M&A Regulatory control


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M&A Regulatory control

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M&A Regulatory control

  1. 1. M&A Regulatory control By Prof. Augustin Amaladas
  2. 2. Content <ul><li>Evolution of Regulatory Control of M&A </li></ul><ul><li>Procedures under the Companies Act, 1956 </li></ul><ul><li>The SEBI Takeover Regulation Code, 1997 </li></ul><ul><li>The recent changes made by SEBI in the take over Code </li></ul><ul><li>Implications under Income tax Act, 1961. </li></ul>
  3. 3. Evolution of Regulatory Control of M&A <ul><li>Every business is targeted. </li></ul><ul><li>MRTP-1969 </li></ul><ul><li>Indian firms require consolidation </li></ul><ul><li>Survival and growth </li></ul><ul><li>Preceding to 1991 there were 120 successful mergers and takeovers and about which failed to succeed. </li></ul><ul><li>HLL-TOMCO merger -SC’s Judgment.It is the best route to reach a size comparable to global companies so as to effectively compete with them. </li></ul>
  4. 4. Compliance under the Companies Act, 1956 <ul><li>1. Scheme of Amalgamation /Merger </li></ul><ul><li>2. Financial Institutions’ approval-Debenture holders, Banks, creditors etc. </li></ul><ul><li>3. Approval of BODs </li></ul><ul><li>4. Intimation to stock exchange-when release to press. </li></ul><ul><li>5. Application to court for direction-U/S 391(1)-A separate application by TFR and TFREE </li></ul><ul><li>6. Direction by court Directions for Members’ Meeting. </li></ul><ul><li>7. Draft notices calling for meetings of Members </li></ul><ul><li>8. 21 days clear notices </li></ul><ul><li>9.Advertise for Meeting of members </li></ul><ul><li>10. Confirmation about services of the Notice-Chairman conveys to the court for the fulfillment of issue of notices and advertised. </li></ul>
  5. 5. <ul><li>No one can acquire individually or along with some one (more than 15% upto 75%) of holding further shares without public announcement. </li></ul><ul><li>The offer price to be paid in cash/shares of acquirer company. </li></ul><ul><li>Average weekly high and low of the closing prices of the shares of target price traded during 26 weeks quoted </li></ul><ul><li>or average daily price high and low of closing prices most frequently traded during two weeks before the public announcement whichever is higher. </li></ul><ul><li>Minimum 20% of voting capital to be acquired. </li></ul><ul><li>The offer should not be more than 16 days </li></ul>
  6. 6. Continuation <ul><li>11. Holding the meeting and pass with ¾ th majority of the value of shares.And file such resolution with the Registrar within 30 days of the resolution </li></ul><ul><li>12. Submission of Chairman’s Report of the General Meeting to Court within 7 days. </li></ul><ul><li>13. Joint petition to court within 7 days from the date of his report to court for approving the scheme. </li></ul><ul><li>14.Issue of Notice to Regional Director’s Company Law Board u/s 394A by the Court. </li></ul><ul><li>15. Hearing of petition and confirmation of scheme </li></ul><ul><li>16. Filing of Court’s order with ROC by both the Companies. </li></ul><ul><li>17. Dissolution of Transferor Company u/s 394(1)(iv) without winding up. </li></ul><ul><li>18. Transfer of assets and Liabilities U/s 394(2) </li></ul>
  7. 7. Continuation <ul><li>19 . Allotment of shares to shareholders of Transferor company </li></ul><ul><li>20. Listing of shares at Stock Exchange-new shares allotted </li></ul><ul><li>21. Court Order to be annexed to Memorandum of Transferee Company </li></ul><ul><li>22.Prevention of Books and papers of amalgamated Company </li></ul><ul><li>23. Post merger secretarial obligation </li></ul>
  8. 8. The Companies Act 1956-Special provisions-merger/take over <ul><li>1. Condition Prohibiting Reconstruction or Amalgamation of Company (sec.376) </li></ul><ul><li>MOA Or AOA Or resolution prohibiting is void.It is also applicable for reorganisation </li></ul>
  9. 9. Power to compromise or make arrangements with creditors and members <ul><li>Compromise either with company and the creditor/members/any class of them </li></ul><ul><li>The court may order the company to conduct meeting of the creditors/class of creditors/members/class of members. </li></ul><ul><li>¾ in value of such creditors/members vote for the resolution.It binds on all creditors/members </li></ul>
  10. 10. Regulatory framework of Takeovers <ul><li>As per SEBI (Substantial Acquisition of Shares and takeover) Regulations </li></ul><ul><li>The company which takes over make outside shareholders an opportunity to exit. </li></ul><ul><li>The price will be the price the company which takes over paid to the sellers or the average price quoted in the market </li></ul>
  11. 11. Disclosure of share holdings <ul><li>Any person holding more than shares 5% or 10%, 15% of voting rights –disclose to SEBI within 2 months and to the company at every stage. </li></ul><ul><li>The company also should disclose to all stock exchanges with in 3 months from the date of notifications. </li></ul><ul><li>A promoter or person controlling company disclose with in 2 months. </li></ul><ul><li>Purchase/ sale of 2% or more-with in 2 days to stock exchange and the company. </li></ul><ul><li>The company should disclose to all stock exchanges. </li></ul><ul><li>Any person holding 15% -disclose to company within 21 days of the financial year ending on 31 st March </li></ul>