Comparative study of the takeover regulations prevailing in different countries

Comparative Study of Takeover Regulations in Different Countries

Research Assignment: Set I

Comparative Study of the Takeover
Regulations in Different Countries
25th December 2009

BY

RAMNATH SRINIVASAN
GOVERNMENT LAW COLLEGE
SLC ROLL NO: 54

Electronic copy available at: http://ssrn.com/abstract=2139745


ABSTRACT
The author has tried to explain the core differences in the Indian and international takeover
regulations and thereby has attempted to point out certain crucial learning that can be
incorporated in the Indian Code. The author has critically reviewed the partial open offer
triggers and the process in comparison with those in U.K and Singapore. This work suggests
scrapping of some redundant regulations to make the law more competitive and business
friendly.

Electronic copy available at: http://ssrn.com/abstract=2139745


THE CONCEPT OF TAKEOVER AND GENESIS OF THE LAW

The term takeover has the potential, like many terms in law, to encompass a wide
variety of events and transactions leaving enough room for speculation and ambiguity. Loosely
speaking, Mergers are often spoken of in the same breadth as takeovers and little effort is
made in common usage to distinguish between them. Strictly speaking, however, they are two
different worlds with similar characteristics.

So, what is a Takeover?

Takeover can be simply defined as purchase of one company by another for consideration- cash
or non cash or a combination of both. Again, different regulations define it in different ways so
as to cover a wide ambit of transactions as may be relevant to the country or with regards to
the history of such transactions in the country. However, it is important to note that no law can
ever provide an exhaustive definition to something as dynamic as takeovers. As mentioned in
The Singapore Code on Takeovers and Mergers, It is impracticable to devise rules in sufficient
detail to cover all circumstances which can arise in take-over or merger transactions.

Background

A study on the business activities of US companies revealed that so far there have been five
major merger waves in US. First wave (1897-1904); during this period rapid economic growth
through concentration was achieved. Expansion of business operations, economies of scale and
drive for efficiency & technological changes were the motivating forces. It created monopoly
and large companies absorbed smaller ones. For example, US Steel emerged on combination of
785 companies. Similarly, American Tobacco and General Electric emerged after absorbing large
number of companies. Second wave (1916-1929); if first wave was the era of horizontal
mergers, second wave was the period of vertical and diversified mergers. It created oligopoly.
Achieving technical gain, avoid dependence on other firms and to consolidate sales and
distribution networks were the driving forces. Third wave (1965-1969; during this period no
pervasive motive could be identified. Merger activities were mainly influenced by the Anti-trust
policies. Circumventing regulatory provisions, managerial reorganization, product diversity etc.
were the governing forces. During this period a large number of firms disappeared from the
market. Fourth wave (1981-1989); during this period Companies responded to a common set of
environmental/macro factors and assumed an international dimension. Hostile takeovers and
LBOS were the primarily acquisition strategy. Fifth wave (1990-2000); this is the era of cross
border acquisitions. A number of mega mergers emerged involving companies from different


countries. IT revolution, continued deregulation of the economies, reduction in trade barriers,
globalization and privatization led to these mergers.

Indian Scenario

The concept of takeover for India is a borrowed one- one that originated in the west following
the wave of mergers & acquisitions. Mergers and takeovers are prevalent in India right from the
post independence period. But Government policies of balanced economic development and to
curb the concentration of economic power through introduction of Industrial Development and
Regulation Act-1951, MRTP Act, FERA Act etc. made hostile takeover almost impossible and
only a very few M&A and Takeovers took place in India prior to 90s. But policy of decontrol and
liberalization coupled with globalization of the economy after 1980s, especially after
liberalization in 1991 had exposed the corporate sector to severe domestic and global
competition. This had been further accentuated by the recessionary trends, resulted in falling
demand, which in turn resulted in overcapacity in several sectors of the economy. Companies
started to consolidate themselves in areas of their core competence and divest those
businesses where they do not have any competitive advantage. It led to an era of corporate
restructuring through Mergers and Acquisitions in India. While the possibility of takeover of a
company through share acquisition is desirable in new competitive business environment for
achieving strategic corporate objectives, there has to be well defined regulation so that the
interest of all concerned are not jeopardized by sudden takeover threats. In the light of the
circumstances prevalent at the time, the need for some law to regulate takeover was strongly
felt.

It is interesting to note that while in most countries including UK, rest of Europe and Singapore,
Takeovers and mergers are governed by the same law, in India, mergers and amalgamations are
governed by the Companies Act,1956 (Sections 391 to 394) while takeovers are governed by
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

This, in my opinion, is a flaw that needs to be corrected at some point in time as feasible. Since
the nature of the transactions by themselves is so similar, a common law to govern the same
would be the logical step.

I now move on to explore takeover code in its current form in India and juxtapose relevant
important provisions from similar regulations around the world. The focus of my research is on
how effective are the regulations in really protecting investors’ interest as they claim to whilst
comparing the scenario around the world. I would also like to throw light on the relation
between the takeover law and ease of doing business which is, among other things, dependent
on the regulation governing mergers and takeovers in general.


INTERPRETATION OF CONCEPTS IN DIFFERENT REGULATIONS

The Concept of Persons Acting in Concert

The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 defines PAC
more broadly by using the words “persons who for a common objective or purpose of
substantial acquisition of shares or voting rights or gaining control over the target company,
pursuant to an agreement or understanding (formal or informal), directly or indirectly co-
operate by acquiring or agreeing to acquire shares or voting rights in the target company or
control over the target company.” Thus it leaves the agreement implicit or explicit, common
intent etc open to interpretation. We have often seen cases that include contesting of this
definition hovering around whether there was a “common objective” and implicit agreement
for the persons to be referred to as PAC.

The Singapore Code on Take-overs and Mergers defines PAC in a similar fashion too, but
notable is the fact that the terms common objective is unique to Indian Code. The same applies
mutandis mutatis to THE CITY CODE ON TAKEOVERS AND MERGERS of the UK- where
agreement being implicit is a part of the definition, but the terms common objective are not
present. A case in point around this definition and its interpretation in the Indian context is
Modi Spg. & Wvg. Mills Co. Limited v SEBI.

Concept of Control

The concept of control as laid out in the Indian scenario is as follows: “control” shall include the
right to appoint majority of the directors or to control the management or policy decisions
exercisable by a person or persons acting individually or in concert, directly or indirectly,
including by virtue of their shareholding or management rights or shareholders agreements or
voting agreements or in any other manner.


This is a crucial definition and forms the basis for trigger points of the open offer. The
Singapore Code too defines control, but being more specific with regards to the percentage
threshold that gives control. It is heartening to see the Indian cod a step ahead, as control can
be established even when a person has less than 10% of shareholding. Noteworthy is the case
of now infamous Ramalinga Raju of erstwhile Satyam. The UK’s city code and EC directive on
takeover make no explicit definition of control.

