SEBI - Takeover Code
Evolution of TOC
Evolution... Pre - 1990 Clause 40 of Listing Agreement Nov 1990 Clause 40(A) & 40(B) of Listing Agreement Nov - 1994 SEBI ...
Modes of  Restructuring – Where does TOC fit in Indian M&A Amalgamations Merger De-merger Acquisitions Asset Purchase Stoc...
Objectives <ul><li>Shareholders: </li></ul><ul><ul><li>Equality of treatment </li></ul></ul><ul><ul><li>Adequate opportuni...
Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997
Framework of the Code… Chapter 1 Preliminary, Definitions, exemptions and the takeover panel Chapter 2 Disclosures of shar...
Definitions
Key Definitions... <ul><li>Acquirer </li></ul><ul><li>Any person who,  directly or indirectly , acquires or agrees to acqu...
Key Definitions... <ul><li>Persons Acting in Concert (‘PAC’)  </li></ul><ul><li>PACs  - persons who for a  common objectiv...
Key Definitions... <ul><li>Promoter shall include  </li></ul><ul><ul><li>Person/s in control of the company  </li></ul></u...
Key Definitions... <ul><li>Offer period </li></ul><ul><li>Period between the date of entering into MOU or the PA, as the c...
Disclosures
<ul><li>Periodical disclosures  </li></ul><ul><li>Disclosures by acquirer to the company / stock exchange within 2 working...
Open Offers
Trigger points…. <ul><li>Substantial acquisition </li></ul><ul><li>Acquisition upto 15% of shares or voting rights or cont...
Trigger Provisions Regarding Open Offers <ul><li>Regulation 10 </li></ul><ul><li>Substantial Acquisition of Shares </li></...
Exemptions
Exemptions from Open Offer… <ul><li>Reg. 3 Provides Exemptions from Reg. 10, Reg. 11 and Reg. 12… </li></ul><ul><li>   all...
Public Announcement <ul><li>to disclose  intention to acquire a minimum of 20% of the voting capital of the  target compan...
Public Announcement <ul><li>The other disclosures in this announcement would  inter alia  include: </li></ul><ul><li>the o...
Other key provisions
Minimum Size of Offer <ul><li>Minimum of 20% of the voting capital of the target company  </li></ul><ul><li>Less than 20% ...
Minimum Public shareholding  <ul><li>Breach of minimum public shareholding limit specified in the Listing Agreement: </li>...
Timing of Open Offer <ul><li>Direct acquisition or change in control - Within 4 working days of –  </li></ul><ul><li>Agree...
Minimum Offer Price <ul><li>Frequently traded shares, highest of the following: </li></ul><ul><li>Negotiated price </li></...
Payment of Offer Price <ul><li>Modes of payment –  </li></ul><ul><li>Offer price payable in -  </li></ul><ul><li>Cash; or ...
DATE OF PUBLIC ANNOUNCEMENT Filing of Letter of Offer with the SEBI Within 14 days Offer to reach the shareholders  Within...
