[FAQs] Acquisition of Company

Check-list for a transferee company in the takeover process is given as under:

(1) An official offer of Transferee Company to acquire shares of Transferor Company should be received from the Transferee Company.

(2) The offer shall be approved by the Board of Directors at a duly convened and held meeting.

(3) Offer received from the Transferee Company along with other documents particulars etc. should have been circulated to the members of the Transferor Company (Form CAA-14).

(4) Filing with the Registrar of Companies before issuing to the members of the company.

(5) The scheme for transfer of shares of the company to Transferee Company shall be approved by the shareholders of not less than 9/10th in value of the shares within stipulated period of 4 months.

(6) Comply with any orders of the Tribunal, if dissenting shareholder(s) approach the Tribunal against the proposed transfer and if the Tribunal had passed any order contrary to the proposed transfer.

(7) Send the offer of Transferee Company to the dissenting shareholders, along with value of the shares sought to be transferred.

(8) The consideration received for the shares has been deposited in a separate bank account to be held in trust for the dissenting shareholders.

(9) Documents involved in this process: Offer of a scheme, Minutes of Board meeting, notice of general meeting, Form CAA 14, Minutes of general meeting with approval 90% majority, any Tribunal order, Register of Members, notice to dissenting shareholders, instruments of transfer of shares, Bank Pass Book, Annual Report etc.

• • A high level of competitive pressure and an increasing need for growth have forced companies across industries and countries to choose the inorganic growth path.
  • Takeover implies acquisition of control and management of an existing company, through the purchase or exchange of shares.
  • Takeovers may be classified into three kinds –

(a) Friendly Takeover – Friendly takeover is with the consent of the Target Company. In friendly takeover, there is an agreement between the management of two companies through negotiations and the takeover is approved by majority or all shareholders of Target company. It is also called Negotiated Takeover. E.g. Reliance Industries and Net Meds.

(b) Bail Out Takeover – Takeover of a financially sick company by a profit earning company to bail out the sick company is known as bail out takeover. Merits of bail-out takeover include better price, Govt. support, lesser competition, better capacity utilization. Bail-out takeover takes place with the approval of Banks, Financial Institutions and NCLT confirmation.

(c) Hostile Takeover – When an acquirer company does not offer the target company any proposal to acquire its undertaking, but silently and independently puts efforts to gain control against the wishes of existing management. E.g. L&T and Mindtree

1. In India, the earliest statute regulating takeovers was the SEBI Regulations, 1994 which was replaced by improved version i.e., SEBI Regulations, 1997 (Bhagwati Committee).

2. Later, to align takeover laws with international practices, SEBI Regulations, 1997 were replaced with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

3. In 2009, SEBI constituted a Takeover Regulation Advisory Committee (TRAC) under the Chairmanship of Mr. C Achyutan to review the Takeover Regulations of 1997. The committee submitted its report in 2010 and the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 were notified on September 21, 2011.

4. The major amendments were —

• • • Increase in trigger limit for open offer from 15% to 25%
    • Increase in statutory open offer size from 20% of share capital to 26% of total share capital of the target company
    • Changes in the exemptions from open offer.
    • Introduction of the concept of Volume Weighted Average Market Price.
    • The new regulations provided that an acquirer could make creeping acquisition of 5% annually (in a FY) to reach 75% stake.
    • Recommendation of independent directors on the open offer shall be published in those newspapers, where Detailed Public Statement was given.

• • Where an Acquirer makes a public announcement of an open offer for acquiring shares of a Target Company, he may delist the company.
  • However, the acquirer shall have declared upfront his intention to so delist at the time of making the detailed public statement.
  • For the purpose of delisting, compliance of SEBI (Delisting of Equity Shares) Regulations, 2009 is needed. However, if the delisting offer fails, the same shall be disclosed within two working days through a detailed public statement.
  • Where there is a competing offer, the acquirer is not entitled to delist the company.
  • Further, the acquirer shall not be liable to pay interest to the shareholders on account of delay due to competing offer. But it is required to make a public announcement in newspapers within 2 working days.

