SEBI relaxes Takeover Code disclosures when Board of Directors of company are superceded overriding Competitive bids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• its the direct impact of Satyam scam yet again where Government/Regulatory Authorities has superceded the board of Satyam.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 http://www.box.net/shared/rxx0gf6m4r

To track all Takeover recent amendments, click http://yehseeyes.blogspot.com/search/label/SEBI%20Takeover 

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[Regulation 8A]Takeover disclosure of pledged shares within 7 working days to Company & Stock Exchange

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

Disclosure of pledged shares is mandated under SEBI Takeover Code.

The terms "promoter" and "promoter group" shall have the same meaning as is assigned to them under Clause 40A of the Listing Agreement.

Transitional Provision

A promoter or every person forming part of the promoter group of any company shall, within 7 working days from 28th January 2009 disclose details of shares of that company pledged by him, if any, TO that company.

Disclosure by Promoter or Promoter Group TO Company

• Promoter or promoter group shall inform details of pledge of shares within 7 working days of creation of pledge on shares TO the Company.
• Promoter or promoter group shall inform details of invocation of pledge of shares within 7 working days of invocation of pledge on shares TO the Company.

Disclosure by Company To Stock Exchanges

If during any quarter ending March, June, September and December of any year, the lower of the following limits are exceeded,

• The aggregate number of pledged shares by promoter or promoter group during the Quarter exceeds Rs.25,000/-
• The total aggregate number of pledged shares by promoter or promoter group including that Quarter exceeds 1% of total shareholding or voting rights.

Then, Company shall inform details of pledge received from promoter or promoter group within 7 working days of receipt of information TO the Stock Exchanges.

Click here to download the amendment - Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2009

CS Final Financial, Treasury & Forex Management [FTFM] Notes & Study in a nutshell, to win Exams

Exciting Ways to Study FTFM is continued...

Mr. CS Sunil Kumar of CS Mysore has shared these Interesting Materials, which can help you to kick-start your basic understanding of Financial, Treasury & Forex Management subject in Company Secretary Professional Program.

Now, lets start studyin... [I mean, lets start enjoyin...]

1. Financial Management - An Introduction;

2. Derivatives - Basic & Further Discussion;

3. Capital Structure;

4. Dividend Policy;

5. Financial Services;

6. Treasury Management;

7. Forex Management;

8. CS Final - Question & Answers

Yes, This will get you an basic understanding of the Subject and then start reading Guideline Answers [Past Question Papers] of CS Final Exams and enjoy writin...CS exams.

All the Best ! Think, you have conquered FTFM as a Territory.

Wealth Tax planning ideas for CS Final & professionals

Manoj Singh Bisht on Taxing

Taxing, no more TAXING, yes its interesting with us. Lets start with the most interesting Tax, as its on your wealth. Relax, we are giving you the way out, as usual. Enjoy taxin...

These ideas will help for CS Final friends & all other professionals for their preparations & practice.

TAX PLANNING MEASURES IN RELATION TO WEALTH TAX

Tax Planning is a crucial work to be done, in case of Wealth tax u should keep the following points in your mind:

• Companies should not invest in unproductive taxable assets like jewellery, motor cars etc. If the assessee has extra funds for investing in assets then use those funds only for investing in non-taxable funds.
• Avoid the transactions which attracts the inclusion of deemed assets in the Net Wealth.
• An individual and HUF should not keep cash in excess of Rs. 50,000. Any excess should be kept in a Bank.
• assesses other than individuals and HUF should not keep cash in excess of what is shown in their books of account , this will help in avoiding the inclusion of cash in assets for computation of Net Wealth.
• The exemptions under section 5 should be availed of.
• Always use borrowed funds for investing in taxable assets since there is a deduction available for borrowed debts under the Act, and thus use the owned funds for investment in non-taxable assets.

Do comment your views for betterment & to make it more interestin...

