Takeover Code

Download as pdf or txt
Download as pdf or txt
You are on page 1of 25

The Takeover Code, 2011

INTRODUCTION
The Securities and Exchange Board of India (SEBI) introduced the SEBI (Sustantia!
"c#uisition of Shares and Ta$eo%ers) Regu!ations& '(() (*Ta$eo%er Code& '(()*) to
regu!ate the ac#uisition of shares and %oting rights in +u!ic !isted co,+anies in India- The
Securities and Exchange Board of India (*SEBI*) had een considering re%ie.ing and
a,ending the Ta$eo%er Code& '(() for #uite so,e ti,e no.-
" Ta$eo%er Regu!ations "d%isor/ Co,,ittee .as constituted under the chair,anshi+ of 0r-
C- "chuthan (*"chuthan Co,,ittee*) in Se+te,er& 122( to re%ie. the Ta$eo%er Code&
'(() and gi%e suggestions- The "chuthan Co,,ittee +ro%ided its suggestions in its re+ort&
.hich .as su,itted to the SEBI in 3u!/& 12'2- "fter ta$ing into account the suggestions of
the "chuthan Co,,ittee and feedac$ fro, the interest grou+s and genera! +u!ic on such
suggestions& the SEBI fina!!/ notified the SEBI (Sustantia! "c#uisition of Shares and
Ta$eo%ers) Regu!ations& 12'' (*Ta$eo%er Code& 12''*) on 14 Se+te,er 12''- The
Ta$eo%er Code& 12'' .i!! e effecti%e fro, 11 Octoer 12''- SEBI has& ho.e%er& c!arified
that an/ o+en offer& for .hich a +u!ic announce,ent has a!read/ een ,ade& .ou!d e
go%erned / the Ta$eo%er Code& '(()-
The Ta$eo%er Code& 12'' adheres to the fra,e.or$ and +rinci+!es of the Ta$eo%er Code&
'(() ut the changes that it rings aout are significant- This edition of the I56itness U+date
+ro%ides an o%er%ie. of the Ta$eo%er Code& 12'' and discusses so,e of the ,ost i,+ortant
a,end,ents that ha%e een rought aout-
"C7UISITION
The Ta$eo%er Code& 12'' ex+!icit!/ states that it sha!! a++!/ to direct or indirect ac#uisition
of
shares or %oting rights in or contro! o%er an/ target co,+an/- Shares as defined under the
Ta$eo%er Code& 12'' inc!ude de+ositor/ recei+ts a!so- 8urther& the Ta$eo%er Code& '(()
exc!uded 9+reference shares fro, the definition of 9shares %ide an a,end,ent of 1221-
:o.e%er& this exc!usion has een re,o%ed in the Ta$eo%er Code& 12'' and therefore no.
9shares .ou!d inc!ude& .ithout an/ restriction& an/ securit/ .hich entit!es the ho!der to
%oting
rights-
The Ta$eo%er Code& 12'' defines ac#uisition as direct!/ or indirect!/& ac#uiring or agreeing
to ac#uire shares or %oting rights in& or contro! o%er& a target co,+an/ ("c#uisition)- Since
target co,+an/ has een defined in the Ta$eo%er Code& 12'' to ,ean a +u!ic !isted
co,+an/ (Target Co,+an/)& "c#uisition for the +ur+ose of the Ta$eo%er Code& 12'' can
e road!/ defined as the direct or indirect ac#uisition of shares or contro! or %oting rights in
a
+u!ic !isted co,+an/- "n ac#uirer under the Ta$eo%er Code& 12'' is therefore an/ +erson
.ho either direct!/ or indirect!/ or .ith or through +ersons acting in concert engages in such
"c#uisition ("c#uirer)-
It is .orth noting that the definition of ;"C in the ne. Ta$eo%er Code& 12'' has een
,odified .ith the i,+!ication that the o<ecti%e of the "c#uisition need not e sustantia!