• • The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 provides certain trigger events where the Acquirer is required to make an Open Offer to the shareholders of the Target Company to provide them exit opportunity.
  • As per Regulation 3 of the SEBI (SAST) Regulations, 2011, an acquirer, along with PAC, if any, who intends to acquire shares or voting rights which along with his existing shareholding would entitle him to exercise 25% or more voting rights, can acquire such additional shares only after making a Public Announcement to acquire minimum 26% shares of the Target Company from the shareholders through an Open Offer
  • In case, if an Acquirer and ‘PAC’, are already holding above 25% shares, any further acquisition above 5% in a financial year also requires public announcement.
  • However, as per Regulation 10 of the SEBI (SAST) Regulations, 2011, an acquirer is exempt from the applicability of making Open Offer to the shareholders of the Target Company.
  • As per Regulation 10, any acquisition pursuant to a Resolution Plan approved u/s 31 of the Insolvency and Bankruptcy Code, 2016 is exempted, from the abovementioned compliances.

• • Any instance of acquisition/takeover of a listed company is regulated by the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
  • The SEBI Regulations provide certain trigger events where the Acquirer is required to make an Open Offer to the shareholders of Target Company to provide them exit opportunity.
  • Further, where a certain trigger is initiate, the SEBI Regulations place certain obligations on the Acquirer, the Target Company and the Manager to the Offer.
  • Regulation 31 of the SEBI (SAST) Regulations, 2011 contains provisions relating to disclosure of pledged shares. Since the company is a listed company, hence provisions of Regulation 31 of SEBI (SAST) Regulations, 2011 would apply.
  • In the given case, the promoter Mr. Ramesh shall disclose details of shares pledged with the bank within 7 working days of such pledge to the Target Company (Green Ltd.) at its registered office and to the National Stock Exchange where the shares of the target company are listed.
  • Further, upon invocation or release or satisfaction of such pledge, Mr. Ramesh shall inform the Target company (Green Ltd.) at its registered office and the National Stock Exchange, where the shares of the company are listed, within 7 working days of the occurrence of such an event.

• • A high level of competitive pressure and an increasing need for growth have forced companies across industries and countries to choose the inorganic growth path.
  • Takeover implies acquisition of control and management of an existing company, through the purchase or exchange of shares.
  • Global takeovers are driven by market consolidation, expansion or corporate diversification motives. Also, financial, accounting and tax related matters inspire such takeovers.
  • Expansion and diversification are the primary reasons for cross-border deals, since domestic markets do not provide the desired growth opportunities.
  • Such companies have improved profitability through better cost management. Another main reason for cross border takeovers is to attain monopoly position.
  • Thus, going global is rapidly becoming Indian company’s mantra of choice. Indian companies are looking for ways to reduce costs, innovate speedily and increase their international presence. One of the best ways for this is cross border takeovers.
  • Following are the various benefits and challenges of cross border takeover –

• Some of the recent cross border takeovers are:

(a) Walmart – Flipkart

(b) Bayer – Monsanto

(c) Hindalco – Aleris Corporation

(d) Rosneft Oil Company – Essar Oil

(e) General Electric – Alstom

• • Any instance of acquisition/takeover of a listed company is regulated by the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
  • The SEBI Regulations provide certain trigger events where the Acquirer is required to make an Open Offer to the shareholders of Target Company to provide them exit opportunity.
  • Generally, once an open offer is made by an Acquirer, it cannot be withdrawn. However, as per Regulation 23 of the SEBI (SAST), 2011, an open offer may be withdrawn in the following circumstances –

(a) Acquirer, being a natural person, has died;

(b) Statutory approvals required for the open offer or for effecting the acquisitions attracting the obligation to make an open offer have been refused;

(c) Any condition stipulated in the SPA attracting the obligation to make the open offer is not met for reasons outside the reasonable control of the acquirer;

(d) Such circumstances which in the opinion of SEBI merit withdrawal of offer.