Threshold Limits & Open Offer

Threshold limit is the level of holding when holders have to observe certain provisions.
Threshold limit is defined for two purposes- first, for the purpose of Disclosure and second, as
the trigger point for open offer. In the Indian context, if a person holds 5%, 10% or 14% then at
each level, he has to inform to concerned company and stock exchange about the level of his
holding. It shows the level of holdings beyond which acquirer have to make open offer for
further acquisition of shares or voting right.

The Singapore Code on Take-overs and Mergers has the same trigger specified at 30%, much
higher than in India. Also important to reiterate that it is the percentage that defines control in
Singapore listed entity. Continual disclosures have to be made from this percent onwards for
every percent increase in the holdings.

The City Code on Takeovers in UK also has 30% threshold limit and requires continual
disclosures from the potential acquirer once 15% shareholding is crossed. While in the USA, any
holding above 10% needs to be reported to the SEC.

Below is a comparison of the major takeover provisions in India, U.K, Singapore and USA that
are relevant to my research.

Regulation India U.K Singapore USA
Who Regulates SEBI FSA Securities Securities and
Industry Council Exchange
Commission (SEC)

Threshold limit (Initial 15% 30% 30% or 1% Offers are only
Acquisition) creeping voluntary
between 30% to
50%
Creeping Acquisition limit 5% for No 1% in 6 months No
(subsequent acquisitions shareholders for shareholders
for consolidation of holding 15% to holding shares
holdings) 75% between 30%
and 50%


Public announcement To be made To be made To be made To be made
Letter of offer To be sent To be sent To be sent. To be sent.
Offer size Minimum 20% of For balance shares Regulation Is As much as 5%
the voting share silent called “Tender
capital of the Offers”
target company

Less than 5% –
‘Mini tender offer’

Offer price parameters parameters specified parameters -
specified specified
Escrow Account 25% of Confirmation from a -
consideration third party that there
payable are resources.

Competitive bids allowed Yes Yes Yes -

Can offer be withdrawn Yes, under Yes. If a competitive Yes Regulation Is silent
certain bid is made at a higher on this
conditions:- price.
- Refusal of
statutory
approvals.

- Death of sole
acquirer

- As and when
SEBI deems fit

Can shareholders Yes, up to three Yes. Under certain Yes Yes, up to seven
withdraw the days before circumstances. days of the copies
acceptances tendered? closure of offer of the offer are
sent.
Concept of Indirect Present Yes, chain rule is Yes, Chain -
acquisitions existing subject to principle is there
condition of significant
shareholding

Penalties Civil and Criminal Reprimand, public Private Civil penalties
Liabilities censure, etc. reprimand or
public censure or
deprive the
offender

temporarily or
permanently to
enjoy facilities of
securities
market.
Data Source: Takeovercode.com, www.mas.gov.sg, Takeover panel, UK

CRITICAL EVALUATION & OPINION ON CORE REGULATIONS AND
SUGGESTIONS FOR IMPROVEMENT IN THE CODE

Now that I have laid out some comparisons between the takeover regulations of the world, I
would like to present my opinion on certain regulations backed by intensive research.

I am personally an admirer of the principle of the Code. When the Code was first introduced
way back in 1992, it served to remove a major lacuna in the then regulatory structure- Clause
40A and 40B of the listing agreement did not cover a wide variety of people who were brought
under the ambit of this code that provided a transparent and orderly framework for substantial
acquisition of shares of companies listed on the stock exchanges. However, that by itself
doesn’t exempt SEBI’s SAST of its own lacunae. It is one of those regulations that has been
making news ever since its proposal and is keeping up the trend till date as fresh amendments
are underway.

On Trigger Points

In the last 13-14 years of the existence of the new regulations, there have been almost 20
amendments to the code. And as many experts would agree, as I have seen from the list of
amendments myself, many were in areas that did not even require a second look. One look at
the existing regulations will outline the level of complexity and consequent bottleneck to its
interpretation.

The takeover regulations mandating a compulsory tender offer to public shareholders is
triggered on any one of the following thresholds being reached:

1.) Acquisition of shares or voting rights of 15% or more; (inclusive of the shares or voting rights
already held by the acquirer or by the persons acting in concert). Thus a person holding no
shares can acquire up to 14.99% voting rights and a person holding 10 % could acquire up to
4.99% voting rights. The holding should be such as would entitle the acquirer to exercise 15% or
more of the voting rights in a listed company according to Regulation 10.


2.) Regulation 10 implies that a 12% holder of voting equity cannot buy 5% without triggering
the tender offer, but a 20% or a 49% holder is exempt from the tender offer on acquiring upto
5%. This convoluted system allows creeping acquisition above 15% but not between 10 and
15% levels of existing shareholding. In addition 15% is the hard boundary, if by acquiring even
one share a person reaches or crosses 15%, the tender offer trigger is reached.

3.) Acquisition of more than 5% of shares or voting rights in any financial year ending on 31st
March when the acquirer holds 15% or more but less than 55% of the shares or voting rights of
the company concerned would also trigger the compulsory tender offer according to Regulation
11(1). This is consistent with the listing agreement for most companies which require a
minimum public shareholding of 25% because if a person with 55% acquires a single share and
then is required to make a tender offer for 20%, the acquirer would not be breaching the listing
agreement (except by one share).

4.) Where such acquisition is for less than 5% in a year (as defined), then it is exempt in what is
known as creeping acquisition exemption under the same regulation 11(1).

5.) Also exempt is acquisition of shares or voting rights up to 5% (one time), where the acquirer
already owns or controls between 55 to 75% votes, if the same is the result of buy back of
shares by the company or purchases are made through open market purchases as per Reg.
11(2) second proviso. This exemption is subject to an upper holding limit of 75% in case of all
companies irrespective of minimum public shareholding requirement under the listing
agreement.

6.) Acquisition of even a single shares or voting right where holding is already 55% or beyond
the exemption given in 5) above would trigger the tender offer according to Regulation 11(2).
Where a person already holds say 60% and acquires further shares, and thus makes a tender
offer which is fully subscribed (i.e. 20%), the acquirer would be holding 80 % post tender offer.
In such a case, if the acquirer is breaching the listing agreement which imposes a condition of
public shareholding of a minimum of 25%, the acquirer must bring down his holding within a
time period permitted by the exchange to be again in compliance with its agreement. In the
same facts where the listing agreement only requires a minimum 10% public shareholding, the
acquirer can continue to hold the 80% shareholding. In another fact scenario of a company with
a listing agreement for a minimum of 10% public shareholding, where a person is already in
control of 76% voting equity, acquires further voting rights, and the tender offer for 20% takes
his holding to 96%, he must again divest his voting rights to below 90% levels within a period
prescribed by the exchange.


7.) In a company with a minimum public shareholding of 25%, any acquirer already holding 75%
or more would be prohibited from acquiring further shares as it would result in direct breach of
the listing agreement except 8) below.

8.) Regulation 11(2A) read with Reg. 21 (3) provides for a special route of acquisition which
does not mandate a 20% tender offer.