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Take over ppt

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Take over ppt

  1. 1. SEBI - Takeover Code
  2. 2. Evolution of TOC
  3. 3. Evolution... Pre - 1990 Clause 40 of Listing Agreement Nov 1990 Clause 40(A) & 40(B) of Listing Agreement Nov - 1994 SEBI Takeover Code Feb - 1997 New Takeover Code (Bhagwati Committee) Oct - 2002 Few amendments as per Bhagwati Committee’s reco. Apr-2007 SEBI amended Code Pre - 1990 Post - 1994
  4. 4. Modes of Restructuring – Where does TOC fit in Indian M&A Amalgamations Merger De-merger Acquisitions Asset Purchase Stock Purchase The Takeover Code, 1997 Slump Sale Itemized Sale
  5. 5. Objectives <ul><li>Shareholders: </li></ul><ul><ul><li>Equality of treatment </li></ul></ul><ul><ul><li>Adequate opportunity </li></ul></ul><ul><ul><li>Protection of interests </li></ul></ul><ul><li>Acquirers: </li></ul><ul><ul><li>Adequate disclosure </li></ul></ul><ul><ul><li>Disclosure to all </li></ul></ul><ul><ul><li>Disclosure within stipulated time limits </li></ul></ul><ul><li>Managements: </li></ul><ul><ul><li>Ensure flow of information </li></ul></ul><ul><ul><li>No unnecessary action during the offer period </li></ul></ul>AT THE SAME TIME: Ensure full play to the predatory instincts of the corporate and business class (i.e. facilitate legitimate takeovers)
  6. 6. Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997
  7. 7. Framework of the Code… Chapter 1 Preliminary, Definitions, exemptions and the takeover panel Chapter 2 Disclosures of shareholding and control in a listed company Chapter 3 Substantial Acquisition of shares and control Chapter 4 Bail out takeovers Chapter 5 Investigation and action by the Board
  8. 8. Definitions
  9. 9. Key Definitions... <ul><li>Acquirer </li></ul><ul><li>Any person who, directly or indirectly , acquires or agrees to acquire shares or voting rights in the target company, or acquires or agrees to acquire control over the target company, either by himself or with any person acting in concert with the acquirer </li></ul><ul><li>Shares </li></ul><ul><li>Means shares in the share capital of a company carrying voting rights and includes any security which would entitle the holder to receive shares with voting rights [but shall not include preference shares] </li></ul><ul><li>Control </li></ul><ul><li>Right to appoint majority of directors or Right to control management decisions or Right to take policy decisions exercisable by PAC, directly or indirectly, by virtue of their shareholding or management rights or SHA or voting agreements or in any other manner </li></ul>
  10. 10. Key Definitions... <ul><li>Persons Acting in Concert (‘PAC’) </li></ul><ul><li>PACs - persons who for a common objective of substantial acquisition of shares or voting rights or gaining control over the target company, directly or indirectly co-operate by acquiring or agreeing to acquire shares or voting rights in or control over the target company. </li></ul><ul><li>Persons deemed to be PACs with other persons in the same category </li></ul><ul><li>a company, its holding or subsidiary company or a company under the same management and their directors or persons responsible for management of funds </li></ul><ul><li>Mutual fund with sponsor or trustee or AMC </li></ul><ul><li>FIIs with sub account (s) </li></ul><ul><li>Merchant bankers with their clients as acquirers </li></ul><ul><li>VCFs with sponsors </li></ul><ul><li>Banks with financial advisors, stock brokers of acquirer, a company which is a holding / subsidiary or relative of the acquirer </li></ul>
  11. 11. Key Definitions... <ul><li>Promoter shall include </li></ul><ul><ul><li>Person/s in control of the company </li></ul></ul><ul><ul><li>Named as promoters in any document of offer of securities </li></ul></ul><ul><li>Deemed to be a promoter </li></ul><ul><ul><li>Individual – spouse, parents, brothers, sisters or children </li></ul></ul><ul><ul><li>Corporate: </li></ul></ul><ul><ul><ul><li>a subsidiary or holding company </li></ul></ul></ul><ul><ul><ul><li>any company in which it holds 26% or more of the equity capital </li></ul></ul></ul><ul><ul><ul><li>any other body corporate under the same management </li></ul></ul></ul><ul><li>A financial institution, scheduled commercial bank, FII or VCF shall not be deemed to be a promoter by virtue of shareholding </li></ul>
