 109. ON TARGET PRICE SENSITIVE INFORMATION- AS PER CLAUSE 36 LISTING AGREEMENT  Change in the general character or nature of business.  Disruption of operations due to natural calamity.  Commencement of Commercial Production/ Commercial Operations.  Litigations/ dispute with a material Impact.  Revisions in Ratings.
  110. 110. ON TARGET PRICE SENSITIVE INFORMATION- AS PER CLAUSE 36 LISTING AGREEMENT Any other information having bearing on the operation/ performance of the Company as well as price sensitive information which includes but not restricted to;  Change in market lot / sub-division ;  Voluntary delisting by the company ;  Forfeiture of shares;  Alteration in terms of any securities ;  Information regarding securities issued abroad ;  Cancellation of dividend/ rights/ bonus etc.
  111. 111. ON TARGET OFFICER OF A COMPANY – REGULATION 2(g) OFFICER OF A COMPANY Means Includes Person defined in Section 2(30) of the Companies Auditor of the Company Act, 1956 Section 2(30) : "officer" includes any director, manager or secretary, or any person in accordance with whose directions or instructions the Board of directors or any one or more of the directors is or are accustomed to act.
  112. 112. ON TARGET UNPUBLISHED -REGULATION 2(k) Information which is not published by the company or its agents and is not specific in nature. Explanation Speculative reports in print or electronic media shall not be considered as published information.
  113. 113. ON TARGET DEALING IN SECURITIES - REGULATION 2(d) “Dealing In Securities” means an act of subscribing, buying, selling or agreeing to subscribe, buy, sell or deal in any securities by any person either as principal or agent;
  114. 114. ON TARGET WORKING DAY – REGULATION 2(l) “Working Day” shall mean the working day when the regular trading is permitted on the concerned stock exchange where the securities of the company are listed
  117. 117. ON TARGET EXCEPTION TO REGULATION 3 Any communication which is required in the Ordinary course of business, OR Profession, OR Employment, OR Under any law.
  119. 119. ON TARGET NON APPLICABILITY OF REGULATION 3A The decision of Proper arrangement in place to transaction or agreement block the dissemination of was not taken by officer or employee UPSI; AND of the company who is in possession of UPSI; AND The acquisition was in line with the SEBI Takeover Regulations Adequate Procedures are in place to The information was demarcate the persons not so communicated and having UPSI & persons dealing in securities; AND no such advice was so given; OR.
  120. 120. ON TARGET PROVISIONS RELATING TO VIOLATION – REGULATION 4 Any insider, who deals in securities in contravention of the provisions of Regulation 3 or 3A shall be guilty of Insider Trading..
  122. 122. ON TARGET POWER TO MAKE INQUIRIES AND INSPECTION- REGULATION 4A If the Board Suspects any person has violated the provisions of these Regulations It may Make enquiries, or appoint person to inspect books & records of such persons Form a prima facie opinion , whether there is violation of these regulations
  123. 123. ON TARGET BOARD‟S RIGHT TO INVESTIGATE -REGULATION 5 Where the Board, is of prima facie opinion that it is necessary to investigate and inspect books of account, documents of an insider or any person On the basis of compliant received form investors, intermediaries or any other person, Or suo-motu upon its own knowledge, to protect the interest of investors, it may appoint an INVESTIGATING AUTHORITY
  125. 125. ON TARGET REGULATION 6 to 9 On Appointment Complaints of Notice Issued / Suo-moto Invtg. Auth. On Investigation To provide Conclusion Started all assistance Report to Board Findings to Shall Reply Board will suspected within 21 Issue person days directions
  127. 127. ON TARGET REGULATION 6 to 9 Not to deal in securities ; Not to dispose of any of the securities acquired in violation of these regulations; Not to communicate or counsel any person to deal in securities; Declaring the transaction(s) in securities as null and void; Deliver the securities back to the seller : To transfer proceeds to the investor protection fund of a recognized stock exchange.