1. Any instance of acquisition/takeover of a listed company is regulated by the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. The concept of Conditional Offer and Competition Offer are different, as explained below:

2. Conditional offer (Regulation 19)

• • An acquirer may make an open offer conditional as to the minimum level of acceptance.
  • Here, the open offer contains a condition that if the desired level of acceptance of the open offer is not received, the acquirer shall not acquire any shares under the open offer.
  • Also, the share purchase agreement that attracted the obligation to make the open offer shall stand rescinded. Where a conditional offer is made, the acquirer and PAC shall not acquire, during the offer period, any shares in Target Company.
  • Further, 100% consideration payable in respect of minimum level of acceptance or 50% of the consideration payable under the open offer, whichever is higher, shall be deposited in cash in the escrow account.

3. Competing Offer (Regulation 20)

• • When a public announcement for acquiring shares of a target company in an open offer is made, any person, other than the acquirer may make a competing offer.
  • Such person making the competing offer shall make a public announcement, of an open offer within 15 working days of the date of the detailed public statement made by the acquirer.
  • Upon the public announcement of a competing offer, the original acquirer may revise the terms of his open offer, provided the revised terms are more favourable to the shareholders of the target company.
  • The new acquirer(s) making the competing offers can make upward revisions of the offer price at any time up to 1 working day prior to the commencement of the tendering period.

• • Takeover implies acquisition of control and management of an existing company, through the purchase or exchange of shares.
  • A hostile takeover bid is a tender offer made directly to a target company’s shareholders, without any previous proposal to the target company’s management. Thus, it is similar to a corporate attack for acquiring the target company.
  • A Target Company may use various defence strategies to avoid a hostile takeover bid, i.e. protect itself from the corporate attack.
  • One such takeover defence strategy is ‘Shark Repellents’ or Anti-takeover Amendments. There are anti-takeover amendments in the company’s Articles of Association. Such amendments are known are ‘shark repellents.’ The rules, bye-laws, regulations, Articles of Association etc. are amended to make shareholders’ approval difficult and hence any takeover bid becomes less attractive.
  • Types of Anti-Takeover Amendments are –

(a) Supermajority – the Articles are amended such that 90% majority voting power required for all transactions involving change of control. This reduces flexibility in management actions.

(b) Fair Price Amendments – the offer price to be approved shall be the highest price paid by the bidder during a specified period. It is a mode of getting a better deal for the shareholders.

(c) Classified Board – it provides for a staggered or classified Board of Directors to delay the effective transfer or control in takeover, e.g. increase tenure of retirement by rotation of Directors, in Articles of Association.

(d) Preferred Stock – In this case, the Board of Directors is authorized to create a new class of securities with special voting rights. This security, typically preferred stock, may be issue to a friendly party. Hence, it is a defence device against hostile takeover bids.

• • Takeover implies acquisition of control and management of an existing company, through the purchase or exchange of shares. Generally, takeovers take place where shares are acquired from the shareholders of a company at a specified price to gain control of that company.
  • It shall be noted that not every profitable company is a prospective Target Company, i.e. there are certain factors that make a company attractive for takeover bid.
  • It is possible to identify some characteristics that make a company a desirable candidate for a takeover from the acquirer’s point of view. Following factors make a company vulnerable –

(1) Low stock price with relation to their potential earning power;

(2) Highly liquid balance sheet with large amounts cash and significantly unused debt capacity,

(3) Good cash flow in relation to current stock prices;

(4) Subsidiaries and properties which could be sold off without disturbing cash flows; and

(5) Having valuable IPRs, but not utilized to full capacity due to various reasons,

(6) Relatively small stockholdings under the control of an existing management.

(7) Poor financials (continuous losses), despite growing industry and economy

(8) Disputes in the promoter group/management personnel etc.

(a) Takeover implies acquisition of control and management of an existing company, through the purchase or exchange of shares.

(b) The SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 provide certain trigger events where an Acquirer is required to make a public announcement and an open offer to the shareholders of Target Company.

(c) However, SEBI (SAST) Regulations, 2011 also provide certain exemptions from making the open offer to the shareholders of the Target Company. The following acquisitions, pursuant to transfer of shares amongst qualifying persons are exempted from making the open offer –

• • • immediate relatives;
    • persons named as promoters in the shareholding pattern (for not less than 3 years);
    • holding company, subsidiary company,
    • other subsidiaries of such holding company,
    • persons holding not less than 50% of equity shares of such holding, subsidiaries,
    • PAC for not less than three years prior to the proposed acquisition etc.

