INDIA: Clarification on application of India Takeover Regulations

Monday January 21 2013

In a Board meeting, SEBI took note of the concerns raised during the implementation of the India Takeover Regulations, 2011 and approved the following changes:

Relevant date for making Public Announcement and determination of offer price in cases of combined modes of acquisition

Where the open offer obligations are triggered pursuant to an agreement or otherwise in combination of any modes of acquisition, the ‘relevant date’ for making the Public Announcement and determination of offer price shall be the earliest date on which obligations are triggered. This will, however, not be applicable if the subsequent trigger is on account of wilful and deliberate act on the part of the acquirer.

Relevant date for making Public Announcement and determination of offer price in cases of preferential allotment

It has been decided that the date of board resolution authorizing the preferential allotment shall be the relevant date for the purpose of triggering open offer obligations and determination of offer price, instead of the date on which special resolution is passed under Section 81(1A) of the Companies Act, 1956.

Aligning disclosure requirements under Takeover Regulations with SEBI (Prohibition of Insider Trading) Regulations, 1992

In order to bring parity in disclosure requirements among various SEBI regulations, the disclosure requirement as regards acquisitions or disposals of 2% by persons holding more than 5% as specified in Takeover Regulations, 2011 shall be modified in line with SEBI (Prohibition of Insider Trading) Regulations, 1992.

Clarification on reckoning the period of ninety days in case of increase of voting rights due to buyback by target company

Presently, if the voting rights of a shareholder, who is not a party to the buyback arrangement, go beyond the prescribed threshold limit on account of buyback by the target company, the open offer requirement will not be triggered if voting rights are brought below the threshold limit within ninety days from the date on which the voting rights so increase. It has now been clarified that the period of ninety days will be reckoned from the date of closure of the buyback offer.

Norms for completion of market purchase of shares made during the offer period

Presently, the Takeover Regulations do not allow completion of acquisition of shares or voting rights which triggers the open offer obligations until the expiry of the offer period. However, such acquisition can be completed after the expiry of 21 working days from the date of the detailed public statement, provided the acquirer deposits 100 percent of the consideration payable in cash in the escrow account. The regulations also allowed purchase of shares from stock exchange which required to be completed within two days as per settlement process, thus creating an anomalous situation.

It has, therefore, now been decided that market purchases made during the open offer period can be completed during the open offer period subject to such shares being kept in an escrow account. Further, these shares can be transferred from the escrow account to the name of the acquirer after the expiry of 21 working days from the date of the detailed public statement, provided the acquirer deposits 100 percent of the consideration payable in cash in the escrow account.

An amended version of the Takeovers Regulations 2011 is yet to be published.

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