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An Overview of
   SEBI Takeover Regulations, 2011 &
SEBI Insider Trading Regulations, 1992
SEBI TAKEOVER REGULATIONS, 2011
Need of SEBI Takeover Regulations
Announcement 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
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
BASIC CONCEPT
ON TARGET


             The Takeover Regulations
            are applicable on the acquisition

               of Voting    Rights or
             Control over the Listed
                     Company
ON TARGET




                     Shares


            Voting
                              Control
            Rights
KEY DEFINITIONS
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
ON TARGET


                             ACQUISITION
                                 means

                     Directly     OR        Indirectly


                                  OR            Agreeing to
               Acquiring
                                                 Acquire

            Shares      OR      Voting Rights     OR     Control


                         Target Company
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
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.
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
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
ON TARGET

                    IDENTIFIED DATE



            Identified
              Date
                          A date falling on
                             the 10th
                           business day
                              prior to
                         tendering period
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
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.
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)]
ON TARGET

            ENTERPRISE VALUE
                      means
                   value calculated
                          as

                       Market
                   Capitalization of
                     a Company



                         Minority          Preferred
            Debt
                         Interest           shares


                                      Cash
            Total Cash              Equivalents
ON TARGET

                                ENTERPRISE VALUE

            Minority Interest
            A significant but non-controlling ownership of less than 50% of a company's
            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
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
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……………..
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
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……………..
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
TRIGGERED POINTS FOR OPEN OFFER
ON TARGET

                        TYPES OF OFFER




                                      OPEN OFFER



                        MANDATORY/                  VOLUNTARY
                        TRIGGERED                     OFFER
                          OFFER



              Initial    Creeping     Change in     Indirect
            Threshold   Acquisition    Control     acquisition
ON TARGET

                 INITIAL THRESHOLD



            Acquirer along with PAC

                • 25% or more shares or
                  voting rights
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
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
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.
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.
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.
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
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
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.
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%
OPEN OFFER AND ITS RELATED CONCEPTS
ON TARGET

                MINIMUM OFFER SIZE




            Mandatory            Voluntary
             Offer -              Offer -
              26%                  10%
ON TARGET

                            OFFER PRICE



                                    Offer Price –
                                  Specific Criteria for




                      Direct                               Indirect
                    Acquisition                           Acquisition



              Frequently       Infrequently
            Traded Shares     Traded Shares
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
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)
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
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)
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
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
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
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
ON TARGET

            NON COMPETE FEES


            Control Premium / Non-
                Compete Fees




                To be included in
                 the Offer Price
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
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)
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
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
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
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
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
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
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
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.
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
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.
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.
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
ON TARGET
            TIMING UNDER COMPETING OFFERS



                       Public
                    Announcement



                      Within 15
                    Working days
                    of the date of
                    DPS issued by
                        the first
                       acquirer
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
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
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
EXEMPTION FROM OPEN OFFER
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
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
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
ON TARGET
                Inter-se transfer amongst Immediate Relatives

       • Immediate Relative


                                 Immediate
                                  Relative




                Means                               Includes



                               Person        Person            Person
                                                                         Person and
               Person's       Parents /      Brother/          Sister/
                                                                          Spouse
               Spouse         Spouse         Spouse            Spouse
                                                                            Child
                              Parents        Brother            Sister
ON TARGET
                Inter-se transfer amongst Promoters




                          Persons shown
                           as Promoters


                           Atleast 3
                            years

              Listing                       SEBI Takeover
            Agreement                        Regulations
ON TARGET
            Inter-se transfer amongst Qualifying Parties being
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.
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
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
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
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
ON TARGET
            ACQUISITION-CORPORATE DEBT RESTRUCTURING


                                Conditions


                 No change in control


                    Shareholders’ Approval by way of Special Resolution passed
                    by Postal Ballot.
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.
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.
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
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
ON TARGET
               COMPLIANCES DETAILS – 10(6)




            All the automatic exemptions

                    from the open offer

              as specified under Regulation 10
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
DISCLOSURES LIMITS
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.
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.
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).
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.
ON TARGET

