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Friday, February 13, 2009

SEBI relaxes Takeover Code disclosures when Board of Directors of company are superceded overriding Competitive bids

Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) (Second Amendment) Regulations, 2009

Yes, takeover amended for the second time in 2009 and 

  • its the direct impact of Satyam scam yet again where Government/Regulatory Authorities has superceded the board of Satyam.
  • Then they realised takeover code compliance is so stringent and there is no provision for exemption.  
  • Thus, SEBI (Substantial Acquisition of Shares & Takeovers) Regulation, 1997 has been amended to empower SEBI to exempt the provisions of Regulation 10 to 29A (the crucial disclosures) when an application is made by target company subject to certain conditions.  Regulation 10 to 29A of Takeover provide for the provisions of disclosure on crossing the prescribed limits of 15% to 55%/75% by making a public offer of shares after complying with prescribed norms.
  • Further, after such exemption is granted and publicly announced by the Acquirer, NO competitive bidding is allowed.  Competitive bidding as per Regulation 25 implies a bid made WITHIN 21 days of public announcement of first offer for the equal number of shares.
  • So now, SEBI can exempt Satyam from not only the disclosures & public offer under this chapter but also no competitors can bid once public announcement is made.

Regulation 29A - ''Relaxation from the strict compliance of provisions of Chapter III in certain cases.''

After regulation 29, following regulation shall be inserted, namely, 

29A. SEBI board may, on an application made by a target company, relax any or more of the provisions of the chapter [CHAPTER III: Substantial Acquisition Of Shares Or Voting Rights In And Acquisition Of Control Over A Listed Company which covers Regulation 10 to 29A], subject to such conditions as it may deem fit, if it is satisfied that:

(a) the central government or state government or any other regulatory authority has removed the board of directors of the target company and has appointed other persons to hold office as directors thereof under any law for the time being in force for orderly conduct of the affairs of the target company;

(b) such directors have devised a plan which provides for transparent, open, and competitive process for continued operation of the target company in the interests of all stakeholders in the target company and such plan does not further the interests of any particular acquirer;

(c) the conditions and requirements of the competitive process are reasonable and fair;

(d) the process provides for details, including the time when the public offer would be made, completed and the manner in which the change in control would be effected;

(e) the provisions of this chapter are likely to act as impediment to implementation of the plan of the target company and relaxation from one or more of such provisions is in public interest, the interest of investors and the securities market.''

Regulation 25(2B) - Competitive Bid

SEBI has also amended regulation 25 Takeovers Regulations, 1997, wherein, after sub-regulation (2A) the following sub-regulation shall be inserted, namely, 

''(2B) No public announcement for a competitive bid shall be made after an acquirer has already made the public announcement pursuant to relaxation granted by the Board in terms of regulation 29A (as above).''

Click here for this amendment

To track all Takeover recent amendments, click 

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