Takeover Code

SEBI

Mamta Tiwari

83

Meaning of Takeover

quirer Company
Acquires shares/ voting rights Company Target

PAC

Purpose & Regulator

Purpose- Protection of Investors regulates this?

Who

SEBI - SEBI TAKEOVER CODE

SEBI Regulation:- 1997 Changes:- 28th July, 2011

How

SEBI

regulates?

Exit opportunity to the investors. Disclosure of all material information relating to the open offer.

Ensuring the sufficiency of financial resources by the promoters for the payment to investors.

Timely completion of takeover formalities.

DISCLOSUREs

They are the rules pertaining to the acquiring company wherein it has to disclose the %age of stake it acquires in the target company from time- to-time.

Disclosure 6
Regulation No. By whom - who holds > To whom 5% shares /voting rights Time limit

6. (1)

Person

Company

2 months 3 months
2 months

6. (2)

Company

Stock Exchange

6(3)

A promoter

Company

DISCLOSURE 7
Regulation No. 7(1) By whom To whom Time limit 2 Days

Any person who Company acquires > Stock Exchange 5%,10%, 14%, 54%, 74%

7 (1A)

Any person who holds Company 15%-55% shares and Stock Exchange purchases/sells > 2% shares

2 Days

7 (3)

Target Company

Stock Exchange

7 Days

DISCLOSURE 8
Reg. No.
Yearly disclosure Reg. 8(1) Time Limit (financial year) Who shall disclose Whom to What to disclose disclose

21 days

Person holding > 15 % shares

His holdings as on Company 31st March

Reg.8(2)

21 days Promoter or Disclose % of + PAC Company shares held by the record date for him or PAC the purposes of declaration of dividend Within 30 days Listed Company all Stock Disclose changes Exchange in shareholdings of the person >15% of shares

Reg. 8(3)

Disclosure - 9
Regulation No. By whom 9 To whom Time limit What to disclose

Stock Exchanges Company & Board Company

As & Disclosur when e 6,7,8 required

Takeover Code Application

Point -25% (Previous 15%) Public Announcement

Offer

Open Offer Voluntary Open Off

Public Announcement

q Offer price q Offer size- minimum 26% q Identity of acquirer q Purpose of acquisition q Future plans of acquirer q The procedure to be followed by acquirer in accepting the shares q The period within which all the formalities pertaining to the offer would be completed. (57 business days as against 95 calendar days)

Open Offer

Invitation to the shareholders surrender/sell their shares to acquirer specified price on or before of the closure of the offer period. Minimum open offer size :- 26% (Previous 20%) Maximum open offer size :- Cannot exceed the maximum permissible non-public shareholding (75%)

Voluntary Offer

Event attracting PA
Under Previous Regulation Now

10

Trigger limit 15%

Trigger limit 25%

11 (1)

15%- 55% - > 5% (creeping 25%-75% - > 5% in one acquisition) in financial financial year year 55%-75%- > 5% in one financial year

11(2)

Exception In case of 11(2)

E.g. An acquirer holding 50% shares 2009-10, he falls under 15%-55% i.e. 11(1) applicable. So he can acquire 5% in 2009-10 as per 11 (1). Now his holding becomes 55%, falls under 55%-75% i.e. 11(2) applicable. As per 11(2) he can acquire 5% in 2009-10. Hence he acquired 10% in 2009-10 which is an exception.

Process OF public announcement

Before making PA

Not later than 4 days of Acquisition

SEBI Target company

Stock Exchange where shares of Target co. are listed

Within 14 days of P.A

Shareholders

Escrow depository account is opened to receive the shares in demat form which are off

open for a fix period of 20 days. acquirer may revise the open offer upto 7 working days shareholders may withdraw their offer upto 3 working days

Changes in Takeover code

qTrigger for open offers

qOpen offer size q qNon-compete fee q

Trigger

WHY 25 %
To align India closer to global practices UK- 30%, Singapore, Hong Kong and South Africa-30%-35%

IMPLICATION

Acquirer-Can hold more stake without having to make open offer. Target Tap more funds without losing control

Open offer size

IMPLICATION

Acquirer- Increases the cost of acquisition Investors would give all the shareholders an exit opportunity.

non-compete fee

IMPLICATION

Shareholders:- This will bring about parity in compensation to all classes of shareholders (Majority / minority)