                            TAKEOVER OFFERS


                                     Total Open
                                       Offers
                                         43*


                  Mandatory                        Voluntary Open
                 Open Offer –                          Offer –
                     38                                   5

            *In terms of SEBI (SAST) Regulations, 2011
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
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
ON TARGET

            For any clarification on SEBI Takeover Regulations


                       Log on to www.takeovercode.com




                        Write to info@takoevercode.com
ON TARGET
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
SEBI INSIDER TRADING REGULATIONS, 1992
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
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.
Who Is an INSIDER ?????
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
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
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;
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
What Is Price Sensitive Information ?????
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.
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
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.
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.
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.
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.
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;
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
PROHIBITION ON DEALING, COMMUNICATING
            OR COUNSELLING
ON TARGET
                PROHIBITION ON INSIDER-REGULATION 3

                                   NO INSIDER
                                       shall
            Either on his own behalf    or        On Other’s behalf

                     DEAL IN SECURITIES OF THE COMPANY
                                       Owhen
                           IN POSSESSION OF ANY UPSI
                                          or

                     COMMUNICATE / COUNSEL / PROCURE

                      Directly               or       Indirectly

                            ANY UPSI TO ANY PERSON
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.
ON TARGET
            PROHIBITION ON COMPANY- REGULTAION 3A


                              NO COMPANY
                                SHALL
                        Deal in Securities of
                                            Associate of that
              Other company       or         other company

                                WHEN
                      IN POSSESSION OF ANY


            UNPUBLISHED PRICE SENSITIVE INFORMATION
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.
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..
INVESTIGATION
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
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
PROCEDURE FOR INVESTIGATION
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
DIRECTIONS BY SEBI
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.
DISCLOSURE TO BE MADE
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%
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
ACTION IN CASE OF DEFAULT
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.
MODEL CODE OF CONDUCT
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
ON TARGET
             SCHEDULES – MODEL CODE OF CONDUCT

                          SCHEDULE I

                    MODEL CODE OF CONDUCT
               FOR PREVENTION OF INSIDER TRADING

                 PART A - FOR LISTED COMPANIES
                  PART B – FOR OTHER ENTITIES

                          SCHEDULE II
            CODE OF CORPORATE DISCLOSURE PRACTICES
                             FOR
                 PREVENTION OF INSIDER TRADING
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.
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.
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 company's securities in such period.

             The trading window shall be opened 24 hours after the Price
              Sensitive Information is made public.
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.
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
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 company's code of conduct to the
                    Company‟s employees.
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
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: pkvijay@indiacp.com

                   In case of any query, log on to www.takeovercode.com




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Sebi takeover & insider trading reg 230712 final