• • Takeover implies acquisition of control and management of an existing company, through the purchase or exchange of shares.
  • The SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 provide certain trigger events where an Acquirer is required to make a public announcement and an open offer to the shareholders of Target Company.
  • However, SEBI (SAST) Regulations, 2011 also provide certain exemptions from making the open offer to the shareholders of the Target Company.
  • As per Regulation 10 of SEBI (SAST) Regulations, 2011 any acquisition pursuant to a scheme of arrangement involving the Target company as Transferor company or as Transferee company, or reconstruction, amalgamation, merger, approved by the Tribunal or any other competent authority, open offer obligation is not triggered, even though threshold limits are crossed.
  • As per Regulation 10 of the SEBI (SAST) Regulations, 2011 the Acquirer shall file a report, if any exemption from Regulations availed, in a prescribed form within 4 working days from the acquisition date with the concerned stock exchange.
  • In the case of Spice-Jet, Mr. Ajay Singh re-acquired Spice-Jet Ltd. from T. Kalanidhi Maran and KAL Airways Pvt. Ltd. where, Mr. Singh’s stake increased from 1.85% to 60.31%. However, Mr. Singh did not go through the open offer process, since the deal was part of a negotiated deal and approved by the Ministry of Civil Aviation as a competent authority.

(a) Voluntary Open Offer means Open Offer given by the acquirer voluntarily without triggering the mandatory Open Offer obligations as per the SEBI (SAST) Regulations, 2011.

(b) The purpose of giving Voluntary Open Offer is to consolidate the shareholding of the Acquirer.

(c) Regulation 6 of SEBI (SAST) Regulations, 2011 deals with the concept of Voluntary Open Offer. The conditions and restrictions for voluntary open offer are given below:

• • • Acquirer (along with PACs) should be holding at least 25% or more shares in the Target Company prior to making Voluntary Open Offer.
    • After completion of the Open Offer, the shareholding of the Acquirer (including PAC) shall not exceed the maximum permissible non-public shareholding, i.e. 75%
    • The Acquirer or PACs have not acquired any shares of the Target Company in the preceding 52 weeks without attracting the Open Offer obligation.
    • The Acquirer becomes ineligible to acquire further shares for a period of six months after the completion of Open Offer except by way of another voluntary open offer or acquisitions by making a competing offer.
    • The Voluntary Open Offer shall be made for the acquisition of atleast 10% of the voting rights in the Target Company.

• • In India, takeover of listed companies is regulated by The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. The SEBI Takeover Code provides certain trigger events where the Acquirer is required to make an Open Offer to the shareholders of the Target Company to provide them exit opportunity.
  • As per Regulation 3 of the SEBI (SAST) Regulations, 2011, where an Acquirer (with PAC), crosses the threshold limits prescribed the Takeover Regulations, it makes Public Announcement for the purpose of Open Offer to the shareholders of the Target Company.
  • As per Regulation 26 of the SEBI (SAST) Regulations, 2011, where an Acquirer makes a public announcement, the Target Company shall comply with certain obligations. The Board of Directors of the Target Company shall ensure that the business of the target company is conducted in the ordinary course consistent with past practices.
  • A committee of independent directors shall be constituted by the Board of the Target Company to provide fair recommendations on the open offer being made by the Acquirer and the Target company shall publish such recommendations. The committee of independent directors will be entitled to obtain external professional advice at the cost of the target company.
  • The committee shall provide its rational recommendation on the open offer to the shareholders of the Target company. Prior to commencement of the tendering period, such recommendation shall be published in the same newspapers where the public announcement was published.
  • Simultaneously, copies shall be sent to SEBI and stock exchanges where the shares of the Target company are listed and the stock exchanges shall distribute such information to public.
  • The committee shall ensure that the copy containing such recommendations is also sent to the manager for open offer and where there are competing offers, to the managers to the open offer for every competing offer.