 

CS Financial Management Starter Pack

Yes,

CS Final FTFM gets a life over here. These are the few pages, which created very exciting interests to study & pass Financial Management even to a person like me, who hates finance subjects.

Salutes to the author Mr. Pattabhiram, whose every style right from scripting every letter in the page is awesome. He narrates a story of Financial Management here.

Find http://www.primeacademy.com/mafachapter1.pdf here.

Friends, dont get carried away by this, as it contains lots of informations, as far as, CS Final is concerned, just get the idea from this, as this makes the concept very clear, then you may proceed with your study material and guideline answers.

Just read it....atleast for the sake of readin it....you feel the passion then.

Enjoy Passin....Vj

Demerger/Non Compete Clause Case

Ashim Investment Co. Ltd.,

Where in view of demerger scheme, subsidiary companies of transferor-company, personally holding equity shares in transferee-company would be entitled to allotment of further equity shares in transferee-company, it would not amount to violation of Section 42; as Section 42(3) provides an exception to general rule and permits a subsidiary company to continue as member of holding company.

"42(3) This section shall not prevent a subsidiary from continuing to be a member of its holding company if it was a member thereof either at the commence­ment of this Act or before becoming a subsidiary of the holding company, but except in the cases referred to in sub-section (2), the subsidiary shall have no right to vote at meetings of the holding company or of any class of members thereof".

Held that Section 42 provides that a subsidiary company cannot hold shares or be a member of its holding company. Section 42(3) provides an exception to general rule and permits a subsidiary company to continue as member of holding company. Existing shareholding of the subsidiary company in the holding company will be protected under section 42(3), but the subsidiary companies will not have any voting rights.

Non Compete Clause

Supreme Court in Gujarat Bottling Co. Ltd v. Coca Cola, HELD that any NEGATIVE COVENANT in an agreement which was operative during the SUBSISTENCE of a contract was VALID but such negative covenant in an agreement which were purported to be made operative AFTER the expiry of the agreement were VOID being restrictive of trade under Section 27 of The Indian Contract Act, 1872.

--
Vj
Trezrrr every pulsss
http://yehseeyes.blogspot.com/

B Smart to Take Over

Credit to takeovercode.com

1.What is meant by Takeovers & Substantial acquisition of shares?

When an "acquirer" takes over the control of the "target company", it is termed as Takeover. When an acquirer acquires "substantial quantity of shares or voting rights" of the Target Company, it results into substantial acquisition of shares. The term "Substantial" which is used in this context has been clarified subsequently.

2.What is a Target company?

A Target company is a listed company i.e. whose shares are listed on any stock exchange and whose shares or voting rights are acquired/ being acquired or whose control is taken over/being taken over by an acquirer.

3.Who is an Acquirer?

An Acquirer means (includes persons acting in concert (PAC) with him) any individual/company/any other legal entity which intends to acquire or acquires substantial quantity of shares or voting rights of target company or acquires or agrees to acquire control over the target company.

4.What is meant by the term "Persons Acting in Concert (PACs)"

PACs are individual(s) /company(ies)/ any other legal entity(ies) who are acting together for a common objective or for a purpose of substantial acquisition of shares or voting rights or gaining control over the target company pursuant to an agreement or understanding whether formal or informal. Acting in concert would imply co-operation, co-ordination for acquisition of voting rights or control. This co-operation/ co-ordinated approach may either be direct or indirect.
The concept of PAC assumes significance in the context of substantial acquisition of shares since it is possible for an acquirer to acquire shares or voting rights in a company "in concert" with any other person in such a manner that the acquisition made by them may remain individually below the threshold limit but may collectively exceed the threshold limit.
Unless the contrary is established certain entities are deemed to be persons acting in concert like companies with its holding company or subsidiary company, mutual funds with its sponsor / trustee/ Asset management company, etc.

5.How substantial quantity of shares or voting rights is defined?

