SECURI TI ES LAW

ANALYZI NG (SUBSTANTI AL ACQUI SI TI ON OF SHARES AND TAKEOVERS)

REGULATI ONS, 2011
I N THE LI GHT OF
SWEDI SH MATCH AB V. SECURI TI ES AND EXCHANGE BOARD OF I NDI A






SUBMI TTED BY: ALOK MURMU
I D No.: 2013/LL/M//024
(LL.M. FI NAL TRI MESTER 2013-14)











List Of Cases
Swedish Match AB v. Securities and Exchange Board of India AIR 2004 SC 4219.
Securities and Exchange Commission v. Datronics Engineers 490 F. 2d 250.
Hardy Oil Ltd. v. SEBI [2006] 68 SCL 287 (SAT).
Shirish Finance & Investment Ltd v M. Sreenivasulu Reddy (2002) 2 Com LJ 386.
Parthasarathy (N) v Controller of Capital Issues (1991) 72 Comp Vas 651 (SC).
Bina Barua v Dalowjan Tea Co Ltd (1981) 51 Comp Cas 660 (Gua).
Borland Trustee v Steel Brother and Co Ltd [1901] 1 Ch 279.





















Contents
INTRODUCTION ........................................................................................................................... 4
STATEMENT OF THE PROBLEM ................................................................................................ 5
SCOPE AND OBJECTIVE ............................................................................................................. 6
HYPOTHESIS ................................................................................................................................. 6
RESEARCH QUESTIONS .............................................................................................................. 7
CHAPTERISATION ........................................................................................................................ 7
LITRATURE REVIEW .................................................................................................................... 8
FACTS LEADING TO THE CASE .................................................................................................. 9
TRANSFER OF SHARES; BASIC PRINCIPLES ............................................................................ 9
1. Transferability-a vital feature ................................................................................................. 9
2. What is Share? ...................................................................................................................... 10
3. Free transferability ............................................................................................................... 10
4. Restriction on trade of share in relation to The Company Act 2013 .................................... 11
TACK-OVER OF A LISTED COMPANY ..................................................................................... 11
1. Meaning of take-over .......................................................................................................... 11
2. Take-Over of a Listed Company............................................................................................ 12
3. Case of acquisition of shares in which a public offer is required ......................................... 13
SWEDEN TAKEOVER CODE ...................................................................................................... 17
CONCLUSION .............................................................................................................................. 19
BIBLOGRAPHY ............................................................................................................................ 20
Acts And Circulars .................................................................................................................... 20
Books ......................................................................................................................................... 20
Internet Source: ......................................................................................................................... 20




I NTRODUCTI ON

The principle rule of the Substantial Acquisition of Shares and Takeovers Regulations, 2011 is
that any person or companies, singly or together, can acquire up to 24.99% shares or voting
rights in a listed company in India (target company), provided the acquirer does not take control
over the target company.
If the acquisition results into entitlement of 25% or more voting rights in the target company, the
acquirer is required to make an open offer to acquire at least 26% shares from the existing public
shareholders of the target company in terms of the Takeover Code (open offer obligation)
1
.

Whereas in Swedish Match Group had acquired in the target company 52.11 per cent shares,
i.e., 46.18 per cent by Haravon and 5.93 per cent by Seed. AVP Trading Private Limited (AVP)
and Plash Floods P. Ltd. (Plash) were Indian promoters of the target company. They belong to
one Jatia Group of Companies holding 24.11 per cent of the share capital of the target company,
i.e., AVP holding 6.03 per cent and Plash holding 18.08 per cent. 3. The Swedish Match entered
into an agreement with the Jatia Group to acquire majority shareholding in Haravon and Seed
and to make a public announcement of offer to acquire 20 per cent shares in Wimco. The
obligation to make a public announcement of offer arose in view of indirect acquisition of more
than 10 per cent shares in Wimco (in view of the law as prevailing thence) attracting the
provisions of Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997
2
On or about 17th December, 1997, the public announcement of offer was
made by S.M.S. together with the Jatia Group of Companies, viz., Plash and AVP as acquirers
and persons acting in concert. In the letter of offer, it was specified that both Swedish Match
Group and Jatia Group intend to exercise joint control over the affairs of Wimco. For the purpose
of the public announcement of offer, Haravon and seed being subsidiaries of Swedish Match
Singapore were deemed to be persons acting in concert in terms of Regulation 2(e )(2)( i) of the
Regulations . Upon completion of the process of public offer, the shareholding in Wimco was as

