INDIA: SEBI Amendments to Procedures for Execution of Trades and Settlement

Wednesday December 14 2016

SEBI had issued circular No. CIR/CFD/POLICY CELL/1/2015 dated April 13, 2015 on the mechanism for the acquisition of shares through the stock exchange pursuant to tender-offers for the purpose of takeovers, buy back and delisting of securities.

In the current mechanism, the shareholders submit their bids through stock brokers and subsequently, the brokers transfer the shares to the special account of the clearing corporation. Likewise, the consideration payable to shareholders for the shares accepted in the offer are routed through stock brokers. Also, the shares not accepted in the offer are returned to shareholders through the stock brokers.

It has now been decided in consultation with the stock exchanges and depositories that transfer of shares of shareholders under the tender offers would be made directly to the account maintained by the clearing corporation. After such transfer of securities, the clearing corporation will be allowed to utilise the securities towards the settlement obligations under such offers. Further, consideration for the accepted shares in the tender offer and shares tendered but not accepted under such offer would be credited directly to the shareholders` bank and demat accounts respectively.

The amendments in the procedure are carried out in exercise of the powers conferred under section 11 (1) of the Securities and Exchange Board of India Act, 1992 read with regulation 13(1A) of Delisting Regulations, regulation 9(3A) of Buy Back Regulations, regulation 18(6A) of Takeover Regulations as amended.

Amendment to Procedure for Execution of trades and settlement

The clause (l) and (m) shall be substituted with the following:

l. “Once the basis of acceptance is finalised, CC would transfer unaccepted shares directly to the shareholders account. If the securities transfer instruction is rejected in the depository system, due to any issue then such securities will be transferred to the seller broker’s depository pool account for onward transfer to the shareholder.”

m. “Acquirer will transfer the funds pertaining to the offer to CC`s bank account. CC will then settle the trades by making direct funds payout to shareholders. If shareholders bank account details are not available or if the funds transfer instruction is rejected by RBI/bank, due to any issue then such funds will be transferred to the seller broker’s settlement account for onward transfer to shareholder.”

Clause (n) shall be deleted.

Clause (o) shall be substituted with the following:

o. “The seller broker would then issue contract note for the shares accepted in the offer.”

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