Forum Views - June 2024
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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.
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