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SEBI
Mamta Tiwari
83
Meaning of Takeover
quirer Company
Acquires shares/ voting rights Company Target
PAC
Who
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.
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
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
Offer
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
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)
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.
Before making PA
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
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
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)