ac#uisition of shares (as .as under the Ta$eo%er Code& '(())& rather& sharing the co,,on
o<ecti%e of ac#uisition of shares is enough for a +erson to e considered as acting in concert
as !ong as the +erson direct!/ or indirect!/ co5o+erates for ac#uisition of shares or %oting
rights in& or exercise of contro! o%er the Target Co,+an/-
It ,a/ e noted here that the definition of "c#uirer has een ,odified in the Ta$eo%er Code&
12'' to inc!ude "c#uisition / a +erson through +ersons acting in concert (;"C) in
addition to such +ersons as ,a/ e acting in concert .ith hi, as .as +re%ious!/ +ro%ided
for in the Ta$eo%er Code& '(()- Thus .hi!e +re%ious!/& an "c#uirer .as re#uired to e a
+art/ to the transaction of "c#uisition& according to the ne. Ta$eo%er Code& 12''& a +erson
acting through other +ersons& for exa,+!e& a s+ecia! +ur+ose %ehic!e or through other
contro!!ing entities or entities acting in concert& sha!! a!so co,e .ithin the a,it of the
definition of "c#uirer- ;"C under the Ta$eo%er Code& 12'' can e either such +ersons .ho
.ith the co,,on o<ecti%e of "c#uisition as defined ear!ier& direct!/ or indirect!/& coo+erate
for ac#uisition of shares or %oting rights in& or exercise of contro! o%er the Target Co,+an/
or such +ersons as ,a/ e dee,ed to e acting in concert as defined in the ne. Ta$eo%er
Code& 12''- Thus a co,+an/& its ho!ding co,+an/& susidiar/ co,+an/ and an/ co,+an/
under the sa,e ,anage,ent or contro! are dee,ed to e ;"C- Si,i!ar!/& a co,+an/& its
directors& and an/ +erson entrusted .ith the ,anage,ent of the co,+an/ .ou!d a!so e
dee,ed to e ;"C un!ess +ro%en other.ise-
"gain& the definition of +ersons dee,ed to e acting in concert has een ex+anded in the
Ta$eo%er Code& 12''- The +re%ious definition under the Ta$eo%er Code& '(() inc!uded a
co,+an/ .ith an/ of its directors& or an/ +erson entrusted .ith the ,anage,ent of the
funds of the co,+an/- The ne. definition .idens the sco+e to such +ersons as ,a/ e
entrusted .ith the ,anage,ent of the co,+an/ and not necessari!/ <ust the funds of the
co,+an/- Trustee co,+anies ha%e een added to +ersons dee,ed to e acting in concert .ith
res+ect to ,anage,ent of ,utua! funds-
The ao%e changes in definitions of "c#uirer and +ersons acting in concert and +ersons
dee,ed to e acting in concert suggest the intention of the regu!ators to ex+and the sco+e of
+ersons .hose actions sha!! e su<ect to scrutin/ under the ne. Ta$eo%er Code& 12''-
TRI==ERIN= O8 T:E O;EN O88ER
Initia! Thresho!d >i,it for Triggering of an O+en Offer
Under the Ta$eo%er Code& '(()& an ac#uirer .as ,andated to ,a$e an o+en offer if he& a!one
or through +ersons acting in concert& .ere ac#uiring '?@ or ,ore of %oting right in the target
co,+an/- This thresho!d of '?@ has een increased to 1?@ under the Ta$eo%er Code& 12''-
This is a significant raise fro, the thresho!d +rescried in the o!d Ta$eo%er Code& '(()- It is
+ercei%ed that the increase in the thresho!d .i!! e eneficia! to +ri%ate e#uit/ funds and
institutiona! in%estors .ho had to ear!ier restrict their sta$e to 'A-((@- No. in%estors&
inc!uding +ri%ate e#uit/ funds and ,inorit/ foreign in%estors& .i!! e a!e to increase their
shareho!ding in Target Co,+anies u+ to 1A-((@ and .i!! ha%e greater sa/ in the ,anage,ent
of the Target Co,+anies-
The +ro,oters of !isted co,+anies .ith !o. shareho!ding (e!o. 1?@) and not ha%ing access
to funds to increase their shareho!ding .ou!d e concerned aout hosti!e ac#uirers .ho can
ac#uire u+ to 1A-((@- :o.e%er& in the e%ent an "c#uirer a!ong .ith ;"C increases its
shareho!ding to ,ore than that of the +ro,oters& it .ou!d e considered to e a 9change of
contro! and such "c#uirer .i!! need to ,a$e an o+en offer- "n "c#uirer ho!ding 1A-((@
shares .i!! a!so ha%e a etter chance to !oc$ an/ decision of the Target Co,+an/ .hich
re#uires a s+ecia! reso!ution to e +assed- The +ro,oters& irres+ecti%e of their !e%e! of
shareho!ding& .i!! undouted!/ e concerned aout an/ "c#uirer ,is5uti!ising the ne.