9.) Acquisition of direct or indirect control with or without acquisition of shares or voting rights
would also trigger the tender offer requirements according to Reg. 12.

As can be seen above, there are a very large number of unnecessary and convoluted trigger
points for a compulsory tender offer to be triggered. Complexity devoid of any rationale or
philosophy ought to be avoided. There is a need to simplify this unnecessary complexity while
keeping the philosophy of the regulations alive.

Suggestion

Firstly, as the Code is being reviewed by the Takeover Review Committee, I would like to
suggest that the percentage threshold for open offer be hiked from its current 15% to at least
25%, a suggestion by the Economic Times Bureau (see Refine Takeover Code- Dated 30th Dec
2009) and one that I concur with. The hike will give private equity players a good chance to
invest without triggering the code. Subject to compliance with other regulations, this will
definitely provide more PE capital to the companies. I propose that Creeping acquisition of 5%
be allowed up to 55% without any open offer, and subsequent to that an open offer for all the
remaining shares up to 75% as required by the listing agreement should be made. This is
consistent with the view of the Finance Ministry that gradually all companies should be
mandated to have a minimum of 25% public shareholding. Also, whilst respecting the Listing
Agreement, one would also streamline our regulations with those in UK and USA, where there
is no creeping limit at all and open offer is made for all the remaining shares. I have also
implicitly stated here that the partial open offer of 20% be done away with. I have my reasons
to back that “belief” and would explain the same in my analysis of the open offer.

Another change I suggest is with regards to the continual disclosures would be netting of
transactions. Currently, though the view of the Bhagwati Committee is not incorporated in
black and white that purchases should not be netted off for calculating the acquisition of shares
and votes, SEBI has often relied on this view to calculate positions on a gross basis. This means
that a person acquiring 4% shares, then selling 3% shares and further buying 2% shares is
required to make a disclosure. This is a violation of principle of the code as well as impractical in


that the person never actually acquires “substantial” percentage of shares to trigger the
disclosure. This must be made clear in the regulation itself so as to avoid ambiguity.

The Singapore Code disallows netting only in case of reduction/ dilution below 30%.

Open Offer

As I already above have mentioned, the open offer which currently is triggered at different
levels in the Indian code should be simplified. There are also certain loopholes that need to be
plugged so that the code moves toward the uniform and simplified yet comprehensive version
as in regulations around the world. Let us first have a look at the regulations around the world
and try to converge our Indian regulations towards the same.

The Singapore Code doesn’t specify any open offer limit and the trigger points are relatively
simple. An open offer has to be made when the 30% threshold is crossed or creeping
acquisition limit is exceeded (see Rule 14.1). It also has provisions of partial offer but not as
complicated as one in SEBI’s SAST Regulations ’97. My objective of quoting these differences
will be clear when I discuss the Investment Climate.

The UK Takeover Code says that when the threshold limit of 30% as mentioned in Rule 9 of the
Code is reached, or when the offeror approaches the offeree and the resultant speculation
causes undue share price movement in the latter’s stocks, an open offer for the balance shares
needs to be made.

The Indian Takeover Code has multiple limits with multiple rules. Regulation 10 is the first
trigger at 15%, much lower than international standards and a barrier according to the media
and industry sources for more Private Equity investment. Then comes the terrible Regulation
11(2) and 11(2A). The two provisions create an unnecessary legal arbitrage between acquiring
no shares and acquiring one share, where the choice would determine whether an expensive
20% tender offer is required to be made or a cheaper, say 5%, tender offer is required.

Again, a reading of Regulation 21 causes confusion. For example, one interpretation that can be
made is a person can make an offer of 20%, stating that the acquirer will refuse to accept the
offer if acceptance is below say 18%. Where a person has acquired shares from the market and
triggered the tender offer, giving such a right to the acquirer would be unfair, and in fact SEBI
does not permit such an interpretation. What the regulation is trying to say is that only where
acquisition of shares is by way of a memorandum of understanding which can be revoked, can a
person make such a conditional offer; because there would not be any acquisition of voting
right as the whole tender offer and the primary acquisition could be reversed altogether.


The Code also claims to provide investors with an exit option in case of a takeover and
subsequent mandatory open offer. The step is a significant one as it will prevent the
clandestine acquisition of shares at high prices from selected shareholders leaving the bulk of
the shareholders high and dry. But again, 11(2A) has left me disappointed as it allows open
market purchase as an option to creep up 5% shares for holders of more than 55% shares
without making an announcement. The typical shareholder has no way of knowing how well
the open market operations are succeeding. He is thus faced with a dilemma – should he hold
on to his shares in the hope that the acquirer will be forced to offer a better price or should he
sell immediately before the acquirer winds up his open market operations?

In this situation, I believe that

a) The small shareholders will be stampeded into tendering shares at low prices

b) The small shareholders, particularly in rural and semi-urban areas will be severely
disadvantaged in availing of the opportunity to sell.

With regard to the open offer size of 20%, as mentioned, not only do I detest the partial offer,
but worse detest the principle on which it was formulated. The Bhagwati Committee report
mentioned that the offer size is low (20%) because they believed Indians will not have the
financial clout to take advantage of any provision requiring offer size greater than 20%. The
Bhagwati Committee recommendations have been accepted in full measure in this regard.
However,it is interesting to note the acquisitions of Eight O Clock Coffee by Tatas or the famous
Tata- JLR deal. The question to be asked is, will the review panel change its view in this regard
and accordingly make the open offer a full offer as suggested by me later in this work?

Suggestions

Reg. 11(2A) thus should be deleted in order to remove the unnecessary regulatory arbitrage.
The conditional offer should be only available in acquisitions made by way of private
agreements which can be reversed if the conditional offer is not satisfied and not in every
acquisition of shares from the market which are incapable of being reversed. This is the way
SEBI implements the regulation, but the position is different on a literal reading of the
regulation. Also, I believe that the open market purchases should not be permitted and all
acquirers who seek to cross the threshold shareholding must be asked to follow the open
tender offers.

Partial Takeovers & Two Step Takeovers is another area in which more stringent regulation is
called for. In one form of this takeover, the acquirer consolidates his position in the first step by
acquiring a significant proportion of control, and then makes the next move for a greater


control. In the second form, what is also known as “boot strap” takeover, the takeover is made
self financing by the acquirer by diverting the acquiree’s own funds to himself in form or other.

