SEBI Takeover Code

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SEBI Takeover Code

  1. 1. Chandigarh 29.03.2008
  2. 3. Regulation 3(3) Regulation 3(4) Regulation 3(5) Regulation 6 Regulation 7 Regulation 8 Regulation 10, 11 & 12 Regulation 20(4) & 20(5) Clause 40A of Listing Agreement Disclosures & Compliances Open Offer Provisions Pricing Provisions Minimum Public Shareholding Regulation 3 (1) Exemptions under Takeover Code Regulation 4 Takeover Panel Exemptions
  3. 5. Acquisition of more than 5%, 10%, 14%, 54% & 74% [ Regulation 7] Persons, who are holding between 15% - 55%, acquisition/ sale aggregating more than 2 % or more voting rights [Regulation 7(1A)] Person holding more than 5% shares [Regulation 6]
  4. 6. Acquisition more than 15% or more voting rights [ Regulation 10] Persons, who are holding between 15% - 55%, acquisition more than 5% or more voting rights in a financial year.[Regulation 11(1)] Persons, who are holding more than 55% , acquisition of single share or voting right [Regulation 11(2)]
  5. 9. Intimation to Stock Exchange Regulation 3(3) & Report to SEBI (Regulation 3 (4) is required to be filed in every case.
  6. 11. C OMPARISON OF SOME KEY TERMS
  7. 12. Vs. “ SEBI Takeover Code is applicable on acquisition of voting rights beyond the specified limits.” Nagreeka Exports Limited, Jain Irrigation Systems Limited
  8. 13. Vs. “ A person may acquire control over a Company without acquiring the shares. Acquisition of shares is covered under regulation 10 & 11 whereas acquisition of control is covered under regulation 12”
  9. 15. R EGULATION 6 & 8 – CONTINUAL DISCLOSURES
  10. 19. R EGULATION 7 – EVENT –BASED DISCLOSURES
  11. 23. R EGULATION 10, 11 & 12 – PUBLIC ANNOUNCEMENT
  12. 24. Regulation Existing holding (Any person already holding…) Shall not acquire shares or voting rights entitling him to exercise Voting rights Maximum Allowable Holding 10 0-15% 15% or more voting rights 11(1) 15%-55% Additional 5% more voting rights 11(2) 55%-75% Any single share 12 Shall not acquire control over the target company Unless such person makes a PUBLIC ANNOUNCEMENT to acquire such shares in accordance with the regulations.
  13. 26. Whether the Acquirer is eligible for exemption?? NO
  14. 27. <ul><li>What is the relevant date for deciding the eligibility for availing exemption?? </li></ul><ul><li>Regulation 3 comes into play only if a violation of the substantive clauses 10, 11 or 12 is first established. Therefore, the date of claiming exemption under regulation 3 cannot be prior to the date when regulation 10, 11 or 12 is attracted. </li></ul><ul><li>Whether acquisition of shares pursuant to conversion of warrants is an involuntary acquisition and hence eligible for exemption?? </li></ul><ul><li>The acquisition of shares and consequent voting rights is out of a voluntary action on the part of the Acquirers and it is not due to compulsion under or operation of any law. Hence, such acquisition is not exempt. </li></ul>
  15. 28. P AYMENT OF NON-COMPETE CONSIDERATION
  16. 33. R EGULATION 3 – EXEMPTIONS
  17. 35. On 16.01.2006 , A & B gave an Open Offer. With in 3 years On 19.12.2006, A agreed to transfer his shareholding to B A & B were shown as promoters in the Open Offer. The exemption was claimed u/r 3 (1) (e) (iii) (b). The regulation applicable in this case is regulation 3 (1) (e) (iv), therefore since the promoters are not acquiring shares after three years from the date of closing of open offer , the acquisition is NOT EXEMPT. SEBI Decision:
  18. 36. X Ltd (Foreign Company) Y Ltd (Foreign Company) Z Ltd (Indian Listed Company) Scheme of Arrangement approved by HC of a Foreign Country Holding Company Subsidiary Company
  19. 37. <ul><li>Whether the indirect acquisition of shares of an Indian Company pursuant to a scheme of arrangement approved by the High Court of a foreign country will be exempt under regulation 3(1)(j)(ii) of SEBI Takeover Regulations, 1997? </li></ul><ul><li>Yes, because section 3(1)(j)(ii) of Takeover Regulations provides exemption from regulation 10, 11 & 12, in case of acquisition of shares pursuant to a scheme of arrangement or reconstruction including amalgamation or merger or demerger under any law or regulation, Indian or foreign. Therefore, acquisition of shares pursuant to a scheme of arrangement approved by a foreign court will also be exempted. </li></ul>
  20. 38. R EGULATION 4 – A STUDY ON SOME GROUNDS & ISSUES…
  21. 47. <ul><li>Acquisition of 14.99% Shares. </li></ul><ul><li>Acquisition of Control by passing a Special resolution through Postal Ballot u/r 12. </li></ul><ul><li>Merger of the Target Company with the </li></ul><ul><li>Acquirer Company. </li></ul>
  22. 48. <ul><li>Choice of Company for Investment </li></ul><ul><li>Decision of Investment vis-a-vis various laws. </li></ul><ul><li>Due Diligence of Company </li></ul><ul><li>Market Perception about the Company </li></ul>
  23. 49. <ul><li>Anticipation of Competitor </li></ul><ul><li>Cost of Investment </li></ul><ul><li>Decision as to acquisition type </li></ul><ul><ul><li>Acquisition of Shares </li></ul></ul><ul><ul><li>Acquisition of Control </li></ul></ul><ul><ul><li>Acquisition of Shares and Control </li></ul></ul><ul><li>Mode of Acquisition </li></ul><ul><ul><li>Through Open Offer </li></ul></ul><ul><ul><li>Through Postal Ballot </li></ul></ul>

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