1
K.R. CHANDRATRE, CORPORATE RESTRUCTRURING, 426, 2
nd
Ed., 2010, Bharat Law House, New Delhi.
2
Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997


under: Haravon 28.28 per cent, Seed 10.33 per cent, AVP 5 per cent and Plash 15 per cent. The
aggregate of total shareholding of both the groups, thus, came to 58.61 per cent.
3
The said
transaction was also brought to the notice of the SEBI (the Board) by a letter dated 28th
September, 2000. It also agreed to adhere to the lock-in restrictions applicable to the locked in
shares forming part of 21.89 per cent shares purchased from AVP and Plash (Jatia Group of
Companies). Upon receipt of the said information, SEBI by a letter dated 17th October, 2000
made a query as to whether the said transaction took place in accordance with Regulation 20
(pricing guidelines) Regulation 7 (mandatory disclosures) and Regulation 12 (change in control)
of the Regulations, in response whereto, Swedish Match by a letter dated 1st November, 2000
submitted its replies thereto. An additional query by SEBI was made as regard calculation of
market price and compliance of the provisions of the Regulations by a letter dated 30th
November, 2000; to which a reply was given on 8th January, 2001 Proceedings before SEBI 6. A
show-cause notice was served upon the Appellants by SEBI asking them to show cause as to
why no public announcement of offer had been made in terms of Regulations 10 and 11(1) of the
Regulations stating : As you have acquired the shares of WI, in the manner as stated above
without making a public announcement as required by the provisions of the captioned
regulations, you have prima facie, violated the provisions of Regulation 10 individually and
Regulation 11(1) collectively of the captioned Regulations and, therefore, you are liable for
penal action under the Regulations and SEBI Act, 1992. In view of the above, you are called
upon to show cause as to why one or more or all action(s) under Regulation 44 and Regulation
45(6) of the Regulations and section 11B of the SEBI Act, 1992, should not be initiated against
you for violation specified above.

STATEMENT OF THE PROBLEM
A Corporations practice of purchasing Securities of Listed Public companies may violate
regulation provisions of the Securities Act. Acquisition by the Corporation of the nature
mentioned ahead is likely to have an impact on the current shareholders. So to protect the interest
of the current shareholder and future shareholder the Indian legal system with the SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the Takeover Code) is

3
Swedish Match AB v. Securities and Exchange Board of India AIR 2004 SC 4219


being legislated on point that it is friendly to incumbent shareholders and management and is
unfriendly to raiders who buys the Securities of the Listed Public companies with the intention of
Hostile Takeovers. This (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 is
also important in the prospectus of the Anti-Competition law in India.

SCOPE AND OBJ ECTIVE
The Scope of this paper has been limited to know Takeover Code in India in accordance to
Substantial Acquisition of Shares and Takeovers Regulations, 2011. The Objective of the paper
is to understand the working of Substantial Acquisition of Shares and Takeovers Regulations,
2011 in the light of Swedish Match AB v SEBI.
The Establishment of independent regulatory agencies and need for expert regulations were long
felt primarily as a response to the growing complexity in human affairs and trade and business in
particular. In the case of Swedish Match AB v SEBI the Supreme Court decision in the favor of
SABI Act and Substantial Acquisition of Shares and Takeovers Regulations, 2011 that both the
Act and Regulations are very much important to deals with the technicality problem which arises
in case like Swedish Match AB v SEBI.
HYPOTHESI S
The Establishment of independent regulatory agencies and need for expert regulations were long
felt primarily as a response to the growing complexity in human affairs and trade and business in
particular. In the case of Swedish Match AB v SEBI the Supreme Court decision in the favor of
SABI Act and Substantial Acquisition of Shares and Takeovers Regulations, 2011 that both the
Act and Regulations are very much important to deals with the technicality problem which arises
in case like Swedish Match AB v SEBI.