Several different approaches have been evolved by regulators around the world to deal with
this problem:

a) The UK takeover code frowns upon partial takeovers. Attempts to acquire less than majority
control are permitted only under special conditions. Attempts to acquire majority but less than
total control are allowed only if they are approved by the acquiree’s board and the holders of at
least 50% of the voting rights not already owned by the acquirer.

b) Some US states permit partial takeovers but block the second step of the takeover. After the
first step is completed, any subsequent merger, asset sale or other similar step requires
approval of a majority of the remaining voting rights.

c) Some US states allow shareholders to tender any number of shares at the price at which the
acquirer has bought shares in the partial takeover. Under Indian conditions, a total ban on
partial takeovers may not be appropriate at this stage. Option (b) above is however more
acceptable in the Indian context. We already have some similar provisions in Sections 293 and
314 of the Companies Act. These could be strengthened to bring all second step takeover
stratagems under their ambit and also modified to require a majority not merely of the entire
voting rights but of the voting rights not already owned by the acquirer. If necessary, these
stringent provisions could be limited to the first five years after the first step takeover is
completed.


DEFENSE MECHANISMS AVAILABLE UNDER ALL REGULATIONS

The term defense mechanism comes into picture in the takeover world only when we talk about a
hostile takeover. In friendly takeovers, which occur by mutual understanding and an almost win-win
situation of the management of both the companies, and hopefully also for the shareholders. Hostile
takeovers were primarily prevalent in the US when the SEC regulation was not adequate to counter such
hostile bids. However, the number of hostile bids has gone down considerably since world over,
regulatory authorities have stepped in to nip this loophole.

When an acquirer takes the control of a company by purchasing its shares without the knowledge of the
management it is termed as a hostile takeover. In short, when an acquirer silently tries to gain control of
a company against the wishes of the existing management, the acquirer has triggered what comes to be
called as a hostile takeover bid. Hostile takeover is an attempt by outsider to wrest control away from
an incumbent management.

Defenses against Hostile Takeovers-Shark Repellents

There are several ways to defend against a hostile takeover. The most effective methods are those
where there are built-in defensive measures that make a company difficult to take over. These methods
are collectively referred to as "shark repellents".

The classic ‘poison pill strategy’ (the shareholders’ rights plan) is the most popular and effective defense
to combat the hostile takeovers. Under this method the target company gives existing shareholders the
right to buy stock at a price lower than the prevailing market price if a hostile acquirer purchases more
than a predetermined amount of the target company’s stock.

The purpose of this move is to devalue the stock worth of the target company and dilute the percentage
of the target company equity owned by the hostile acquirer to an extent that makes any further
acquisition prohibitively expensive for him. ‘White Knight’ is another type of defense mechanism. In this
case, a third company makes a friendly takeover offer to the company facing a hostile takeover. This is a


common tactics in which the target company finds another company to enter the scene and purchase
them out and away from the company making the hostile bid. The several reasons why the companies
prefer to be bought out by the third company could be -- better purchase terms, a better relationship or
better prospects for long-term success. At times these ‘white knight’ companies only help the target
company improve the deal terms with the hostile bidder. A very good example is of Severstal which
acted as a ‘white knight’ in the Arcelor-Mittal deal, and causing a 52.5 % increase in the Mittal offer.

Some other types of defenses which are available to the target company are:

# Pac-Man Defense – Pac-Man Defense, which has its etymological roots in the Pac-Man Game, is a
strategy wherein a target company thwarts a takeover bid by buying stocks in the acquiring company,
then taking the bidder company over.

# Staggered Board:-It is used generally in combination with ‘Shareholder’s Rights’ plan and is considered
most effective. This method drags out the takeover process by preventing the entire board from being
replaced at the same time. The directors are grouped into classes; each group stands for the election at
each annual general meeting. It prevents entire board from being replaced at one go.

# Golden Parachute is a tactics which works in the manner that it makes the acquisition more expensive
and less attractive. It is provision in a CEO's contract, which is worded such that the CEO gets a large
bonus in cash or stock if the company is acquired.

The Indian Takeover Code makes it difficult for the hostile acquirer to just sneak up on the target
company. It forewarns the company about the advances of an acquirer by mandating that the acquirer
make a public disclosure of his shareholding or voting rights to the company if he acquires shares or
voting rights beyond 5, 10 or 14% of shares. However, the Takeover Code does not present any
insurmountable barrier to a determined hostile acquirer.

The Takeover Code, vide Regulation 23, also imposes a prohibition on the certain actions of a target
company during the offer period, such as transferring of assets or entering into material contracts and
even prohibits the issue of any authorized but unissued securities during the offer period. However,
these actions may be taken with approval from the general body of shareholders.

However, the regulation provides for certain exceptions such as the right of the company to issue shares
carrying voting rights upon conversion of debentures already issued or upon exercise of option against
warrants, according to pre-determined terms of conversion or exercise of option. It also allows the
target company to issue shares pursuant to public or rights issue in respect of which the offer document
has already been filed with the Registrar of Companies or stock exchanges, as the case may be.


However this may be of little respite as the debentures or warrants, contemplated earlier must be
issued prior to the offer period. Further the law does not permit the Board of Director, of the target
company to make such issues without the shareholders approval either prior to the offer period or
during the offer period as it is specifically prohibited under Regulation 23.

During a takeover bid, it may be critical for the Board to quickly adopt a defensive strategy to help ward
of the hostile acquirer or bring him to a negotiated position. In such a situation, it may be time
consuming and difficult to obtain the shareholders’ approvals especially where the management and the
ownership of the company are independent of each other.

The Takeover Code is required to be read with the SEBI ICDR (formerly DIP Guidelines). They impose
several restrictions on the preferential allotment of shares and/or the issuance of share warrants by a
listed company. Under the ICDR, issuing shares at a discount and warrants which convert to shares at a
discount is not possible as the minimum issue price is determined with reference to the market price of
the shares on the date of issue or upon the date of exercise of the option against the warrants. This
creates an impediment in the effectiveness of the shareholders’ rights plan which involves the
preferential issue of shares at a discount to existing shareholders.

The ICDR also provide that the right to buy warrants needs to be exercised within a period of eighteen
months, after which they would automatically lapse. Thus, the target company would then have to
revert to the shareholders after the period of eighteen months to renew the shareholders’ rights plan.

Without the ability to allow its shareholders to purchase discounted shares/ options against warrants,
an Indian company would not be able to dilute the stake of the hostile acquirer, thereby rendering the
shareholders’ rights plan futile as a takeover deterrent.

Also, the FDI policy and the FEMA Regulations have provisions which restrict non-residents from
acquiring listed shares of a company directly from the open market in any sector, including sectors
falling under automatic route. There also exist certain restrictions with respect to private acquisition of
shares by non-residents, under automatic route, is permitted only if Press Note 1 of 2005 read with
Press Note 18 of 1998 is not applicable to the non-resident acquirer. This has practically sealed any
hostile takeover of any Indian company by any non-resident.

However, for the poison pill strategy to work best in the Indian corporate scenario certain amendments
and changes to the prevalent legal and regulatory framework are required. Importantly, a mechanism
must be permitted under the Takeover Code and the ICDR which permit the issue of shares/warrants at
a discount to the prevailing market price. These amendments would need to balance the interests of the
shareholders while allowing the target companies to fend off hostile acquirers.