+ro%isions to assu,e greater contro! in decision ,a$ing .ithin the Target Co,+an/-
:o.e%er& at the sa,e ti,e& this .i!! he!+ !isted co,+anies to get in ,ore in%est,ents .ithout
triggering the o+en offer re#uire,ent as ear!/ as '?@& therefore ,a$ing the +rocess ,ore
attracti%e and cost effecti%e& .hich is +ro<ected to !ead to an increase in ,ergers and
ac#uisitions acti%it/ in the Indian econo,/-
The Ta$eo%er Code& '(() recogniBed cree+ing ac#uisition at t.o !e%e!s C fro, '?@ to ??@
and fro, ??@ to the ,axi,u, +er,issi!e !i,it of non5+u!ic shareho!ding& i-e-& )?@ (and
(2@ for so,e s+ecific co,+anies)- "c#uirers ho!ding fro, '?@ to ??@ shares .ere a!!o.ed
to +urchase additiona! shares or %oting rights of u+ to ?@ in each financia! /ear .ithout
,a$ing a +u!ic announce,ent of an o+en offer- "c#uirers ho!ding fro, ??@ to )?@ (or
(2@) shares .ere re#uired to ,a$e such +u!ic announce,ent for an/ additiona! +urchase of
shares- :o.e%er& in the !atter case& u+ to ?@ additiona! shares cou!d e +urchased .ithout
,a$ing a +u!ic announce,ent if the "c#uisition .as ,ade through o+en ,ar$et +urchase on
stoc$ exchanges or due to u/ac$ of shares / the Target Co,+an/-
Cree+ing "c#uisition
The Ta$eo%er Code& 12'' ,a$es the +osition si,+!er- No.& an/ "c#uirer& ho!ding 1?@ or
,ore ut !ess than the ,axi,u, +er,issi!e !i,it for non5+u!ic shareho!ding can +urchase
additiona! shares or %oting rights of u+ to ?@ e%er/ financia! /ear& .ithout re#uiring to ,a$e
a +u!ic announce,ent for o+en offer- The Ta$eo%er Code& 12'' a!so !a/s do.n the ,anner
of deter,ination of the #uantu, of ac#uisition of such additiona! %oting rights-
This .ou!d e eneficia! for the in%estors as .e!! as the +ro,oters& and ,ore so for the !atter&
.ho can increase their shareho!ding in the co,+an/ .ithout necessari!/ +urchasing shares
fro, the stoc$ ,ar$et-
"!so& the Ta$eo%er Code& 12'' ,andates that ca!cu!ation of the ?@ shares .ou!d e on the
asis of gross ac#uisition and .ou!d not ta$e into consideration an/ +ara!!e! di!ution of
shareho!ding- Ear!ier it cou!d for instance ha%e een argued that if so,eone ac#uires '2@
and se!!s ?@ shares in +ara!!e! transactions& the net increase in shareho!ding .ou!d e ta$en
into consideration-
Indirect "c#uisition
The Ta$eo%er Code& 12'' c!ear!/ !a/s do.n a structure to dea! .ith indirect ac#uisitions& an
issue .hich .as not ade#uate!/ dea!t .ith in the ear!ier Ta$eo%er Code& '(()- Si,+!istica!!/
+ut& it states that an/ ac#uisition of shares or contro! o%er a co,+an/& usiness or entit/ that
.ou!d ena!e a +erson and +ersons acting in concert .ith hi, to exercise such +ercentage of
