1- SEBI Guidelines

The Securities and Exchange Board of India Act 1992 (the 1992 Act) established the SEBI to protect the interests of investors and to promote and regulate the securities market in India. Sections 11 and 11A of the 1992 Act empower the SEBI to take various steps in the aforesaid objectives, including by introduction of regulations to govern the issue of securities, regulation of stock brokers and other intermediaries, regulation of substantial acquisition of shares, promotion of investor education, prohibition of insider trading etc. While the 1992 Act itself does not have a separate definition for the term control, various regulations and guidelines made under the 1992 Act have defined the term control. 1. Disclosure: any acquirer who acquires shares or voting rights in a company, which when aggregated with the existing stock of such holdings of the acquirer in the company exceed 5%, 10% and 14% of the total holding shall disclose at every stage of the aggregate of the holdings to the company and to the concerned stock exchange. The stock exchanges shall put information under public display immediately. 2. Trigger point: no acquirer shall acquire holdings which when aggregated with the existing sock of such holdings of the acquirer in the company, equal or exceed 15% of the total unless such an acquirer makes a public announcement to acquire shares through a public offer to the extent stipulated in the code (20%) 3. Merchant banker: before announcing a public offer the acquirer has to appoint a category 1 merchant banker registered with sebi. The merchant banker must ensure that the public announcement of the offer is made in terms of regulations, the acquirer is able to implement the offer and the firm arranges for funds to fulfil the obligations under the offer are in place. 4. Public Enouncement: the merchant banker should make a public announcement within 4 working days of the agreement or the decision to acquire share. The public announcement shall, provide information about the number of shares proposed to be acquired, the minimum offer price, object of acquisition, date by which the letter of the offer will be posted and the opening and closing date of the offer. 5. Offer price: the offer price to the public shall not be less than the highest of the following: negotiated price, avg price paid by acquirer, preferential offer price if made in the last 12mnths and the avg of the weekly high and low for the 26mnths. 6. Obligation of the acquirer: the acquirer must ensure that the letter of offer reaches share holder within 45 days from the date of public announcement and payment is made to shareholders who have accepted the offer within a period of 30 days from the date of the closure of offer. 7. Obligation of the Board of target company: unless the approval of the general body of shareholders is obtain after the date of the public announcement of the offer, the board of Directors of the target company cannot dispose assets, issue capital, enter into material contracts, or appoint additional directors during the period of public offer. 8. Competitive bids: Subject to certain conditions, competitive bids can be made within a period of 21 days of the public announcement of the first offer an, in response; the acquirer who made the earlier offer can revise the offer.

9. Provision of Escrow: As a security for performance, the acquirer is reqd to deposit at least 25% of the consideration payable for the public offer up to Rs. 100 cr. And 10% of the consideration exceeding 100 cr in an escrow account. When an offer is subject to a minimum level of acceptance, the acquirer is required to deposit at least 50% of the consideration payable for the public offer in an escrow account. The escrow account should consist of cash deposit, bank guarantee in favour of the merchant banker. 10. Creeping acquisition: No acquirer together with persons acting in concert can acquire more than 5% of the holdings in any financial year ending 31st march without complying with the open offer requirements, if the existing holdings are between 15% and 75%. In other words, such acquirer who already has more than 15% can do a creeping acquisition of up to 5% per year, without triggering off the open offer requirements. However any such purchase or sale transactions amounting to 2% or more of the share capital of the target company shall be reported within 2 days in the same manner as described in the above point relating to disclosure. Analysis: The above guidelines ensures: 1) Impart greater transparency to take over deals 2) Ensure a greater amount of disclosure to public announcement and offer document. 3) Protect the interest of small share holders.