RESEARCH QUESTI ONS
1. What are the implications of Substantial Acquisition of Shares and Takeovers Regulations,
2011 in Security Market?
2. Is its mandatory to do public announcement by the Acquiring Companies of its acquisition of
the 25 % shares or voting rights in a listed company in India?
3. What are the International practise regarding Controlling Substantial Acquisition of Shares
and Takeovers of the Listed Companies?

CHAPTERISATI ON
1
st
Chapter will deals with the Introduction and functions of the Substantial Acquisition of Shares
and Takeovers Regulations, 2011 in Security Market.

2
nd
Chapter will deals with Safeguards Mechanism in the Securities Market regarding this
mischief of can acquiring more than 24.99% shares or voting rights in a listed company in India
for Example Role of SEBI, Stock Exchanges, Ministry of Commerce and other regulatory body
regarding this matter.

3
rd
Chapter will deals with conclusion part that do there is need for checking of Companies
which acquire the Securities of listed Public Companies and if yes then to what extent regulating
bodies can regulate this acquiring of the Securities.





LI TRATURE REVI EW
In Ramaiya Section 108 to 123 of Company Act 1956 which deals with Transfer and Issue of
Shares and Debentures have been explain. To know the History of Substantial Acquisition of
Shares and Takeovers Regulations, 2011 as how this Regulations works in Securities Market
relevant Circular of SEBI like SEBI (Substantial Acquisition of Shares and Takeover) 1997,
Standardized Formats of Reports/Records, Etc. in terms of Specific Provisions of the SEBI
(Substantial Acquisition of Shares and Takeovers) Regulation, 1997 and SEBI Regulation
Scheme 2002 under SEBI (Shares and Takeovers) Regulation, 1997 [Press Release 19-9-2002]
have been looked through. Reports of Various Committees like Justice P.N. Bhagwati
committee report on takeovers, Dr. N.L. Mitra Committee, Eradi Committee and others have
been looked through to understand the recommendation and reforms is Takeover Code in India.
In Sumit Agarwal and Robin Joseph Babys SEBI ACT, Taxman Publication the Role of SEBI in
matter of Takeover code have been looked through and power and jurisdiction of SEBI have also
looked upon. In H.K. Saharays Company Law, the practice of buying shares in primary and
secondary market have been look through to understood the problem of Hostile Takeover of the
company. In S.S. Grewal & Navjot Grewals Profitable investment in shares, investor interest
have been look through in Primary and Secondary Shares Market. In Dr. K.R. Chandratres
Corporate Restructuring Tack-Over of an Unlisted and Listed Company by acquiring controlling
interest and other mode for tack over is been look through and in Transfer & Transmission of
Shares & Debentures another Book by Dr. K. R. Chandratre the practice of buying shares in
primary and secondary market have been look through to understood the problem of Hostile
Takeover of the company.In Gower International practise regarding Controlling Substantial
Acquisition of Shares and Takeovers of the Listed Companies have been looked upon.
In Swedish Match AB v SEBI, Swedish Match AB have been found guilty of acquiring more
than 24.99% shares or voting rights in a listed company without Public Notification done by the
Swedish Match AB. In Securities and Exchange Commission v. Datronics Engineers, Inc. it was
found that a Corporations practice of purchasing and merging private companies may violate
registration provisions of the Securities Act. In Hardy Oil Ltd. v. SEBI signifies the mandatory
nature of the public announcement which could be made before or after the acquisition.




FACTS LEADI NG TO THE CASE
Swedish Match Group (a foreign group) holding 52% and Jatia Group holding 24% were
exercising joint control over affairs of target company Wimco Limited (Wimco). Pursuant to
letter of Government increasing foreign collaboration to extent of 74 per cent, Swedish Match
Group acquired 22 per cent shares of Jatia Group at a price much higher than market price - As a
consequence of aforesaid acquisition, joint control of Jatia Group with Swedish Match Group
over Target Company ceased leading to sole control of latter group only. As it was a case of
cessation of joint control to sole control, the acquirer did not give any public announcement.
However, SEBI held that this acquisition also attracted the provisions of regulation 11(1),
therefore SEBI directed them to do so in terms of regulation 11(1).