The ICDR do not stipulate any pricing restrictions on the issue of non-convertible preference shares,
non-convertible debentures, notes, bonds and certificates of deposit. Thus, companies may consider
structuring a poison pill in place whereby backend rights which permit the shareholders to exchange the
rights/shares held for senior securities with a backend value as fixed by the Board, are issued to existing
shareholders when the hostile acquirer’s shareholding crosses a predetermined threshold.


As most takeovers are carried out through borrowed funds, the use of backend rights reduces the
profitability of the takeover because of the mounting interest rates on borrowings; thus deterring the
hostile acquirer and more importantly sets the minimum takeover price, which is the price at which the
shares have been exchanged for senior securities.

Another method is where a company puts a provision in its Articles of Associations to the effect that a
hostile acquirer who succeeds in taking control of that company and/or its subsidiaries is prohibited
from using the company’s established brand name. A live example is of the Tata companies who have
put in place a an arrangement with the Tata Sons holding entity, whereby any hostile (or otherwise)
acquirer of any of those entities is not permitted to make use of the established “Tata” brand name.

As a consequence, the bidder might be able to take over the target Tata Company but will not be
entitled to a significant bite of its valuation — the valued brand name!! 1

Hostility is usually perceived when an offer is made public that is aggressively rejected by the target
firm. Consequently, perceptions of hostility are closely linked with takeover negotiations that are far
from completion. Often firms engage in confidential negotiations before there is a public announcement
of a bid or an intention to bid. In some cases, the first public announcement is of a successfully
completed negotiation, which would be perceived to be friendly, even if the early stage private
negotiations would have seemed hostile if they had been revealed to the public. In other cases, private
negotiations break down and one of the parties decides that public information about the potential bid
would enhance its bargaining position.

Other countries

The UK has explicitly rejected managerial discretion in favor of the shareholder-oriented strategy for
regulating takeovers. The US Takeover Code is less friendly to shareholders on the other hand..
Managers of a target company are permitted to use a wide variety of defenses to keep those bids at
bay. In The US, The managers of a company that has both a poison pill and a staggered board of
directors have almost complete discretion to resist an unwanted takeover bid. In contrast, UK takeover
regulation has a strikingly shareholder- oriented cast. The most startling difference comes in the context
of takeover defenses. UK managers are not permitted to take any “frustrating action” without
shareholder consent once a takeover bid has materialized. Poison pills are strictly forbidden, as are any
other defenses, such as buying or selling stock to interfere with a bid or agreeing to a lock-up provision
with a favored bidder that would have the effect of impeding target shareholders’ ability to decide on
the merits of a takeover offer. To be sure, the “no frustrating action” principle of the UK’s Takeover
Code only becomes relevant when a bid is on the horizon. Thus, managers seeking to entrench
themselves theoretically could take advantage of less stringent ex ante regulation to “embed” takeover
defenses well before any bid comes to light. Such “embedded defenses” range from the fairly
transparent, such as the issuance of dual-class voting stock, adopting a staggered board appointment
procedure, or the use of “golden shares” or generous golden parachute provisions for managers, to the
more deeply embedded, such as provisions in bond issues or licensing agreements that provide for
acceleration or termination if there is a change of control. Yet, other aspects of UK law and practice —


including rules that prevent effective staggered boards — mean that embedded defenses are not
observed on anything like the scale that they are in the United States.

As per Directive 2004/25/EC on Takeover Bids, Any anti-takeover actions of the target board following
the public announcement of the bid (but not before, so for example not any action since the board has
become aware of the bid) must be approved by the AGM. Any decisions out of the ordinary course of
business are to be approved by the AGM anyway. (Article 9) The application of this rule is optional for
companies, at the choice of member states or companies. (Article 12.1)
1
Interesting cases I have seen were filing of suit against a National Marketing Company for fraudulently using Tata brand name for its steel
cutlery and the site Oktatabyebye.com. This was a part of drive against misuse of TATA brand name

Chilean tender offer provisions generally prohibit a target company from taking frustrating action during
the tender offer period. However, some mechanisms which can potentially be used to fend off a
takeover are allowed. For example, there is no obstacle for issuance of shares during the tender offer,
though there are limits on increasing debt during a tender offer. Target companies are banned from
acquiring their own shares, and of disposing of more than 5% of their assets. More sophisticated anti-
takeover tactics, such as poison-pills or preferred stock issuance with redemption rights during a control
change are not used. They are not forbidden by law, but would require a general shareholder meeting
approval, and may face a review by the securities regulator, on the legal concern of being “detrimental
to the interests of the corporation and its shareholders”. Golden parachutes would be objectionable on
the same count.

The most common defensive tool of Canadian companies is the shareholder rights plan. Several hundred
Canadian companies have adopted rights plans. Shareholder agreement is only required if the pill will be
in force for more than 6 months. The basic mechanics of Canadian poison pills are similar to US pills,
contemplating that a 'flip-in event' will occur when any person acquires a specified percentage (often
20%) of the securities of the issuer, causing substantial dilution to the acquirer unless a 'permitted bid' is
made. However, Canadian regulators will not permit a target company to use a rights plan to shield itself
indefinitely, and will often have it removed at the request of the hostile bidder. Institutional investors
also favor poison pills of the less potent variety. As a result, poison pills tend to be benign, providing the
target board with some extra time to respond to an unsolicited offer. The more exotic pills common in
the United States, including 'dead hand' pills, 'no hand' pills and 'chewable' pills have not been widely 50
adopted in Canada.

In Germany, the management board needs the approval of 75% of the AGM, either expressly following
the news of the takeover threat, or up to 18 months in advance (# 33 German Takeover Code). To
further protect minority shareholders who disagree with the shareholder meeting decision regarding the
antitakeover measures, a court procedure may be available. In Italy, the anti-takeover regulations
subject only certain anti-takeover tactics to the approval of a shareholder meeting ((# 104 Italy CFA). In
many countries, a blanket prohibition exists against any actions that would frustrate the hostile tender
offer (e.g. Czech Republic and Chile). Such provisions may again prove difficult for a weak court to
enforce.


Below is a table of data from Thomson SDC showing that hostile bids are easier and consequently more
common in the U.K.

Location Announced M&A (total No.) Hostile Bids Hostile Bids completed
number percent number percent
U.S. 54,849 312 0.57 75 24
UK 22,014 187 0.85 81 43
SOURCE: Thomson SDC Platinum database

IMPACT OF TAKEOVER REGULATIONS ON INVESTMENT CLIMATE

My Research is primarily on how proper regulatory framework can help better development of the
country. The thought crossed my mind when an article in Economic Times mentioned India’s position on
ease of doing business (a World bank report) was 134 while that of Pakistan and other lesser developed
nations was at 83. Takeover laws, while not being the only law, definitely play a very important role in
developing the capital market and attracting investment from other countries and improving the quality
of takeovers.

I hereby present my point with the help of the case of Chile.