The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 has defined substantial quantity of shares or voting rights distinctly for two different purposes:
I. Threshold of disclosure to be made by acquirer(s):
1) 5% and more shares or voting rights: A person who, alongwith PAC, if any, (collectively referred to as " Acquirer" hereinafter) 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 of target company, is required to disclose at every stage the aggregate of his shareholding to the target company and the Stock Exchanges within 2 days of acquisition or receipt of intimation of allotment of shares.
2) Any person who holds more than 15% but less than 55% shares or voting rights of target company, and who purchases or sells shares aggregating to 2% or more shall within 2 days disclose such purchase/ sale along with the aggregate of his shareholding to the target company and the Stock Exchanges.
3) Any person who holds more than 15% shares or voting rights of target company and a promoter and person having control over the target company, shall within 21 days from the financial year ending March 31 as well as the record date fixed for the purpose of dividend declaration, disclose every year his aggregate shareholding to the target company.
4) The Target company, in turn, is required to inform all the stock exchanges where the shares of target company are listed, every year within 30 days from the financial year ending March 31 as well as the record date fixed for the purpose of dividend declaration.

(II) Trigger point for making an open offer by an acquirer
1) 15% shares or voting rights:
An acquirer who intends to acquire shares which alongwith his existing shareholding would entitle him to exercise 15% or more voting rights, can acquire such additional shares only after making a public announcement (PA) to acquire atleast additional 20% of the voting capital of target company from the shareholders through an open offer.
2) Creeping acquisition limit:
An acquirer who holds 15% or more but less than 55% of shares or voting rights of a target company, can acquire such additional shares as would entitle him to exercise more than 5% of the voting rights in any financial year ending March 31 only after making a public announcement to acquire atleast additional 20% shares of target company from the shareholders through an open offer.
3) Consolidation of holding:
An acquirer who holds 55% or more but less than 75% shares or voting rights of a target company, can acquire further shares or voting rights only after making a public announcement to acquire atleast additional 20% shares of target company from the shareholders through an open offer.

6.How is "control" defined?

Control includes the right to appoint directly or indirectly or by virtue of agreements or in any other manner majority of directors on the Board of the target company or to control management or policy decisions affecting the target company. However, in case there are two or more persons in control over the target company the cesser of any one of such persons from such control shall not be deemed to be a change in control of management nor shall any change in the nature and quantum of control amongst them constitute change in control of management provided this transfer is done in terms of Reg. 3(1)(e). Also if consequent upon change in control of the target company in accordance with regulation 3, the control acquired is equal to or less than the control exercised by person (s) prior to such acquisition of control, such control shall not be deemed to be a change in control.

7.What is a Public Announcement (PA)?

A public announcement is an announcement made in the newspapers by the acquirer primarily disclosing his intention to acquire shares of the target company from existing shareholders by means of an open offer.

8.What are the disclosures required to be made under Public Announcement?

The disclosures in the announcement include the offer price, number of shares to be acquired from the public, identity of acquirer, purpose of acquisition, future plans of acquirer, if any, regarding the target company, 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.

9.What is the objective of Public Announcement?

The Public Announcement is made to ensure that the shareholders of the target company are aware of an exit opportunity available to them.

10.Can Acquirer make an offer for less than 20% of shares?

No, the acquirer cannot make an offer for less than 20% of shares. The acquirer has to make an offer for a minimum of 20% (less only in specified cases).

11.Who is required to make a Public Announcement and when is the Public Announcement required to be made?

The Acquirer is required to appoint a Merchant Banker (MB) registered with SEBI before making a PA . PA is required to be made through the said MB. The acquirer is required to make the P.A within four working days of the entering into an agreement to acquire shares or deciding to acquire shares/ voting rights of target company or after any such change or changes as would result in change in control over the target company.
In case of indirect acquisition or change in control, the PA shall be made by the acquirer within three months of consummation of such acquisition or change in control or restructuring of the parent or the company holding shares of or control over the target company in India. The offer price in such cases shall be determined with reference to the date of the public announcement for the parent company and the date of the public announcement for acquisition of shares of the target company, whichever is higher, in accordance with the parameters mentioned in the Takeover Regulations.