• • As per SEBI (SAST) Regulations, 2011, at least 2 days before the date of DPS, the Acquirer shall open ‘escrow account’ for the purpose of open offer for acquiring shares.
  • The escrow account serves as security for performance of his obligations under these regulations. The escrow account is opened in a scheduled bank.
  • The escrow account may be in the form of cash deposit or a bank guarantee issued in favour of manager to the open or deposit of frequently traded equity shares of the Acquirer Company.
  • As per Regulation 17 of SEBI (SAST) Regulations, 2011, the amount lying in escrow account can be released in the following cases only:

(1) In case of withdrawal of offer, the entire amount can be released only after certification by the managers to the open offer.

(2) The amount deposited in special escrow account is transferred to special bank account opened with the Bankers to an issue; however, the amount so transferred shall not exceed 90% of the cash deposited in the escrow account.

(3) The balance 10% in the escrow account is to be released to the acquirer on expiry of 30 days from the completion of all obligations under the open offer.

(4) However, where the acquirer fails to comply with the requirements of SEBI Takeover Code, the merchant banker has right to forfeit the escrow account and distribute the proceeds in the following ways –

(a) One third (1/3) of the amount to target company;

(b) One third (1/3) of the escrow account to the Investor Protection and Education Fund;

(c) One third (1/3) distributed to the shareholders who tendered their shares in the offer.

• • A Hostile Takeover Bid is a tender offer made directly to a target company’s shareholders, without any previous proposal to the target company’s management.
  • Thus, it is similar to a corporate attack for acquiring the target company. The most common defence strategy is the adjustment in assets or ownership structure (issue new securities etc.)
  • Poison Pill Defence is a tactic used by companies to prevent/discourage hostile takeovers. Poison pill strategy is used by Target Company to make itself look unattractive or less desirable to the Acquirer. Poison pills are certain type of securities, which provide its holders special rights. Such ‘poison pills’ are created only after occurrence of triggering event.
  • Types of poison pills –

(a) Flip-in – In this case, the existing shareholders (other than Acquirer) are eligible to purchase additional shares at a lower price. This helps existing members to earn profits through open offer. Further, such additional shares dilute the holding of Acquirer and makes the hostile takeover more difficult and expensive.

(b) Flip–over – In this case, the existing shareholders (other than Acquirer) are eligible to buy shares in Acquiring Company at a lower price, after the deal.

• • As per SEBI (SAST) Regulations, 2011, an Acquirer shall open ‘escrow account’ for the purpose of open offer for acquiring shares. The escrow account serves as security for performance of his obligations under these regulations. The escrow account is opened in a scheduled bank.
  • The escrow account may be in the form of cash deposit or a bank guarantee issued in favour of manager to the open or deposit of frequently traded equity shares of the Acquirer Company.
  • However, where the acquirer fails to comply with the requirements of SEBI Takeover Code, the merchant banker has right to forfeit the escrow account and distribute the proceeds in the following ways –

(a) One third (1/3) of the amount to target company;

(b) One third (1/3) of the escrow account to the Investor Protection and Education Fund;

(c) One third (1/3) distributed to the shareholders who tendered their shares in the offer.

• • As per Regulation 19 of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011, an acquirer may make an open offer conditional as to the minimum level of acceptance.
  • Here, the open offer contains a condition that if the desired level of acceptance of the open offer is not received, the acquirer shall not acquire any shares under the open offer.
  • Also, the share purchase agreement that attracted the obligation to make the open offer shall stand rescinded. Where a conditional offer is made, the acquirer and PAC shall not acquire, during the offer period, any shares in Target Company.
  • Further, 100% consideration payable in respect of minimum level of acceptance or 50% of the consideration payable under the open offer, whichever is higher, shall be deposited in cash in the escrow account.