During the 1990s, a wave of changes of control occurred in Chile through private transactions at prices
that were 70% higher on average. Minority shareholders did not participate in this upside. Shareholder
dissatisfaction peaked during the takeover of Enersis S.A, Chile’s largest private energy conglomerate, by
Endesa España (Spain) in 1997. The deal became a landmark case in minority shareholder rights and
equitable treatment and prompted the overhaul of Chilean takeover legislation. The case also allows a
simple illustration of the rules which would prevent minority rights abuse, as well as a practical view on
the exact functioning of different protection mechanisms. Enersis was controlled by a group of five
investment companies, known as the Chispas, via 29.04%. All Chispas companies had the same political
structure: class A shares had 99.94% of the ownership and elected 4 out of 9 directors (held by pension
funds); and Class B shares that represented 0.06% of the ownership but elected 5 out of 9 members of
the board (held by Enersis management). Had the country been under a one-share-one vote listing rule,
the expropriation of non-voting shareholders (in this case the pension funds and ultimately their retired
beneficiaries) would not have occurred.

Even with barely 30%, the Chispas controlled Enersis due to its diluted ownership structure. The
takeover was preceded by secret negotiations between Endesa Spain and key executives of Enersis S.A,
who were promised a handsome price premium in exchange for cooperation on the takeover. Endesa
España offered USD 253.34 for each B share and only USD 0.30 for the A shares. A takeover legislation
with an equal-pricing rule would have made the deal impossible. The Spanish company also offered


Class B shareholders the option of purchasing up to 5% of Endesa shares at discounted prices, and
guaranteed the Enersis managers their positions for at least five years. Strict adherence to good
disclosure practices would have revealed this information prior to the tender offer and publicized it,
likely increasing the chances for a public outcry prior to the deal. Moreover, Enersis executives would be
considered as acting in concert with Endesa España, and therefore the notice would require that they
state their intentions to collaborate in a change in control, as well as the sweeteners used by Endesa
España to lure their cooperation.

Enersis executives applied pressure and influence to encourage employees to sell their shares. In
October of that year, details of the acquisition strategy were made public by the press, because Endesa
España, which was publicly traded in both the US and Spain, had filed several documents with the U.S.
SEC and the Spanish CNMV, explaining the terms of an agreement between Endesa Spain and the
Enersis executives. It was only at this point that the Chilean minority shareholders, the pension funds,
became aware of the details and decried the planned deal. Had that not happened in time, the pension
funds would have been left with non-voting shares and no control over Enersis, which would have gone
under the complete control of Endesa España. Had the latter considered taking Enersis private, the
pension funds would have lost virtually all value of their shares, an expropriation which will be fully
avoided with the new Chilean takeover law, which does not allow squeeze-outs and gives dissenting
shareholders appraisal rights in this case.

The new law established that share transactions that result in a person’s or group’s acquisition of
control of a corporation must be conducted through a tender offer. Additionally, when the target
company has several classes of shares with different voting rights, the tender must be extended to all
classes in proportion. Partial offers must be pro-rated. The law also contains a mandatory offer
provision, so that a shareholder who reaches the ownership level of 2/3rds of a corporation must tender
for all outstanding shares and classes. An optional transitory rule shielded companies for a further three
years from the new law, to allow learning, and most firms took advantage of that rule. The details of the
law are presented in Appendix C. The securities regulator (Conasev) can enforce takeover law by issuing
additional rules, imposing fines for noncompliance, demanding complete information about the
transaction, and suspending tender offers procedures, even before they have started, in response to
incomplete disclosure or a legal obligation default.

Following the implementation and enforcement of the new law, in 2000 and thereafter, one can note a
new wave of IPOs on the Chilean stock market, and a healthy trend of takeover activity after the reform.
The average number of takeovers has increased after year 2000 (see figure below). The control premium
paid over market prices, 23%, is now shared more equally between controlling shareholders and
minorities.

A graph showing improvement in capital markets activity post the launch of the Takeover Code in Chile


The World Bank report commends U.K takeover code as being one of the finest as it doesn’t have any
percentage based open offer; i.e. partial open offer. To support my findings that mandatory offer
doesn’t always provide a feasible exit option and that it may not be the best of the options, I include the
below observation by WB verbatim:

“Mandatory offer rules serve to protect minority shareholders from inefficient control transfers, as
repeatedly shown in the academic literature, but also decrease the chance that efficient control transfers
occur.17 Beyond the positive effect of the mandatory offer rule on minority rights, there have been no
studies on the optimal ownership threshold at which an offer becomes mandatory. To the extent that a
lower mandatory offer threshold increases the incidence of sharing the control premium with minority
shareholders, we expect a negative relationship between the mandatory offer threshold and better
minority shareholders rights.”

Below are some more data and graphs that would help in making the regulations better and on par with
the best in the world.


Basic Economic indicators and the takeover index

Market cap of
Income per NO. of listed listed Stocks traded,
capita 2004 companies, companies (% of total value (% of Takeover
Country (USD$) 2004 GDP) 2004 GDP) 2004 index
ARGENTINA 12,723 129 30.65 5.04 0.33
ARMENIA 4,222 213 0.51 0.05 0.16
AZERBAIJAN 4,175 234 . 0.02 0.06
AUSTRALIA 30,116 1,649 122.99 81.46 0.95
AUSTRIA 32,176 129 29.58 8.21 0.51
BELGIUM 31,009 106 219.64 20.09 0.6
BRAZIL 8,297 367 54.62 15.47 0.51
BULGARIA 8,007 342 11.62 2.12 0.31
CANADA 31,129 3,756 120.18 66.74 0.97
CHILE 11,487 240 124.4 12.32 0.57
CHINA 5,495 1,296 38.79 45.37 0.53
COLOMBIA 7,121 120 25.9 1.5 0.04
CZECH Rep 19,381 63 28.83 16.5 0.71
ECUADOR 3,885 30 8.52 0.33 0.06
EGYPT 4,103 824 51.25 7.46 0.07
FINLAND 29,816 147 98.48 117.93 0.72
FRANCE 29,077 772 92.74 65.5 0.65
GERMANY 28,147 715 44.01 51.8 0.45
GHANA 2,316 25 30.67 0.76 0.29
GREECE 21,954 341 61.57 21.38 0.44
HONG KONG 30,779 968 528.49 269.3 0.92
INDIA 3,115 5,644 56.06 54.79 0.51
INDONESIA 3,583 333 28.43 10.7 0.32
ISRAEL 24,082 576 81.25 39.33 0.5
ITALY 28,162 295 47.21 48.1 0.47
JAPAN 29,539 3,058 79.56 74.2 0.72
JORDAN 4,571 191 164.2 47.59 0.05
KENYA 1,063 51 24.94 2.07 0.36
KOREA 20,371 1,563 63.07 94 0.59
LITHUANIA 13,021 48 29.03 2.08 0.55
MALAYSIA 9,760 897 161.33 50.84 0.66
MEXICO 9,774 159 25.42 6.33 0.39
NETHERLANDS 32,056 180 107.8 104.67 0.47
NIGERIA 1,113 200 20.06 2.31 0.36
PAKISTAN 2,210 663 30.17 76.86 0.31