TRANSFER OF SHARES; BASIC PRI NCI PLES
1. Transferability-a vital feature
Transferability of shares is the one of the most vital features of a company limited by shares. It is
this attribute of a share that endows a company with perpetual and uninterrupted existence. Upon
incorporation, a company acquires its own independent legal personality and distinct entity, and
its shareholders acquire the right to hold and transfer their share in the company. Transferability
of shares (which includes all kinds of corporate securities) is a great beneficial feature of
incorporation. The investor in shares of an incorporated enterprise cannot withdraw his money
from the company. He can only convert his investment into cash outside the company in the
share market or by private sale. The company gets a permanent capital, the shareholder liquid
investment. That is why from the very inception of the public companies, free transferability of
shares has been considered to be of primary importance
4
. In India, with the enactment of The
Company Act 2013, and the Security Contracts (Regulation) (Amendment) Act, 2007, the

4
A RAMAIYA, GUIDE TO THE COMPANIES ACT, 1437, 17
th
Ed., LexisNexis Butterworths Wadhwa, Nagpur.


legislative law relating to transfer of the corporate securities, namely, share and debentures, has
undergone a considerable transformation
5
.
2. What is Share?
Section 2(46)
6
define share as share in the share capital of a company and includes stock except
where a distinction between stock and shares is expressed or implied. A share in a company is
the interest of a shareholder in the company measured by a sum of money, for the purpose of
liability in the first place, and of interest in the second, but also consisting of a serious of mutual
covenants entered into by all the shareholders inter se. The contract contained in the articles of
association is one of the original incidents of the shares
7
.
3. Free transferability
The Companies Act does not expressly declare that shares of a company are freely transferable.
Section 82
8
merely states that the shares shall be moveable property and transferable in the
manner provided by the articles of the company. It has, however, been consistently held by the
courts that subject to the restrictions imposed by the articles, a shareholder is free to transfer his
shares to a person of his choice and that the articles cannot put a complete ban or unreasonable
restrictions on the right to transfer. Likewise, the directors cannot decline to register a transfer
whimsically, arbitrarily or unreasonably. A shareholder, whether in a public or in a private
company, has a property in his share which he has a right to dispose of, subject only to any
express restriction which may be found in the article of association of the company
9
.
It is no doubt correct that any person or company is lawfully entitled to purchase shares of
another company in the open market, but if the transaction is done surreptitiously with a mala
fide intention by making use of some public financial institutions as a conduit in a clandestine
manner, such deal or transaction would be contrary to public policy and illegal. Public financial
institutions while making a deal in respect of a very large number or bulk of shares worth several
crores of rupees must also make some inquiry as to who was the purchaser of such shares. Such
transactions should be made with circumspection and care to see that the deal may not be to

5
K.R. CHANDRATRE, TRANSMISSION OF SHARES & DEBENTURES, 1, 4
th
Ed., 2005, Bharat Law House,
New Delhi.
6
Section 2(46) of the Companies Act, 1956
7
Borland Trustee v Steel Brother and Co Ltd [1901] 1 Ch 279
8
Section 82 of the Companies Act, 1956
9
Bina Barua v Dalowjan Tea Co Ltd (1981) 51 Comp Cas 660 (Gua).


camouflage some illegal contrivance or in-built conspiracy of a private monopoly house in order
to usurp the management of a public company and which, in its opinion, may not be in public
interest
10
.
4. Restriction on trade of share in relation to The Company Act 1956
108A to 108G of the Companies Act, 1956 have imposed certain restrictions on the acquisition
and transfer of shares in certain cases
11
. The object of these provisions was stated in the
statement of object and reasons as following:
A striking unhealthy phenomenon which has appeared in the corporate sector in recent times is a
trend towards take-over of well established companies by individuals or groups or combines. So
to protect Company from Hostile Tack-over these restrictions are being imposed.
TACK-OVER OF A LI STED COMPANY
1. Meaning of take-over
One of the salient features of a company is perpetual succession, which is enabled by free and
easy transferability of shares. Shares of a company limited by shares are transferable by
shareholder to another person. The transfer is easy as compared to the transfer of interest in a
business run as a proprietary concern or a partnership. Where it is proposed to sell the business
of a company as a going concern, all that is required is to transfer the entire shareholding to the
purchaser and thus facilitate easy change in management and ownership
12
.
Take-over means succeed to the management or ownership of or take control of; the assuming of
control, ownership or management of, e.g. a corporation, are an instance of this; the acquisition
of a going business by another through outright purchase; (as noun) the buying of one company
or most of the share in it, by a person or another company, (as verb) to buy a company or gain
control of it, by buying shares in it from the shareholder. Thus, take-over implies acquisition of
control of a company, which is already registered, through the purchase or exchange of shares.
Take-over takes place usually by acquisition or purchase from the shareholders of a company