• • As per the SEBI (SAST) Regulations, 2011, where an Acquirer (with PAC), crosses the threshold limits prescribed the Takeover Regulations, it makes Public Announcement for the purpose of Open Offer to the shareholders of the Target Company.
  • Persons Acting in Concert (PAC) are persons who, with a common objective or purpose of acquisition of shares or voting rights in, or exercising control over a target company, pursuant to an agreement or understanding, formal or informal, directly or indirectly co-operate for acquisition of shares or voting rights in, or exercise of control over target company.
  • The persons falling within following categories shall be deemed to be PAC with other persons within the same category, unless the contrary is proved:

(a) a company, its holding co., subsidiary co., any company under same management or control;

(b) a company, its directors, and any person entrusted with the management of the company;

(c) directors of companies referred to in items (a) and (b) above and associates of such directors;

(d) promoters and members of the promoter group;

(e) immediate relatives;

(f) a mutual fund, its sponsor, trustees, trustee company, and asset management company;

(g) a collective investment scheme, its collective investment management company, trustees;

(h) a venture capital fund and its sponsor, trustees, trustee and asset management company;

(i) a foreign institutional investor and its sub-accounts;

(j) a merchant banker and its client, who is an acquirer;

(k) a portfolio manager and its client, who is an acquirer;

(l) banks, financial advisors, stock brokers of acquirer, or of any company which is a holding

(m) company or subsidiary of acquirer, and if acquirer is an individual, then immediate relative;

(n) an investment company or fund and any person who has an interest in such investment company, fund as a shareholder or unit holder having not less than 10% of the paid-up capital of the Investment Company.

• • The main elements of the ‘PAC’ definition are as follows:

(a) one or more persons must possess a common objective or purpose;

(b) that common objective or purpose must be the substantial acquisition of shares or voting rights or gaining control over a listed company;

(c) the persons must, directly or indirectly, co-operate with each other by acquiring or agreeing to acquire shares or voting rights or control in the listed company; and

(d) the co-operation must be pursuant to a formal or informal agreement or understanding.

• • Takeover implies acquisition of control and management of an existing company, through the purchase or exchange of shares.
  • A hostile takeover bid is a tender offer made directly to a target company’s shareholders, without any previous proposal to the target company’s management. Thus, it is similar to a corporate attack for acquiring the target company.
  • A Target Company may use various defence strategies to avoid a hostile takeover bid, i.e. protect itself from the corporate attack. One such defence technique is ‘Crown Jewel.’
  • ‘Crown Jewel’ defence is a strategy in which the target company sells off its most attractive assets to a friendly third party or spin off the valuable assets in a separate entity.
  • Consequently, the acquirer is less attracted to the company assets. Other effects include dilution of holdings of the acquirer, making the takeover uneconomical to third parties, and adverse influence of current share prices.
  • Generally, a target company sell its ‘Crown Jewels’ to another friendly company and later on, when and if the acquiring company withdraws its offer, buy back the assets. In the short-run, such step may be self-destructive and unwise in the Target company’s interest.

• • As per the SEBI (SAST) Regulations, 2011, where an Acquirer (with PAC), crosses the threshold limits prescribed the Takeover Regulations, it makes Public Announcement for the purpose of Open Offer to the shareholders of the Target Company.
  • However, Regulations 10 and 11 provide certain exemptions to an Acquirer from the applicability of making Open Offer to the shareholders of the Target Company. Such exemptions are either automatic exemptions or SEBI approved exemptions, and these are different.
  • Automatic Exemptions under Regulation 10:

(a) acquisition pursuant to transfer of shares amongst qualifying persons, being –

1. immediate relatives;
2. persons named as promoters in the shareholding pattern (for not less than 3 years);
3. holding company, subsidiary company, other subsidiaries of such holding company,
4. persons holding not less than 50% of equity shares of such holding, subsidiaries,
5. PAC for not less than three years prior to the proposed acquisition
6. Shareholders of Target Company who have been identified as PAC, as per LODR.

(b) acquisition in the ordinary course of business by –

1. a registered underwriter, as per an underwriting agreement;
2. a registered stock broker, on behalf of his client in exercise of lien over the shares;
3. any person acquiring shares as per a scheme of safety-net;
4. a registered merchant banker, acting as stabilizing agent;
5. by a registered market-maker of a stock exchange;
6. a Scheduled Commercial Bank, acting as an escrow agent;
7. an invocation of pledge by a Scheduled Commercial Bank as a Pledgee

(c) acquisition pursuant to a scheme of arrangement involving the target company as a transferor company or as a transferee company, or amalgamation, merger, demerger, as per Tribunal order or any other competent authority.