PERU 5,641 197 29.41 1.65 0.16
PHILIPPINES 4,558 234 33.49 4.24 0.39
POLAND 12,881 203 29.4 6.85 0.58
ROMANIA 8,342 4,484 16.11 1.29 0.42
SINGAPORE 27,273 434 160.6 76.12 0.89
SOUTH AFRICA 11,190 426 214.09 76.53 0.76
SPAIN 25,341 2,986 94.88 120.5 0.6
SRI LANKA 4,173 244 18.23 2.9 0.37
SWEDEN 29,499 278 108.77 119.06 0.62
SWITZERLAND 33,541 258 229.74 202.28 0.59
THAILAND 8,179 405 70.58 66.74 0.55
TURKEY 7,710 294 32.55 48.82 0.25
UK 30,843 1,701 131.53 173.16 0.94
URUGUAY 9,465 11 2.51 0 0.04
USA 39,618 5,685 139.91 165.89 0.76

Components of the takeover law index

Ran Ru
Ran ge les
ge whe ap
whe re pl App
re inte y Fai raisa
inte ntio to r Fair l
ntio n to no Fair pri Offe price right
n to take n- pric ce r for s
cont priv Offexc lis e for discl nonte afte
rol ate hange te for all osur nderin r Sell- Antita
Mandatpr is is price d min cla e g a out keove
Countr y Offer kno kno disclo fir orit sse inde invest mer provi r
y Range wn wn sed m y s x ors ger sions tactics


s

Argenti
na 0.49 0.5 0.25 0 0 1 0 0.25 0 0 1 0.43
Armeni
a 0 0.5 0.25 0 0 0 0 0 0 1 0 0.14
Azerbai
jan 0 0.5 0 0 0 0 0 0 0 0 0 0.17
Australi
a 0.8 0.8 0.8 1 1 1 1 1 1 1 1 1
Austria 0.7 0.7 0.7 n.a. 0 1 1 0.5 1 0 0 0
Belgiu
m 0.5 0.8 0.8 n.a. 1 1 1 0.5 1 0 0 0
Brazil 0.67 0.95 0.67 1 0 0 1 0.67 1 0 0 0.14
Bulgari
a 0.5 0.9 0.1 0 0 1 0 0.5 0 n.a. 0 0.43
Canada 0.8 0.9 0.9 1 1 1 1 1 1 1 1 1
Chile 0.5 0.5 0.5 n.a. 1 1 0 0.5 1 1 0 0.3
China 0.7 0.7 0.25 n.a. 0 1 1 0 1 1 0 0.17
Colomb
ia 0 0.5 0 0 0 0 0 0 0 0 0 0
Czech
Rep 0.6 0.6 0.1 n.a. 1 1 1 0.25 1 n.a. 1 0.57
Ecuado
r 0 0.5 0 0 0 0 0 0 0 0 0 0.17
Egypt 0 0.5 0 0 0 0 0 0 0 0 0 0.29
Finland 0.33 0.5 0.1 n.a. 1 1 1 0.5 1 1 1 0.5
France 0.67 0.9 0.9 1 0 1 0 0.75 1 0 1 0.57
Germa
ny 0.7 0.7 0.7 1 0 1 0 0.75 0 0 0 0.57
Ghana 0.75 0.75 0.25 0 0 1 0 0.25 0 0 0 0.43
Greece 0.5 0.5 0.5 n.a. 0 1 1 0.75 0 0 0 0.57
Hong
Kong 0.7 0.9 0.7 1 1 1 1 1 1 1 1 0.71
India 0.85 0.85 0.1 n.a. 0 1 0 0.25 1 1 0 0.57
Indone
sia 0.75 0.75 0.75 n.a. 0 1 0 0.25 0 0 0 0
Israel 0.75 0.75 0.75 n.a. 0 1 0 0.67 1 0 0 0.57
Italy 0.7 0.7 0.7 n.a. 1 1 0 0.67 0 0 0 0.43


Japan 0.67 0.95 0.67 1 1 1 1 1 0 1 0 0.29
Jordan 0 0.5 0 0 0 0 0 0 0 0 0 0.14
Kenya 0.75 0.5 0.5 0 0 0 0 0.75 1 0 0 0.8
Korea 0.95 0.95 0.95 1 0 0 1 0.5 0 1 0 0.71
Lithuan
ia 0.6 0.6 0.6 1 0 1 0 0.5 0 n.a. 1 0.71
Malaysi
a 0.67 0.67 0.67 n.a. 1 1 1 0.5 0 0 1 0.71
Mexico 0.5 0.5 0 0 0 1 1 0.5 0 0 1 0.2
Netherl
ands 0.5 0.5 0.05 n.a. 1 0 1 1 1 0 0 0.17
Nigeria 0.5 0.5 0.25 n.a. 0 0 0 0.25 1 0 1 0.43
Pakista
n 0.49 0.5 0.5 n.a. 0 0 1 0.25 0 0 0 0.71
Peru 0 0.5 0.33 0 0 1 0 0 0 0 0 0.14
Philippi
nes 0.5 0.95 0.05 n.a. 0 1 0 0.5 0 1 0 0.29
Poland 0.75 0.9 0.75 1 0 1 1 0.5 0 n.a. 0 0.5
Romani
a 0.67 0.67 0.67 n.a. 0 1 0 n.a. 0 0 1 0.14
Singap
ore 0.7 0.7 0.7 1 1 1 1 1 1 1 1 0.57
South
Africa 0.65 0.65 0.65 n.a. 1 1 1 0.75 1 0 1 0.71
Spain 0.75 0.5 0.5 1 1 0 0 1 1 1 0 0.43
Sri
Lanka 0.7 0.7 0.25 0 0 1 0 0.5 1 0 0 0.29
Swede
n 0.6 0.6 0.1 n.a. 1 1 0 1 1 0 1 0.57
Switzer
land 0.67 0.67 0.67 1 1 1 0 0.75 1 0 0 0.29
Thailan
d 0.75 0.75 0.75 1 0 1 0 1 0 1 0 0.29
Turkey 0.75 0.75 0 n.a. 0 1 0 0.25 0 0 0 0
UK 0.85 0.85 0.7 1 1 1 1 1 1 1 1 0.86
Urugua
y 0 0.5 0 0 0 0 0 0 0 0 0 0
USA 0 0.95 0.95 1 1 0.5 0 1 1 1 1 0.71
The impact of takeover laws on capital markets and takeover activity

Listed firms to million population Market cap of stock exchange to GDP
No. Ofg Obs 50 41 41 49 41 41
R Squared 0.1369 0.4282 0.422 0.3311 0.377 0.34


49.88 63.74 41.68 159.43 163.02 158.63
Takeover Law -24.58 -24.83 -22.88 -75.18 -77.35 -61.31
4.17 12.09
Eff. Judiciary -2.44 -6.23
5.79 4.22
Inv. Protection -3.59 -11.88
2.48 -0.06 6.53 10.54 -2.74 9.51
Ln GNI/cap -2.99 -3.35 -3.09 -6.1 -8.75 -6.51
-16.74 -36.97 -70.09 -88.92 -56.59 -84
Constant -24.41 -18.41 -28.53 -39.99 -52.4 -73.15

Conclusion

I do not attempt to suggest what numbers are better for the Indian takeover code as far as trigger points
or thresholds are concerned. My endeavour throughout this work has been to bring to light some
important learning from other regulations, which if implemented might, in my opinion, go a long way in
improving the regulation as it I in its current form. I have tried to present how takeover laws around the
world have an impact, among other laws of course, on the improvement of capital markets in general
and takeover activity in particular. Thus, whatever amendments would be proposed and implemented in
the forthcoming regulations, will hopefully consider some important lacunae and learning from
regulations in other countries.