  • 1. An Overview of SEBI Takeover Regulations, 2011 & SEBI Insider Trading Regulations, 1992
  • 3. Need of SEBI Takeover Regulations Announcement 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. 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. ON TARGET The Takeover Regulations are applicable on the acquisition of Voting Rights or Control over the Listed Company
  • 7. ON TARGET Shares Voting Control Rights
  • 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. ON TARGET ACQUISITION means Directly OR Indirectly OR Agreeing to Acquiring Acquire Shares OR Voting Rights OR Control Target Company
  • 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. 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. 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. 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. ON TARGET IDENTIFIED DATE Identified Date A date falling on the 10th business day prior to tendering period
  • 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. 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. 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. ON TARGET ENTERPRISE VALUE means value calculated as Market Capitalization of a Company Minority Preferred Debt Interest shares Cash Total Cash Equivalents
  • 20. ON TARGET ENTERPRISE VALUE Minority Interest A significant but non-controlling ownership of less than 50% of a company's 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. 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. 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. 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. 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. 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
  • 26. TRIGGERED POINTS FOR OPEN OFFER
  • 27. ON TARGET TYPES OF OFFER OPEN OFFER MANDATORY/ VOLUNTARY TRIGGERED OFFER OFFER Initial Creeping Change in Indirect Threshold Acquisition Control acquisition
  • 28. ON TARGET INITIAL THRESHOLD Acquirer along with PAC • 25% or more shares or voting rights
  • 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. 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. 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. 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. 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. 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. 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. 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. 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%
  • 38. OPEN OFFER AND ITS RELATED CONCEPTS
  • 39. ON TARGET MINIMUM OFFER SIZE Mandatory Voluntary Offer - Offer - 26% 10%
  • 40. ON TARGET OFFER PRICE Offer Price – Specific Criteria for Direct Indirect Acquisition Acquisition Frequently Infrequently Traded Shares Traded Shares
  • 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. 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. 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. 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. 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. 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. 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. 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. ON TARGET NON COMPETE FEES Control Premium / Non- Compete Fees To be included in the Offer Price
  • 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. ON TARGET TIMING UNDER COMPETING OFFERS Public Announcement Within 15 Working days of the date of DPS issued by the first acquirer
  • 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. 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. 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. 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. 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. 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. ON TARGET Inter-se transfer amongst Immediate Relatives • Immediate Relative Immediate Relative Means Includes Person Person Person Person and Person's Parents / Brother/ Sister/ Spouse Spouse Spouse Spouse Spouse Child Parents Brother Sister
  • 73. ON TARGET Inter-se transfer amongst Promoters Persons shown as Promoters Atleast 3 years Listing SEBI Takeover Agreement Regulations
  • 74. ON TARGET Inter-se transfer amongst Qualifying Parties being
  • 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. 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. 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. 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. 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. ON TARGET ACQUISITION-CORPORATE DEBT RESTRUCTURING Conditions No change in control Shareholders’ Approval by way of Special Resolution passed by Postal Ballot.
  • 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. 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. 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. 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. ON TARGET COMPLIANCES DETAILS – 10(6) All the automatic exemptions from the open offer as specified under Regulation 10
  • 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. 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. 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. 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. 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. ON TARGET TAKEOVER OFFERS Total Open Offers 43* Mandatory Voluntary Open Open Offer – Offer – 38 5 *In terms of SEBI (SAST) Regulations, 2011
  • 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. 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. ON TARGET For any clarification on SEBI Takeover Regulations Log on to www.takeovercode.com Write to info@takoevercode.com
  • 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
  • 98. SEBI INSIDER TRADING REGULATIONS, 1992
  • 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. 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. Who Is an INSIDER ?????
  • 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. 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. 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. 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. What Is Price Sensitive Information ?????
  • 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. 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. 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. 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. 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. 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. 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. 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
  • 115. PROHIBITION ON DEALING, COMMUNICATING OR COUNSELLING
  • 116. ON TARGET PROHIBITION ON INSIDER-REGULATION 3 NO INSIDER shall Either on his own behalf or On Other’s behalf DEAL IN SECURITIES OF THE COMPANY Owhen IN POSSESSION OF ANY UPSI or COMMUNICATE / COUNSEL / PROCURE Directly or Indirectly ANY UPSI TO ANY PERSON
  • 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.
  • 118. ON TARGET PROHIBITION ON COMPANY- REGULTAION 3A NO COMPANY SHALL Deal in Securities of Associate of that Other company or other company WHEN IN POSSESSION OF ANY UNPUBLISHED PRICE SENSITIVE INFORMATION
  • 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. 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. 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. 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. 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. 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. 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. 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
  • 131. ACTION IN CASE OF DEFAULT
  • 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.
  • 133. MODEL CODE OF CONDUCT
  • 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
  • 135. ON TARGET SCHEDULES – MODEL CODE OF CONDUCT SCHEDULE I MODEL CODE OF CONDUCT FOR PREVENTION OF INSIDER TRADING PART A - FOR LISTED COMPANIES PART B – FOR OTHER ENTITIES SCHEDULE II CODE OF CORPORATE DISCLOSURE PRACTICES FOR PREVENTION OF INSIDER TRADING
  • 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. 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. 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 company's securities in such period.  The trading window shall be opened 24 hours after the Price Sensitive Information is made public.
  • 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. 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. 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 company's code of conduct to the Company‟s employees.
  • 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. 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: pkvijay@indiacp.com In case of any query, log on to www.takeovercode.com 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 |