(d) acquisition pursuant to a resolution plan under Insolvency and Bankruptcy Code (IBC), 2016;

(e) acquisition pursuant to the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI);

(f) acquisition pursuant to provisions of SEBI (Delisting of Equity Shares) Regulations, 2009;

(g) acquisition by way of transmission, succession or inheritance;

(h) acquisition of shares, pursuant to a scheme of Strategic Debt Restructuring Scheme;

(i) an increase in voting rights in a target company pursuant to buy-back or forfeiture of shares;

(j) acquisition of shares by any shareholder of a target company, as per rights issue.

• • SEBI Exemptions under Regulation 11:
    If prior written application (with fees ` 500,000) is made by an Acquirer, giving details of proposed acquisition and grounds on which, the exemption is sought along with duly sworn affidavit, SEBI may grant exemption to the acquirer from the Open Offer obligations subject to the compliance with such conditions as it deems fits. The BOD shall have an open and transparent plan for acquisition of shares or voting rights over the Target Company and due approval of shareholders should be obtained.

• • As per the SEBI (SAST) Regulations, 2011, where an Acquirer (with PAC), crosses the threshold limits prescribed the Takeover Regulations, it makes Public Announcement for the purpose of Open Offer to the shareholders of the Target Company.
  • The acquirer shall complete payment of consideration to the shareholders who have accepted the offer, within a period of 10 working days from the expiry of the tendering period.
  • As per Regulation 9 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, payment of consideration may be in the form of –

(a) cash, or

(b) issue/exchange/transfer of shares, or

(c) issue/exchange/transfer of secured debt instruments (duly rated by regd. CRA), or

(d) issue/exchange/transfer of convertible debt instruments, or

(e) a combination of all the above, as the case maybe.

• • The payment of cash consideration shall be made through the escrow account opened prior to the open offer. Any unclaimed balances in the escrow account shall be transferred to the IEPF at the end of 7 years. Equity shares issued shall be listed and shall be frequently traded.

• • As per the SEBI (SAST) Regulations, 2011, where an Acquirer (with PAC), crosses the threshold limits prescribed the Takeover Regulations, it makes Public Announcement for the purpose of Open Offer to the shareholders of the Target Company.
  • When a public announcement of an open offer for acquiring shares of a target company is made, the Board of Directors of the target company shall ensure that the business of the target company is conducted in the ordinary course consistent with past practice;

1. 1. 1. During offer period, (unless shareholders’ special resolution) the Board of target company or its subsidiaries shall not:

(a) alienate any material assets whether by way of sale, lease, or otherwise or enter into any agreement therefore outside the ordinary course of business;

(b) effect any material borrowings outside the ordinary course of business;

(c) issue or allot any authorized but unissued securities entitling the holder to voting rights.

(d) implement any buy-back or effect any other change to capital structure of target company.

1. 1. 2. Target Company is prohibited from fixing any record date for any corporate action on or after third working day prior to commencement of tendering period and until the expiry of the tendering period.
      3. All shareholders to be given equitable treatment, and no promoter be paid any extra price.
      4. Target company shall furnish to the acquirer (within 2 working days from identified date), a list of shareholders as per the register of members of the target company containing names, addresses, shareholding and folio number; but the acquirer shall reimburse reasonable costs payable by the target company to external agencies in order to furnish such information.
      5. The Board of Directors of Target Company shall facilitate the acquirer in verification of shares tendered in acceptance of the open offer.
      6. On receiving DPS, the Board of Target Company shall constitute a Committee of Independent Directors to provide recommendations (with reasons) on the open offer. The Committee may seek external professional advice. The Committee shall provide written recommendations on the open offer to the shareholders of the Target Company Also, the recommendations shall be published in newspapers, and sent to stock exchange(s), Board and the Manager.
      7. The Board of Directors of the target company shall make available to acquirers making competing offers, any information and co-operation provided to an acquirer who has made a competing offer.
      8. If a director of the Acquirer Company has pledged any shares with any bank, he shall disclose the same to the Target Company (within 7 days) and to the stock exchange (where shares are listed). On satisfaction/alteration of the pledge, the same shall be updated by such director.