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New Take over code

Effective from 22
nd
October 2011
INTRODUCTION
The Securities and Exchange Board of
India (SEBI) introduced the SEBI
(Substantial Acquisition of Shares and
Takeovers) Regulations, 1997
("Takeover Code, 1997") to regulate the
acquisition of shares and voting rights
in public listed companies in India
MEANING OF TAKEOVER
a transaction or a series of transactions whereby a
person acquires control over the assets of a company,
either directly by becoming the owner of those assets or
indirectly by obtaining control of the management of the
company. Where shares are closely held (i.e. by small
number of persons), a takeover will generally be effected
by agreement with the holders of the majority of the
share capital of the company being acquired. Where the
shares are held by the public generally the take over
may be effected:
1) by agreement between the acquirers and the
controllers of the acquired company.
2) by purchase of shares on the stock exchange.
3) by means of a takeover bid

APPLICABILITY
APPLICABILITY
direct or indirect acquisition of shares or
voting rights in or control over any target
company.
PREFERENCE SHARES
Takeover code 1997 excluded Preference
shares from the definition of shares vide
2002 amendment.
Now in amendment 2011, the same has
been included any security which entitles
the holder to voting rights
The Takeover Code, 2011 defines
acquisition as directly or indirectly,
acquiring or agreeing to acquire shares or
voting rights in, or control over, a target
company (Acquisition).
MAJOR CHANGES
1. The point at which the open offer is
triggered has been changed from the
earlier 15% to 26%. 2. The size of the
open offer has been increased from 20%
to 25%. 3. Non-compete fees which were
paid earlier to promoters is now not
permitted
Difference between New take over
code and old code
open offer trigger
above 25%
Open offer size
increase to 26%
Creeping Acquisition
5% allowed to
promoters up to 75%
Scrapping of Non
compete fees to
promoters
Open offer trigger
above 15%
Open offer size 20%
Creeping acquisition
allowed 5% for
promoters holding
between 15-55%
Non compete fees for
promoters Allowed
deemed to be acting in concert
Takeover Code, 1997 included a company
with any of its directors, or any person
entrusted with the management of the
funds of the company.
Take over code 2011 widens scope to
such persons as may be entrusted with
the management of the company
Promoter allowed
voluntary open offer
up to 10% to increase
holding
57 days to complete
open offer


Promoter not allowed
voluntary open offer
Voluntary offer
A concept of voluntary offer has
introduced in Take over code 2011
Advantages to investor
Minorities shareholders
get fair share in open
offer
Companies get 51%
holding in the new
company
Promoters get voluntary
open offer to increase the
holding
Board recommendation
made compulsory for
open offer
Promoters would get Non
compete fees
NO exemption in case of
acquisition from other
competing acquired
Changes of control only
after open offer
Frequently traded shares
increase from 5 % to 10
% for more realistic
picture
OFFER SIZE
Take over code 1997 to make an open offer, to
offer for a minimum of 20% of the voting capital
of the Target Company as on expiration of 15
days after the closure of the public offer.
Take over code 2011 an acquirer to place an
offer for at least 26% of the total shares of the
Target Company, as on the 10th working day
from the closure of the tendering period.
OFFER PERIOD
The Takeover Code, 2011 provides that the offer
period starts on the date of entering into an
agreement to acquire shares, voting rights in, or
control over a Target Company requiring a
public announcement, or the date of the public
announcement, whichever is earlier and ends on
the date on which the payment of consideration
to shareholders who have accepted the open
offer is made.
Cost increases for the corporate to take over

If the indirectly acquired target company is a
predominant part of the business or entity being
acquired, the takeover code would treat such
indirect acquisition as a direct acquisition for all
purposes.


Offer price paid would be highest among 4 prices that
are as follows
negotiated price
volume weighted average price over the last 52 weeks
prior to the public announcement
the highest price payable or paid in the last 26 weeks
before the public announcement,
the volume weighted average price of 60 trading days
prior to the public announcement.

Thank you

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