Chinese Walls

Artificial barriers to the flow of information set up in large firms to prevent the movement of sensitive information between departments.

Escrow account

The trust account established by a broker under the provisions of the license law for the purpose of holding funds on behalf of the broker's principal or some other person until the consummation or termination of a transaction

Hostile Bid

An effort to gain control of a target company that has not been agreed to by the target's management and board, usually through a tender offer or an unsolicited proposal to the board. Sometimes called an unsolicited bid.

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Vj
Trezrrr every pulsss
http://yehseeyes.blogspot.com/ thisisvj@gmail.com

CORPORATE RESTRUCTURING

Types, Scheme, Listing & Explanatory Statement

Some provisions of the Companies Act, 1956 facilitate corporate, business or financial restructuring in a variety of ways. The main provisions are:

(1)	Chapter V of the Companies Act, comprising sections 390 to 396A, contains provisions on 'Arbitration, Compromises, Arrangements and Reconstructions.' [There are, however, no provisions on 'Arbitration' since section 389, which dealt with Arbitration, stands deleted].
(2)	Sections 100 to 105 of the Act facilitate reduction of share capital.
(3)	Sections 106 and 107 of the Act facilitate variation of shareholders' rights.
(4)	Section 494 facilitates restructuring of a company which is in the course of winding up.

 

 

Drafting of a scheme of amalgamation

The Companies Act or the Rules made thereunder do not prescribe any form or contents of a scheme of amalgamation. Conventionally, however, certain standard clauses are included in a scheme of amalgamation. These are as follows: —

1.	Appointed Date (or Transfer Date) of amalgamation.
2.	Effective Date of amalgamation.
3.	Capital structure of the transferor company and the transferee company
4.	Share Exchange Ratio.
5.	Transfer of undertaking and liabilities of transferor-company to the transferee-company from the appointed date.
6.	Continuance of legal proceedings of the transferor-company by transferee-company after the effective date.
7.	7. Transferor-company to carry on business on behalf of the transferee-company between appointed date and effective date.
8.	Effect of amalgamation on contracts of the transferor-company after the effective date.
9.	Services of the transferor-company's employees, their service conditions, effect of amalgamation thereon, retirement benefits, etc.
10.	Allotment of the transferee-company's shares to the transferor-company's shareholders in exchange of their shares in the transferor-company as per the share exchange ratio, treatment as to fractions, rights of the shareholders.
11.	Dissolution of the transferor-company (without winding up) on the effective date.
12.	Main objects of the transferor-company to become one of the main objects of the transferee-company.
13.	Conditions subject to which the scheme is to take effect.

 

 

LISTING AGREEMENT REQUIREMENTS

In order to ensure that listed companies do not in any way violate or override or circumscribe the provisions of securities laws or the stock exchange requirements, it has been decided to make suitable amendments in the Listing agreement.

Therefore, you are hereby directed under section 11(1) and 11B of the Securities and Exchange Board of India Act, 1992 to immediately take steps to amend the listing agreement as follows:

1. In clause 24 of the Listing Agreement, three new sub-clauses (f), (g) and (h) shall be added as under –

(f) "The company agrees that it shall file any scheme/petition proposed to be filed before any Court or Tribunal under sections 391, 394 and 101 of the Companies Act, 1956, with the stock exchange, for approval, at least a month before it is presented to the Court or Tribunal."

(g) "The company agrees to ensure that any scheme of arrangement/ amalgamation/ merger/reconstruction/reduction of capital, etc., to be presented to any Court or Tribunal does not in any way violate, override or circumscribe the provisions of securities laws or the stock exchange requirements.