10
Parthasarathy (N) v Controller of Capital Issues (1991) 72 Comp Vas 651 (SC).
11
K.R. CHANDRATRE, TRANSMISSION OF SHARES & DEBENTURES, 16, 4
th
Ed., 2005, Bharat Law House,
New Delhi.
12
K.R. CHANDRATRE, CORPORATE RESTRUCTRURING, 426, 2
nd
Ed., 2010, Bharat Law House, New Delhi.


their shares at a specified price to the extent of at least controlling interest in order to gain control
of that company
13
.
2. Take-Over of a Listed Company
The SEBI (Substantial Acquisition of Share and Takeovers) Regulations 2011 regulate takeover
and substantial acquisition of shares. However, in the context of Takeover Regulations, takeover
of a listed company means acquisition of shares beyond a particular percentage and below a
particular percentage of the company called target company. A listed company means a public
company of which any securities are listed in any recognized stock exchange.
The Takeover Regulations do not give the definition of takeover. However, the definition of
Target Company in Regulation 2(1) (o) indicates that takeover of a company means acquisition
of its shares or voting rights or control, directly or indirectly, of a listed company. Accordingly,
what the Takeover Regulations really regulate in the acquisition of shares carrying voting rights
in a listed company beyond certain limits in terms of percentage of the equity share capital of the
company so as to put acquirer in a position to control the composition of the board of directors of
the company and thereby taking over the company management of the company and thereby the
company.
Regulation 10, 11 and 12 of the Takeover Regulations contain the provisions regarding takeover
of a listed company. Any of the following would amount to take-over of a listed company and
such acquisition would require compliance with the requirements of the Takeover Regulations:-
1. Acquisition of shares (which carry voting rights); or
2. Acquisition of voting right (without acquiring the shares to which the voting rights relate); or
3. Acquisition of control of a listed company (without acquiring shares or the voting rights the
shares to which the voting rights relate).
In certain circumstances, acquisition of shares of an unlisted company may trigger the Takeover
Regulations requiring a public announcement under regulation 10, 11 and 12 due to the effect of
regulation 3 (1) (k).

13
K.R. CHANDRATRE, CORPORATE RESTRUCTRURING, 426, 2
nd
Ed., 2010, Bharat Law House, New Delhi.


The basic of the takeover of a company is acquisition of shares. In other words, acquisition of
shares in a listed company paves the way for takeover of the company as explained above. The
Takeover Regulations, however, seek to regulate the takeover in relation to acquisition of
shares, voting rights and control. These three things are mutually exclusive and hence one
of them may exist without another and yet the Takeover Regulations would be attracted. Thus, if
a person acquires voting rights or control without acquiring shares, the Takeover Regulations
would be attracted, although, usually, all the three things exist simultaneously and, rather, voting
rights and control emanate from shares. It is, however, not inconceivable that while voting rights
or control is in one persons hands, shares which give rise to the voting rights or control are in
somebody elses hands. For example, if the older of substantial shares (say 51%) in a company
enters into an agreement with the acquirer that the latter would have management control of the
company (meaning the right to appoint majority of directors on its board) despite that the shares
would continue to be with the former, till certain conditions as stipulated in the agreement are
fulfilled (when the agreement would be consummate), this is the case of having control over a
company without having controlling interest, i.e. shares and voting rights. Therefore, the
Takeover Regulations seek to bring the latter phenomenon within the regulatory framework of
these Regulations.
A person who acquires the shares subjects himself of the compliance with the requirements
under the Takeover Regulations. The centre of compliance in the context of takeover of a
company is, therefore, the acquirer. It is the acquirer who has to make sure that these
requirements are complied with in connection with the acquisition of shares.
There may be a one person who would be acquirer or there may be two or more persons each of
whom would be acquirer in relation to take-over of a company. Where there are two or more
persons involved is one take-over, they are called persons acting in concert with the acquirer
14
.
3. Case of acquisition of shares in which a public offer is required
Regulation 10, 11 and 12 have two-fold objectives, namely to require a person who acquires
(whether by buying or otherwise) voting shares or voting rights in a listed company called target
company) beyond certain limits specified in those regulations:

14
K.R. CHANDRATRE, CORPORATE RESTRUCTRURING, 428, 2
nd
Ed., 2010, Bharat Law House, New Delhi.


to make a disclosure of the acquisition to the stock exchanges and/ or SEBI; and to
make an offer to the public shareholders of the company.
The Bombay High court has in elucidated the object of these provisions of the Takeover
Regulations in these words:
The Regulations disclose a Scheme to bring about transparency in the transactions relating
to acquisition of large block of shares which may ultimately lead to a take-over. That is why
it insists on public announcement being made when the shareholding and, consequently, the
voting power is increased beyond the extent contemplated by regulations 9 and 10. By
obliging the acquirer to make a public announcement or a public offer, it ensures that a
member of the company or an investor is able to take an informed decision on such public
announcement/offer. The particulars which are required to be disclosed in the public
announcement/offer are intended to give a clear picture to a member of the company or a
prospective investor, as the case may be, as to the purpose for which such shares are being
acquired and by whom. It also ensures to existing shareholders a fair return on their
investment, and permits any other person to make a matching bid which may ultimately
benefit the shareholders of the company. On the basis of the particulars furnished, the
shareholder is enabled to take a decision as to whether he should retain his holding or
dispose of them for the price offered. Thus, transparencies in dealings as well as fairness to
the shareholders of the company are ensured
15
.
The said Regulation like Regulations 10 and 11 also speaks of public announcement. Such
public announcement is required to be made irrespective of whether or not there has been
any acquisition of shares or voting rights in a company. In either of the case, the acquirer is
statutorily required to make public announcement of acquisition of shares and control of the
target company in accordance with the regulations. The proviso appended to Regulation 12
curves out an exception as regard necessity of making public announcement. Explanation
appended to Regulation 12, however, states that it would have no application where a
change in control takes place pursuant to a resolution passed by the shareholders in a general
meeting. As would be noticed shortly hereinafter, the proviso to Regulation 12 cannot be

15
Shirish Finance & Investment Ltd v M. Sreenivasulu Reddy (2002) 2 Com LJ 386


said to have any application in the instant case as by reason of the Explanation appended
thereto, Regulation 12 would have no application.. Result in change in control over the
target company in terms of Regulation 12 would come into being in two situations; viz. (i)
by acquisition of share, or voting rights; or (ii) where there has been none. A control over
the target company may be achieved by amending the memorandum of association or by any
other mode which necessitates a resolution to be passed by the shareholders in a general
meeting. The expressions "in pursuance to a resolution passed by the shareholders in a
general meeting" are crucial as the proviso will apply only when the change of control over
the target company takes place otherwise than by acquisition of shares or voting rights.
The primal question would be as to whether Explanation (i) appended to Regulation 12
would bring the matter out of the purview of the regulation? In the fact of the present case, it
does. Explanation appended to Regulation 12 postulates that where there are two or more
persons in control over the target company (here Swedish Match Group and Jatia Group),
the cessor of any one such person (Jatia Group) from such control shall not be deemed to be
a change in control of management nor shall any change in the nature and quantum of
control amongst them constitute change in control of management. By reason of the said
Explanation, a legal fiction has been created pursuant whereto or in furtherance whereof
applicability of Regulation 12 is excluded. Change of control contemplated under
Regulation 12 calls for a public announcement when the same is sought to be achieved by
acquiring shares or voting rights. A change of control in terms of Regulation 12 may also
take place pursuant to a resolution passed by the shareholders in a general meeting. Only in
the latter case the proviso which carves out an exception would be attracted. The effect and
purport of the first proviso may also be construed having regard to the second proviso
appended thereto. The second proviso appended to Regulation 12 takes within its fold a case
where the joint control to sole control is through sale at less than the market value of the
share. It, therefore, speaks of a different situation, namely, control by transfer of joint
control to sole control through sale was at less than the market value of the shares. In a case
where the second proviso is attracted, the Explanation (1) will have no role to play.
Situation, however, would be different when the transfer of joint control to sole control takes
place through sale at a price which is higher than the market value of the shares leading to
change in control over the target company, which cannot be done pursuant to a resolution