  129. 129. ON TARGET DISCLOSURE REQUIREMENT Regulati Particulars By whom To whom Time Form on No. limit 13(1) On the acquisition of >5% Any Person Company 2 A working days 13(2) Disclosure of shares or voting rights Director or Company 2 B held and positions taken in derivatives officer working by such person and his dependents days (as defined by the company) on becoming the Director or officer 13(2A) Disclosure of shares or voting rights on Promoter or Company 2 B becoming the promoter or part of person working promoter group belonging to days promoter group 13(3) Change in shareholding of ( ) >2% Persons Company 2 C from the last disclosure made under already working sub regulation (1) or under this sub holding more days regulation. than 5%
  130. 130. ON TARGET DISCLOSURE REQUIREMENT Regulati Particulars By whom To whom Time Form on No. limit 13(4) Change in holding in excess of Rs.5 Director or Company 2 D Lakh in value or 25,000 shares or 1% officer as well as working of total shareholding or voting rights Stock days from the last disclosure made under Exchange sub regulation (2) or under this sub regulation. 13(4A) Change in holding in excess of Rs.5 Promoter or Company 2 D Lakh in value or 25,000 shares or 1% person as well as working of total shareholding or voting rights belonging to Stock days from the last disclosure made under promoter Exchange Listing Agreement or under sub group regulation (2A) or under this sub regulation. 13(6) On the receipt of disclosure under Company Stock 2 A or B 13(1), 13(2), 13(2A), 13(3), 13(4) and Exchange working or C or 13(4A) days D as the case may be
  132. 132. ON TARGET REGULATION 14  Action under Section 11 of SEBI Act, 1992  Directions under Section 11(4)  Directions under section 11B of the SEBI Act.  Cease and desist order in proceedings under section 11D of the Act;  Penalty for failure to furnish information, return etc. under section 15A of the SEBI Act, 1992  Monetary penalties under section 15G of SEBI Act, 1992  Criminal prosecution under section 24 of the SEBI Act.
  134. 134. ON TARGET CODE OF CONDUCT TO BE ABIDE BY ALL LISTED COMPANIES Organizations Associated with Securities Markets including:  All intermediaries  AMC and trustees of mutual funds;  The Self Regulatory Organizations;  The Stock Exchanges / Clearing House / Corporations;  The Public Financial Institutions  The Professional Firms Such as Auditors, Accountancy Firms, Law Firms, Analysts, Consultants, etc., assisting or Advising Listed Companies
  136. 136. ON TARGET IMPORTANT TERMS- NEED TO KNOW  PSI should be disclosed only to those within the company who need the information to discharge their duty.  Limited access to confidential information  Files containing confidential information shall be kept secure.  Computer files must have adequate security of login and pass word etc.
  137. 137. ON TARGET PRE CLEARANCE OF TRADES  All D/O/E of the Co and their dependants as defined by the company who intend to deal in the securities beyond a limit should pre-clear the transactions.  An application to the Compliance officer indicating  The estimated number of securities that the D/O/E and their dependants intends to deal in,  The details as to the depository with which he has a security account,  The details of securities in such depository mode.  Other details as may be required by any rule made by the company in this behalf.
  138. 138. ON TARGET TRADING WINDOW  Company shall specify a trading period, to be called "Trading Window", for trading in the company‟s securities.  The trading window shall be closed during the time the Price Sensitive information is un-published.  When the trading window is closed, the D/ E shall not trade in the companys securities in such period.  The trading window shall be opened 24 hours after the Price Sensitive Information is made public.
  139. 139. ON TARGET RESTRICTED /GREY LIST  To restrict trading in certain securities and designate such list as restricted / grey list.  Client Companies for which any assignment or appraisal report or credit rating assignments are going on.  Any security which is purchased or sold by the organisation / firm on behalf of its clients / schemes of mutual funds, etc. shall be put on the restricted / grey list.  As the restricted list itself is a highly confidential information, It shall be maintained by CO.
  140. 140. ON TARGET CHINESE WALL  "Chinese Wall" policy demarcates “inside areas” from "public areas".  Those areas having access to confidential information, considered “inside areas” and areas which deal with sales / marketing / investment considered "public areas".  The employees in the inside area shall not communicate any PSI to anyone in public area.  In exceptional circumstances employees from the public areas may be brought "over the wall" and given confidential information on the basis of "need to know" criteria, under intimation to the CO
  141. 141. ON TARGET COMPLIANCE OFFICER (CO)  Compliance Officer means „Senior Level Employee‟ who shall report to the MD / CEO.  The CO shall be responsible for - setting forth policies, procedures - monitoring adherence to the rules for the preservation of “PSI”, - pre-clearing of designated employees‟ and their dependents‟ trades - monitoring of trades and the implementation of the code of conduct under the overall supervision of the Board of the listed company.  The CO shall maintain a record of the designated employees and any changes made in the list of designated employees.  To Provide clarifications regarding the SEBI (Prohibition of Insider Trading) Regulations, 1992 & the companys code of conduct to the Company‟s employees.
  142. 142. ON TARGET Lastly…………. It is easier to identify the beneficiaries of insider dealing But the extent of losses occurred to the general investor is impossible to calculate
  143. 143. ON TARGET PAVAN KUMAR VIJAY Corporate Professionals Capital Private Limited D-28, South Extension –I, New Delhi-110 049 Ph: +91.11.40622200; Fax: +91.11.40622201; E: In case of any query, log on to Our Services: Investment Banking I Valuation & Business Modelling I Mergers & Acquisitions I Tax & Transaction Advisory I ESOP/ESPS I Domestic & Cross Border Investment Structuring I Group Reorganisation I Corporate Funding I Issue Management |