sebi take over code

8/7/2019 Sebi Take Over Code

1/22

SEBI TAKE OVER CODE


2/22

TITLESecurities Exchange Board of India

(Substantial Acquisition of Shares and

Takeovers) Regulations, 1997

(Regulations) as amended in 2002.


3/22

THE CONCEPT OF TAKEOVER

An acquirer taking over the control or

management of the targetcompany.

When an acquirer, acquires substantial

quantity of shares or voting rights of the

target company, it results in theSubstantial acquisition of Shares.


4/22

Meaning of substantial quantity

of shares or voting rights

1. A person who, along with persons acting

in concert (PAC), if any, acquires

shares or voting rights (which when taken

together with his existing holding) would

entitle him to more than 5% or 10% or

14% shares or voting rights oftargetcompany.


5/22

Meaning of substantial quantity

of shares or voting rights

2. An acquirerwho holds more than 15%

shares or voting rights of the target

company,


6/22

PUBLICANNO

UNCE

ME

NTA Public announcement is generally an

announcement given in the newspapers

by the acquirer, primarily to disclose hisintention to acquire a minimum of 20% of

the voting capital of the targetcompany

from the existing shareholders by meansof an open offer.


7/22

CONTENTS OF PUBLIC

ANNOUNCEMENT the offer price,

the number of shares to be acquired from the public,

the identity of the acquirer

the purposes of acquisition,

the future plans of the acquirer, if any, regarding

the target company

the change in control over the target company, if any

the procedure to be followed by acquirer in accepting the

shares tendered by the shareholders and the period within

which all the formalities pertaining to the offer would be

completed.


8/22

APPOINTMENT OF MERCHANT

BANKER

The Acquireris required to appoint a

Merchant Banker registered with SEBIbefore making a PA and is also required to

make the PA within fourworking days of

the entering into an agreement to acquireshares, through such Merchant Banker.


9/22

Procedure to be followed after

the Public Announcement

1. Acquireris required to file a draft Offer

Document with SEBI within 14 days of

the PA through its Merchant Banker,along with filing fees of Rs.50,000/- per

offer Document

2. Merchant Bankeralso has to submit adue diligence certificate as well as

registration details


10/22



3.The acquirerthrough its Merchant Banker

sends the offer document as well as the

blank acceptance form within 45 days fromthe date of PA, to all the shareholders

whose names appear in the register of the

Target company on a particular date


11/22



4.The offer remains open for30 days. The

shareholders are required to send their

Share certificate (s) / related documents tothe Registrar or Merchant Banker as

specified in the PA and offer document


12/22



5. The acquireris obligated to offer a

minimum offer price as is required to be

paid by him to all those shareholders ofthe target company, whose shares are

accepted under the offer, within 30 days

from the closure of offer


13/22

MINIMUM OFFERPRICE AND

PAYMENTS MADEThe offer price shall be the highest of:

Negotiated price under the agreement Price paid by the acquirer by way of public

rights/ preferential issue during the 26-weekperiod prior to the date of the PA

Average of weekly high & low of the closingprices of shares as quoted on the Stockexchanges, where shares of Target companyare most frequently traded during 26 weeks priorto the date of the Public Announcement


14/22

MINIMUM OFFERPRICE AND

PAYMENTS MADEIn case the shares oftarget company are not frequentlytraded, then the offer price shall be determined by relianceon the following:

the negotiated price under the agreement,

highest price paid by the acquirer by way of public rights/

preferential issue during the 26-week period prior to the

date of the PA

return on net worth, book value of the shares of the target company,

earning per share,

price earning multiple vis a visthe industry average.


15/22

PAYMENT Acquirers are required to pay the consideration

to shareholders who have accepted the offerwithin 30 days from the date of closure of theoffer.

In case the delay in payment is not due to willfuldefault or neglect on part of the acquirer, theacquirers would be liable to pay interest to the

shareholders for the delayed period inaccordance with Regulations. If the delay in payment of consideration is not

due to the above reasons, it would be treated asa violation of the Regulations.


16/22

GUARANTEE FOR PAYMENTBefore making the Public Announcement the

acquirerhas to create an escrow account having25% of total consideration payable under the offerof size Rs. 100 crores (Additional 10% if offer sizemore than 100 crores). The Escrow could be in theform of:

cash deposited with a scheduled commercial bank,

bank guarantee in favor of the Merchant Banker deposit of acceptable securities with appropriate

margin with the Merchant Banker.


17/22

PENA

LTIE

SRegulation 45 provides for penalties.

1. If the acquirerfails to carry out the

obligations under the Regulations, the

entire or part of the sum in the escrow

amount shall be liable to be forfeited and

the acquireror such a person shall also beliable for action in terms of the Regulations

and the Act.


18/22

PENA

LTIE

S2.The board of directors of the target companyfailing to carry out the obligations under the

Regulations shall be liable for action in terms of

the Regulations and SEBI Act.

3.Initiate action for suspension or cancellation of

registration of Merchant Banker holding a

certificate of registration under section 12 of theAct.


19/22

PENA

LTIE

S3. For any mis-statement to the shareholders

or for concealment of material information

required to be disclosed to the shareholders,

the acquirers, the directors of the target

company, the merchant banker would be

liable for action in terms of the Regulations

and the SEBI Act.


20/22

PENA

LTIE

SThe penalties referred to in sub-regulation(1) to (5) may include -

criminal prosecution under section 24 of theSEBI Act;

monetary penalties under section 15 H of

the SEBI Act;

directions under the provisions of Section

11B of the SEBI Act.


21/22

EXEMPTIONS

The following transactions are exempted from makingan offer and are not required to be reported to SEBI :

allotment to underwriter pursuant to any

underwriting agreement; acquisition of shares in ordinary course of business

by; Regd. Stock brokers on behalf of clients;

Regd. Market makers; Public financial institutions on their own account; banks & FIs as pledges;


22/22

EXEMPTIONS

Acquisition of shares by way of transmission onsuccession or by inheritance

Acquisition of shares by Govt. companies;

Acquisition pursuant to a scheme framed undersection 18 of SICA 1985;

Out of arrangement/ restructuring includingamalgamation or merger or de-merger under

any law or Regulation Indian or Foreign; Acquisition of shares in companies whose

shares are not listed;

sebi take over code

Documents