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Contents:
Introduction Background of Takeover Regulations SEBI (Substantial Acquisition of Shares and Takeover)
Guidelines, 1997
Transition to the New Takeover Code, 2011 Impact on Industry Case study
Introduction
What is Takeover?
Takeover signifies a transaction or a series of transactions whereby one company acquires control over the assets of the other company, either directly by becoming the owner of those assets or indirectly by obtaining control of the management of the company.
Background The laws relating to takeovers in India where not very organized until the year
1994.
The
guidelines of the Securities and Exchange board of India (Substantial acquisition of shares and takeover), 1994. year 1997 regulations were implemented and since then the regulations have been known as the TAKEOVER CODE.
Finally in the
Some changes have taken place in those regulations in the year 2010 and New
TAKEOVER CODE was set up in the year 2011.
5% and more shares or voting rights. holding more than 15% but less than 55% shares. dividend declaration. The Target company, in turn, is required to inform all the stock exchanges where the shares of target company are listed.
15% shares or voting rights(Regulation 10) Creeping acquisition limit(Regulation 11) Consolidation of holding.
The SEBI (SAST) Guidelines, 1997 formed under the guidance of the Justice P. N. Bhagwati remained in force for a period of almost 13 years. The New Takeover Code was the brainchild of the Takeover Regulations Advisory Committee (TRAC) constituted under the Chairmanship of Shri. C. Achuthan, Former Presiding Officer, Securities Appellate Tribunal Chairman, who submitted its report to SEBI Chairman Shri. C. B. Bhave on July 19, 2010. These Regulations had then been released by SEBI for Public comments from July 19, 2010 to August 31, 2010. SEBI at their Board Meeting held on July 28, 2011, had considered the report of TRAC and had then, on 23 September 2011, notified SEBI (SAST) Regulations, 2011; also known as the New Takeover Code. Finally, the New Code came into force on October 22, 2011.
Detailed provisions relating to Indirect Acquisitions Provisions introduced relating to Recommendation on Open Offer by the Board of Target Company Reduction in timeline for completion of open offer (95 calendar days to 57 business days)
Increase in the Offer size which means exit opportunity to all the shareholders.
More Stringent and frequent disclosure requirement on the part of the
... acquirer.
Clarity in Provisions. a level playing field created for Indian acquirers by fixing the open offer size at 26 per cent.
Too Expensive for Indian Promoters due to insufficient bank funds for acquisitions.
Evidently, SEBI has carefully attempted to juggle the interest of all stakeholders and strike a balance that is not very easy to achieve. As always, the market reaction seems to be mixed ranging from excitement to displeasure. But what is certain is that the Indian takeovers scene is set to see a lot of action good, bad and ugly.