passed by the shareholders in a general meeting in terms of the first proviso. In other words,
in the event, the change in control is sought to be achieved by sale of shares at a price higher
than the market value of the share, Regulation 12 will clearly be attracted making public
announcement imperative. Such public announcement evidently is required to be made
having regard to the fact that the interest of investors is required to be protected; pursuant
whereto and in furtherance whereof the shareholder would be informed of the value of the
share at which the transfer of control would take place so as to enable him to exercise his
option to sell his shares at the price offered by the acquirer or continue to keep the same
16
.
Any person, singly or together with PACs (together referred to as acquirer), can acquire up
to 24.99%
17
shares or voting rights in a listed company in India (target company), provided
the acquirer does not take control over the target company.
If the acquisition results into entitlement of 25% or more voting rights in the target
company, the acquirer is required to make an open offer to acquire at least 26% shares from
the existing public shareholders of the target company in terms of the Takeover Code (open
offer obligation)
18
.
The acquirer holding 25% or more voting rights in the target company can make a voluntary
offer for at least 10% of the total shares of the target company. This is subject to fulfillment
of the following conditions:
Total shareholding of the acquirer post open offer should not exceed maximum permissible
non-public shareholding (generally 75%).
The acquirer should not have acquired shares of the target company in the preceding 52
weeks without attracting open offer obligation.
If maximum permissible non-public shareholding exceeds, say 75%, pursuant to open offer
the acquirer is required to bring down his or her shareholding to 75% within the time
specified as per SCRR.

16
Swedish Match AB v. Securities and Exchange Board of India AIR 2004 SC 4219
17
Regulation 3 (1) of the Securities And Exchange Board Of India (Substantial Acquisition Of Shares And
Takeovers) Regulations, 2011

18
Vivek Mehra, Takeover code Referencer on SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
2011, https://www.pwc.in/assets/pdfs/indian-services/m-a-takeover-book-final-lowres.pdf, (last access on 14.5.14)


The acquirer, whose shareholding exceeds 75% pursuant to an open offer, cannot make a
voluntary delisting offer under the SEBI Delisting Regulations, for one year from the date of
completion of open offer
19
.
Irrespective of acquisition or holding of shares or voting rights in a target company, no acquirer
shall acquire, directly or indirectly, control over such target company unless the acquirer makes a
public announcement of an open offer for acquiring shares of such target company in accordance
with these regulations
20
.
Therefore, Swedish Match AB v SEBI acquirer Swedish Match Group has a statutory obligation
to make public announcement. No, only because regulation 12 also speaks of public
announcement, same by itself would not exempt acquirer from making a public announcement in
terms of clause (1) of regulation 11. Moreover, merely because in a case where acquisition of
additional shares may result in change of control over company, same by itself would not exempt
acquirer from complying with statutory requirement of making public announcement under
section 11.
SWEDEN TAKEOVER CODE
Since the takeover does not require a corporate decision on the part of the target company, there
is no obvious act of the target upon which company law can fasten for the purpose of regulating
the transaction for this reason, most European countries treat takeover as part of their securities
law, i.e. they rightly take the transfer of the shares as the central act
21
. The Sweden follows this
pattern. Swedens regulatory regime aims to protect the shareholders of a target company and to
create a system of rules for participants in a takeover.
The Swedish takeover rules are based on the European Parliament and the councils directive
2004/25/EG on takeover bids. The regulation is based on a number of key principles. According
to these principles, in order to promote an efficient, competitive and informed market, it is
necessary to ensure that the shareholders:

19
Vivek Mehra, Takeover code Referencer on SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
2011, https://www.pwc.in/assets/pdfs/indian-services/m-a-takeover-book-final-lowres.pdf, (last access on 14.5.14)
20
Regulation 4 of the Securities And Exchange Board Of India (Substantial Acquisition Of Shares And Takeovers)
Regulations, 2011