  12. 12. Key Definitions... <ul><li>Offer period </li></ul><ul><li>Period between the date of entering into MOU or the PA, as the case may be and the date of completion of offer formalities relating to the offer made under these regulations </li></ul><ul><li>Public shareholding </li></ul><ul><li>Means shareholding held by persons other than promoters as defined </li></ul>
  13. 13. Disclosures
  14. 14. <ul><li>Periodical disclosures </li></ul><ul><li>Disclosures by acquirer to the company / stock exchange within 2 working days </li></ul><ul><ul><li>If holding crosses 5%, 10%, 14%, 54% or 74% limits </li></ul></ul><ul><ul><li>In case of acquisition under Regulation 11 (1) / (1A) – on Purchase or sale of 2% or more of the share capital </li></ul></ul><ul><li>Company in turn to disclose to all stock exchanges within 7 days </li></ul><ul><li>Continual - “Yearly Disclosures” </li></ul><ul><li>Disclosure to be made within 21 days to the company by – </li></ul><ul><ul><li>Persons holding more than 15% </li></ul></ul><ul><ul><li>Promoter or every person having control over company </li></ul></ul><ul><li>Company in turn to disclose to all stock exchanges within 30 days </li></ul><ul><li>SEBI has the power to call for this information as and when it requires </li></ul>Disclosures
  15. 15. Open Offers
  16. 16. Trigger points…. <ul><li>Substantial acquisition </li></ul><ul><li>Acquisition upto 15% of shares or voting rights or control - No open offer </li></ul><ul><li>Beyond 15% - Open offer triggered </li></ul><ul><li>Consolidation of Holdings </li></ul><ul><li>15% to 55% - Open offer triggered for acquisition beyond 5% per year </li></ul><ul><li>55% to 75% - Open offer triggered on every acquisition </li></ul><ul><li>Beyond 75% - Delisting triggered </li></ul>
  17. 17. Trigger Provisions Regarding Open Offers <ul><li>Regulation 10 </li></ul><ul><li>Substantial Acquisition of Shares </li></ul><ul><li>Open tender offer needs to be made if the Acquirer (along with PAC) decides to acquire, directly or indirectly, more than 15% of shares outstanding in Target </li></ul><ul><li>Once 15% stake has been acquired in the target, an open offer for a minimum of 20% of shares outstanding must be made </li></ul><ul><li>Regulation 11 </li></ul><ul><li>Consolidation of Holdings </li></ul><ul><li>Open tender offer needs to be made if: </li></ul><ul><li>Acquirer and PAC hold >15% but < 55% of the Voting Capital of Target </li></ul><ul><li>Want to exceed creeping limit of 5% within a financial year </li></ul><ul><li>Offer needs to be made if acquirer wants to exceed 55% shareholding in Target </li></ul><ul><li>Regulation 12 </li></ul><ul><li>Acquisition of Control </li></ul><ul><li>Open tender offer needs to be made if acquirer along with PAC wants to acquire control over Target </li></ul><ul><li>Offer needs to be made irrespective of: </li></ul><ul><li>Whether or not any shares have been acquired </li></ul><ul><li>Whether control is acquired directly or indirectly </li></ul><ul><li>This regulation is not applicable if change of control is pursuant to a special resolution </li></ul>
  18. 18. Exemptions
  19. 19. Exemptions from Open Offer… <ul><li>Reg. 3 Provides Exemptions from Reg. 10, Reg. 11 and Reg. 12… </li></ul><ul><li>  allotment to underwriter pursuant to any underwriting agreement; </li></ul><ul><li>    acquisition of shares in ordinary course of business by; </li></ul><ul><li>Regd. Stock brokers on behalf of clients; </li></ul><ul><li>Regd. Market makers </li></ul><ul><li>Public financial institutions on their own account;    </li></ul><ul><li>B anks & FIs as pledges; </li></ul><ul><li>Acquisition of shares by way of transmission on succession or by inheritance </li></ul><ul><li>Acquisition of shares in companies whose shares are not listed; </li></ul><ul><li>Acquisition pursuant to a scheme framed under section 18 of Sick Industrial Companies Act (SICA) 1985 </li></ul>
  20. 20. Public Announcement <ul><li>to disclose intention to acquire a minimum of 20% of the voting capital of the target company </li></ul><ul><li>an Acquirer may also make an offer for less than 20% of shares of target company in case the acquirer is already holding 75% </li></ul><ul><li>Acquirer is required to appoint a Merchant Banker registered with SEBI before making a PA and is also required to make the PA within four working days of the entering into an agreement to acquire shares </li></ul>