(h) "Explanation: For the purposes of this sub-clause, 'securities laws' mean the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956, the Depositories Act, 1996 and the provisions of the Companies Act, 1956 which are administered by SEBI under section 55A thereof, the rules, regulations, guidelines etc. made under these Acts and the Listing Agreement."

(i) "The company agrees that in the explanatory statement forwarded by it to the shareholders under section 393 or accompanying a proposed resolution to be passed under section 100 of the Companies Act, it shall disclose the pre and post-arrangement or amalgamation (expected) capital structure and shareholding pattern."

2. Clause 31(c) of the Listing Agreement shall be substituted as under—

(c) "three copies of all the notices, call letters or any other circulars including notices of meetings convened under section 391 or section 394 read with section 391 of the Companies Act, 1956, together with Annexures thereto, at the same time as they are sent to the shareholders, debenture holders or creditors or any class of them or advertised in the Press."

The A. P High Court has held that in terms of clause 24 of the Listing Agreement, consent of stock exchanges is not compulsory and it would suffice if company files scheme/petition under sections 391, 394 and 101 before the stock exchange, a month before it presents scheme/petition before Court or Tribunal for its approval

 

EXPLANATORY STATEMENT

The Explanatory Statement as required under section 173 is quite different from the Explanatory Statement which is required under section 393(1)( a) of the Act.  Section 393(1)(a) does not ordain disclosure of all material facts. It not only enumerates the categories of particulars, but it deliberately makes a departure by omitting any reference to material facts. The legislature having used a different phraseology in the said two provisions, it must be held that the legislative intent under the said section 393 was not to provide for disclosure of all material facts.   Observe the usage of 2 different words viz. "material facts" & "material interest".

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Vj
Trezrrr every pulsss
http://yehseeyes.blogspot.com/

Corporate Restructuring - only this much - Vj

Here is your syllabus, Vj lists, Part I:- The Companies Act, 1956 - (ONLY from Bare Act) Read Sections 390-396A word by word. Part II:- Takeover Code, the full regulation (ONLY from SEBI website) Read FAQ on Takeovers first, to get a basic idea, just skim through, ok. Give a fast reading once fully; Consider this link too (Amendment 2007) - http://www.sebi.gov.in/Index.jsp?contentDisp=DataTakeOver Part III:- Buyback of securities. Read Section 77A, 77B & 77AA from Act thoroughly. Read Unlisted Public & Private Companies Rules from Annexure given @ the end of the Chapter of Study Material ONLY. Read SEBI Buy back Regulations from Annexure given @ the end of the Chapter of Study Material ONLY but consider this update(2007), http://www.sebi.gov.in/Index.jsp?contentDisp=DataTakeOver Part IV:- Case Studies (Very Very Important) Take last 12 issues of Student Secretary & look out for Supreme Court & SAT cases; Also check out the recent decision by Supreme Court on Valuation under Takeover Code which is a sure shot question, this December 2007. Part V:- Miscellaneous Chapters: From Study Material, read ALLIANCES & POST MERGER REORGANISATION. Know the concepts like split/spin off; Management/Leveraged Buyout (MBO/LBO), types of restructuring, etc.... VALUATION can be better read while doing Financial Management. Also read the four cases that will repeat for valuation from Guidelines which include Mahadev Jalan, etc... Part VI:- Updates: Read Economic Times for recent M&A's. Update with this blog too. THATS IT, NOTHING MORE IS THERE TO RESTRUCTURE THE CORPORATE, NOW START TESTING YOURSELF WITH QUESTION PAPERS OF LAST 6 ATTEMPTS & TALLY IT WITH GUIDE LINE ANSWERS, Kyon Ho gayaa naa.... Vj thinks..... Just 5 days will do for this entire Subject; U can also enjoy reading this Subject from VS Datey's Corporate Law & Secretarial Practice (Heavenly Book) under the head "Compromise, Arrangements & Reconstruction"; pages will be less but very much exhaustive. Vj here for your service.