21
PAUL L DAVIES, GOWER AND DAVIES PRINCIPLE OF MODERN COMPANY LAW, 1012, 8th Ed. ,
(2008), Sweet & Maxwell Ltd, London.


Know the identity of the bidder;
have enough information to assess the merits of the takeover proposal;
have reasonable time to consider and assess the proposal; and
have a reasonable and equal opportunity to share in the benefits of the proposal.
The regulation on takeovers is essentially governed by the Law (2006:451) on public takeover
bids on the stock market (the Takeover Act). Other important rules relating to takeovers are
implemented in the rules of the Swedish stock exchanges and in one case a Swedish MTF.
In addition, the Swedish Securities Council (Swedish: Aktiemarknadsnmnden) provides
substantial guidance on conduct which is or is not permissible.
Takeovers are about control. A takeover is only one way of obtaining control of a company.
Other methods to achieve control include schemes of arrangement, selective reductions of capital
and share buy-backs. The Takeover Act is applicable both to voluntary bids and mandatory bids.
The level of control selected under Swedish law as the trigger for mandatory bids is 30% of the
voting power in a company
22
.









22
Per Berglof & Anders Bjrk, Sweden Takeover Guide,
http://www.ibanet.org/Document/Default.aspx?DocumentUid=25F6AC17-156B-4ADC-B8ED-CED5CACFF2BB,
(last access on 14.5.14)



CONCLUSI ON
So in the light of Swedish Match AB v SEBI we can conclude that public announcements for
Open offer under 10 and 11(1) should be made by acquirer. The Substantial Acquisition of
Shares and Takeovers Regulations, 2011 is very important Regulation because it safeguards the
Targeted Company from Hostile Tack-over and also protects the interest of investors.
Since its introduction, the Takeover Code has weathered many a challenge and SEBIs efforts to
keep the Takeover Code abreast of the latest global developments in the public M&A scenario
seem to be bearing dividends. Whilst the rapidly evolving public M&A landscape will, no doubt,
throw up new challenges and questions for SEBI to address, it can be safely said that the
Takeover Code in its present form is at par with any foreign code governing public mergers and
acquisitions. The management becomes more accountable.
Advantages of the Tack-Over Code are that Promoters of Indian companies have never been
answerable to small shareholders for their business practices. Even if they had minority holdings
and indulged in mismanagement, Indian promoters didn't contend with threats of losing control.
It is a powerful corrective mechanism, in a mismanaged business; the minority shareholder
suffers more than the management. The management lives off expense accounts while profits
erode, dividends dwindle, and share price falls. The management performs because of fear of
being replaced. The management may also be forced to make an open offer to increase its own
stake. It may have to share powers by allowing minority shareholders onto the board and thus
create greater transparency. The share price automatically climbs. The rising share price gives
minority shareholders an exit option at higher prices as well, as an option of siding with
potentially better management in the event of an actual takeover bid.







BI BLOGRAPHY

Acts And Circulars
The Companies Act 2013
The Companies Act 1956
The Securities and Exchange Board of India Act, 1992
The Substantial Acquisition of Shares and Takeovers Regulations, 2011
The Substantial Acquisition of Shares and Takeovers Regulations, 1997

Books
SUMIT AGRAWAL & BABY ROBIN JOSEPH, AGRAWAL & BABY ON SEBI ACT,
(2011),Taxmann Publication Pvt. Ltd., New Delhi.
PAUL L DAVIES, GOWER AND DAVIES PRINCIPLE OF MODERN COMPANY
LAW, 8th Ed. , (2008), Sweet & Maxwell Ltd, London.
K.R. CHANDRATRE, CORPORATE RESTRUCTRURING, 2
nd
Ed., 2010, Bharat Law
House, New Delhi.
K.R. CHANDRATRE, TRANSMISSION OF SHARES & DEBENTURES, 4
th
Ed.,
2005, Bharat Law House, New Delhi.
A RAMAIYA, GUIDE TO THE COMPANIES ACT, 17
th
Ed., LexisNexis Butterworths
Wadhwa, Nagpur.

I nternet Source:
Vivek Mehra, Takeover code Referencer on SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations,2011, https://www.pwc.in/assets/pdfs/indian-services/m-a-
takeover-book-final-lowres.pdf
Per Berglof & Anders Bjrk, Sweden Takeover Guide,
http://www.ibanet.org/Document/Default.aspx?DocumentUid=25F6AC17-156B-4ADC-
B8ED-CED5CACFF2BB.