  21. 21. Public Announcement <ul><li>The other disclosures in this announcement would inter alia include: </li></ul><ul><li>the offer price, </li></ul><ul><li>the number of shares to be acquired from the public, </li></ul><ul><li>the identity of the acquirer , </li></ul><ul><li>the purposes of acquisition, </li></ul><ul><li>the future plans of the acquirer , if any, regarding the target company , </li></ul><ul><li>the change in control over the target company , if any </li></ul><ul><li>the procedure to be followed by acquirer in accepting the shares tendered by the shareholders and the period within which all the formalities pertaining to the offer would be completed. </li></ul>
  22. 22. Other key provisions
  23. 23. Minimum Size of Offer <ul><li>Minimum of 20% of the voting capital of the target company </li></ul><ul><li>Less than 20% where an acquirer has shareholding between 55% to 75% </li></ul><ul><li>Acquisition through MOU should ensure to maintain the minimum specified public shareholding post open offer </li></ul><ul><li>An acquirer may make a conditional offer which may be less than 20% of minimum offer size – (S&P / Crisil) </li></ul><ul><li>Acquirer to deposit in the escrow account in cash a sum of 50% of the consideration payable under the public offer </li></ul><ul><li>Cancel the MOU in case minimum acceptance condition is not met </li></ul><ul><li>Disclosure in the Public Announcement </li></ul>
  24. 24. Minimum Public shareholding <ul><li>Breach of minimum public shareholding limit specified in the Listing Agreement: </li></ul><ul><li>Acquirer to make an offer to buy the remaining shares in accordance with the Delisting guidelines </li></ul><ul><li>Acquire only such number of shares under the agreement or MOU to maintain the minimum public shareholding </li></ul><ul><li>Acceptance on proportionate basis if number of shares offered by the shareholders are more </li></ul>
  25. 25. Timing of Open Offer <ul><li>Direct acquisition or change in control - Within 4 working days of – </li></ul><ul><li>Agreeing or deciding to acquire the shares/voting rights/change in control </li></ul><ul><li>Execution of Shareholders agreement </li></ul><ul><li>Upon conversion or exercise of option – Convertibles </li></ul><ul><li>Indirect acquisition or change in control - Within 3 months of - </li></ul><ul><li>Consummation of acquisition or change in control or restructuring of the parent or holding company </li></ul><ul><li>Submission of Letter of Offer to SEBI / Shareholders </li></ul>
  26. 26. Minimum Offer Price <ul><li>Frequently traded shares, highest of the following: </li></ul><ul><li>Negotiated price </li></ul><ul><li>Highest of average of weekly highs and low of the last 26 weeks or daily highs and low of last 2 weeks </li></ul><ul><li>Highest price paid by the acquirer during the last 26 weeks </li></ul><ul><li>Infrequently traded shares – in consultation with Merchant Banker , highest of the following: </li></ul><ul><li>Negotiated price </li></ul><ul><li>Highest price paid by the acquirer during the last 26 weeks </li></ul><ul><li>Return on net worth, BV of shares, EPS, PE multiple vis-à-vis industry average </li></ul><ul><li> </li></ul>
  27. 27. Payment of Offer Price <ul><li>Modes of payment – </li></ul><ul><li>Offer price payable in - </li></ul><ul><li>Cash; or </li></ul><ul><li>Shares (other than preference shares) of acquirer listed company; or </li></ul><ul><li>Secured instruments of acquirer company with a minimum A Grade from a credit rating agency; or </li></ul><ul><li>Combination of the above </li></ul><ul><li>Discharge of consideration - </li></ul><ul><li>Transfer of cash consideration to a special account within 7 days from closure of the offer </li></ul><ul><li>Issue of shares / secured instruments </li></ul>
  28. 28. DATE OF PUBLIC ANNOUNCEMENT Filing of Letter of Offer with the SEBI Within 14 days Offer to reach the shareholders Within 45 days Offer to open Within 55 days Offer to close Dispatch consideration to shareholders SEBI may permit extension on payment of interest for delay MOU Within 4 days Within 20 days Open a Special A/c for Payment Within 7 days Within 15 days of Offer Closure Timelines
  29. 29. Thank you

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