LIST OF REFERENCES
FOR TAKEOVER LAWS OF VARIOUS COUNTRIES REFERRED HEREIN :

 CANADA STATE SECURITIES ACTS: ONTARIO 1987, QUEBEC 1987, BRITISH COLUMBIA 1985,
MANITOBA 1988,A LBERTA 1988,
 CHILE LAW 18.045 ON THE SECURITIES MARKET , LAW 19.705 ON PUBLIC OFFER FOR ACQUISITION
OF SHARES. STOCK EXCHANGE REGULATOR : CHILEAN SECURITIES AND INSURANCE SUPERVISOR .
 CZECH REP. COMMERCIAL CODE.STOCK EXCHANGE REGULATOR: CZECH SECURITIES COMMISSION.
 GERMANY TAKEOVER CODE (2002), SECURITIES TRADING ACT (1998 AS AMENDED BY 2001),
STOCK CORPORATIONS ACT, SECTION 305, BORSENGESETZ (E XCHANGE LAW) (1896), REVISED
1989, BORSENAUFSICHTSBEHORDE 1,2 (1) OF THE EXCHANGES ACT, 3 OF RULES AND REGULATIONS
OF THE FRANKFURT STOCK EXCHANGE . STOCK EXCHANGE REGULATOR : FEDERAL FINANCIAL
SUPERVISORY AUTHORITY.
 HONG KONG HONG KONG CODE FOR TAKEOVERS AND MERGERS 1975 AND AMENDMENTS BY 2002,
COMPANIES ORDINANCE, SECURITIES ORDINANCE, SECURITIES AND FUTURES COMMISSION
ORDINANCE, STOCK EXCHANGES UNIFICATION ORDINANCE , RULES OF THE EXCHANGE . STOCK
EXCHANGE REGULATOR: SECURITIES AND FUTURES COMMISSION .
 INDIA SECURITIES CONTRACT ACT (1956), SUBSTANTIAL ACQUISITION OF S HARES AND TAKEOVERS
REGULATIONS (1997 AS AMENDED BY 2002), BUY BACK OF SECURITIES REGULATION (1998). STOCK
EXCHANGE REGULATOR: THE SECURITIES AND EXCHANGE BOARD OF INDIA
 ITALY LAW 149/1992, DECREE 58 OF 1998, PART IV, REGULATION 11971 OF 1999, PART II AND
III ON PUBLIC TENDER OFFERS, MERGERS, AND DISCLOSURE STOCK EXCHANGE REGULATOR: STOCK
EXCHANGE COUNCIL (C ONSIGLIO DI BORSA, UNDER CONSOB - COMMISSIONE NACIONALE PER LE
SOCIETA E LA BORSA).
 SINGAPORE COMPANIES A CT (AMENDED BY 1998), SECURITIES INDUSTRY ACT (2000), SECURITIES
INDUSTRY REGULATIONS, SECURITIES AND FUTURES ACT (2001), PART VIII, SINGAPORE CODE ON
TAKEOVERS AND MERGERS (2002). STOCK EXCHANGE REGULATOR: MONETARY AUTHORITY OF
SINGAPORE
 SOUTH AFRICA COMPANIES ACT 1973, AMENDED 1989: SECTIONS 314 TO 321, CHAPTER XV AND
XV, AND SECTION 440C OF THE AMENDED ACT , SECURITIES REGULATION CODE ON TAKEOVERS AND
MERGERS 1991, RULES OF THE SECURITIES REGULATORY PANEL 1991, STOCK EXCHANGES CONTROL
ACT 1 (1985), RULES AND DIRECTIVES OF THE EXCHANGE . STOCK EXCHANGE REGULATOR: STOCK
EXCHANGE COMMITTEE.
 UNITED KINGDOM- COMPANIES ACT 1989, CITY CODE ON TAKEOVERS AND MERGERS, FINANCIAL
SERVICES AND MARKETS ACT 2000, SCHEDULE 11, RULES GOVERNING SUBSTANTIAL ACQUISITION OF
SHARES STOCK EXCHANGE REGULATOR: FINANCIAL SERVICES AUTHORITY


 UNITED STATES SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934, REGULATION 13D-
G: SECURITIES OWNERSHIP , REGULATION 14D: DISCLOSURE REQUIREMENTS AND MINIMUM TIME
FOR TENDER OFFERS, REGULATION 14E: T ENDER OFFER RULES, REGULATION M-A: M ERGERS AND
ACQUISITIONS, RULE 13E-3: GOING PRIVATE TRANSACTIONS, RULE 13E-4: TENDER OFFERS BY
ISSUERS, SCHEDULE TO: TENDER OFFER STATEMENT UNDER SECTION 14(D)(1) OR 13(E)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934, DELAWARE GENERAL CORPORATION LAW STOCK EXCHANGE
REGULATOR: U. S. SECURITIES AND EXCHANGE COMMISSION
 WORLD BANK REPORT ON INVESTMENT CLIMATE 2006
 TAKEOVERCODE.COM
 THE HINDU BUSINESS LINE ONLINE ARTICLES
 THE ECONOMIC TIMES ONLINE ARTICLES
 WHY CONTINENTAL EUROPEAN TAKEOVER LAW MATTERS- D ISCUSSION PAPER NO. 454
OF THE HARVARD LAW S CHOOL
 THE DIVERGENCE OF US AND U.K TAKEOVER REGULATION- BY JOHN ARMOUR, UNIVERSITY OF
OXFORD AND DAVID A. SKEEL, JR., UNIVERSITY OF PENNSYLVANIA LAW S CHOOL
 LUTHRA & LUTHRA CASE STUDY ON COMBATING HOSTILE TAKEOVERS IN INDIA
 P.N. BHAGWATI REPORT 2002
 WORKING PAPERS OF THE INDIAN INSTITUTE OF MANAGEMENT, AHMEDABAD BY PROF SANDEEP
PAREKH- NOVEMBER 2009 W.P. NO. 2009-11-06.

Comparative study of the takeover regulations prevailing in different countries

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