Forum Views - June 2024

Welcome to interactive presentation, created with Publuu. Enjoy the reading!

FORUM VIEWS - JUNE 2024

t is a widely recognized fact that one of the key elements

of a robust corporate governance regime in any country

Iis the existence of an efficient and well-administered set

of regulations concerning the substantial acquisition of

Shares and Takeover of a company. The SEBI Act, 1992

expressly mandates SEBI to regulate substantial

acquisition of shares and takeovers by suitable measures.

Accordingly, SEBI provides a legal framework through the

SEBI (Substantial Acquisition of Shares and Takeover)

Regulations, 2011 (“Regulations/Takeover Code”), which

have been amended from time to time.

As the saying goes “Better the devil you know, than the

devil you don't”, the purpose of the Takeover Code is to

provide transparency arising out of substantial acquisition

of shares and takeovers and to bring fairness and

equitability in such transactions so as to protect the interest

of the investors in securities. At times, a substantial

acquisition of shares or takeover may result in the change of

management or promoters of a company. Thus, the

Takeover Code seeks to ensure that the public and minority

shareholders are provided with an exit opportunity in the

event of any substantial change in shareholding or change

in control of the company.

When there is an acquisition or an agreement to acquire

substantial shares, control or voting rights of a company in

excess of the prescribed threshold, the Regulations

mandate the acquirer to provide the shareholders an

opportunity to exit the company by making an open offer.

An open offer is an offer made by the acquirer to the

shareholders of the target company inviting them to tender

their shares in the target company at a fair valuation on

account of change in control or substantial acquisition of

shares.

1. What is 'Open Offer'? When is an 'open offer'

required to be made under SEBI SAST Regulations?

The Regulations provide for a threshold and acquisition of

shares beyond the threshold or change in control of the

target company triggers the requirement to make an open

offer. There are various circumstances in which the acquirer

is required to make an open offer thereby providing an exit

opportunity to the shareholders of the Target company. The

circumstances are- (a) when there is an acquisition of an

aggregate of 25 % or more voting rights in a target company

by the acquirer i.e. initial trigger, (b) if the acquirer already

holds 25 % or more voting rights, the open offer requirement

will be triggered if the acquirer acquires additional 5% or

more voting rights of the target company, within a financial

year i.e. creeping acquisition trigger, (c) Irrespective of the

acquisition or holding of shares or voting rights in the target

company, an open offer will have to be made by the acquirer

if there is an acquisition of control over the target company

AN OVERVEW OF SEBI’s TAKEOVER REGULATIONS

Zerick Dastur

Founder

ZERICK DASTUR,

ADVOCATES AND SOLICITORS

As the saying goes “Better the devil

you know, than the devil you don't”,

the purpose of the Takeover Code is to

provide transparency arising out of

substantial acquisition of shares and

takeovers and to bring fairness and

equitability in such transactions so as

to protect the interest of the

investors in securities.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32