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
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
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%
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
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24X7 discussion forum on all topics related to takeovers & acquisitions.
Customized section to feed your distinctive needs
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.
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
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
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
132. ON TARGET
REGULATION 14
Action under Section 11 of SEBI Act, 1992
Directions under Section 11(4)
Directions under section 11B of the SEBI Act.
Cease and desist order in proceedings under section 11D of
the Act;
Penalty for failure to furnish information, return etc. under
section 15A of the SEBI Act, 1992
Monetary penalties under section 15G of SEBI Act, 1992
Criminal prosecution under section 24 of the SEBI Act.
134. 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
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