%oting rights or contro! o%er the Target Co,+an/& .hich if direct!/ ac#uired in the Target
Co,+an/ .ou!d ha%e other.ise necessitated a +u!ic announce,ent for o+en offer& sha!! e
considered an indirect ac#uisition of %oting rights or contro! of the Target Co,+an/-
the +ro+ortionate net asset %a!ue of the Target Co,+an/ as a +ercentage of the
conso!idated net asset %a!ue of the entit/ or usiness eing ac#uiredD or
the +ro+ortionate sa!es turno%er of the Target Co,+an/ as a +ercentage of the
conso!idated sa!es turno%er of the entit/ or usiness eing ac#uiredD or
+ro+ortionate ,ar$et ca+ita!iBation of the Target Co,+an/ as a +ercentage of the
enter+rise %a!ue for the entit/ or usiness eing ac#uiredD
is ,ore than E2@ on the asis of the !atest audited annua! financia! state,ents& such indirect
ac#uisition sha!! e regarded as a direct ac#uisition of the Target Co,+an/ and a!! the
o!igations re!ating to ti,ing& +ricing and other co,+!iance re#uire,ents for the o+en offer
.ou!d e sa,e as that of a direct ac#uisition (Dee,ed Direct "c#uisition)-
Triggering Thresho!ds Indi%idua!!/ or 3oint!/ .ith ;"C
Under the Ta$eo%er Code& 12''& an o!igation to ,a$e an o+en offer .ou!d e triggered in case
of ac#uisition of shares / an/ "c#uirer such that the indi%idua! shareho!ding of such "c#uirer
ac#uiring shares exceeds sti+u!ated thresho!ds irres+ecti%e of .hether there is a change in the
aggregate shareho!ding .ith the ;"C-
Change of Contro!
"s in the +re%ious Ta$eo%er Code& '(() the re#uire,ent of ,a$ing an o+en offer arises under
the ne. Ta$eo%er Code& 12''& irres+ecti%e of the ac#uisition or ho!ding of shares or voting rights in
the Target Co,+an/& .here the "c#uirer intends to ac#uire& direct!/ or indirect!/& contro! o%er
such Target Co,+an/- :o.e%er& under the +re%ious Ta$eo%er Code& '(()& Contro! inc!udes the
right to a++oint ,a<orit/ of the directors or to contro! the ,anage,ent or +o!ic/ decisions of the
target co,+an/- Under the ne. Ta$eo%er Code& 12''& the definition of 9contro! inc!udes not
on!/ the right ut a!so the ai!it/ to a++oint ,a<orit/ of the directors on the oard of the Target
Co,+an/-
Fo!untar/ Offer
" conce+t of %o!untar/ offer has een introduced in the Ta$eo%er Code& 12''& / .hich an
"c#uirer .ho ho!ds ,ore than 1?@ ut !ess than the ,axi,u, +er,issi!e !i,it for non5+u!ic
shareho!ding& sha!! e entit!ed to %o!untari!/ ,a$e a +u!ic announce,ent of an o+en offer for
It a!so states that .here%erG
ac#uiring additiona! shares su<ect to the aggregate shareho!ding of such "c#uirer a!ong .ith
;"C& after co,+!etion of the o+en offer& not exceeding the ,axi,u, +er,issi!e non5+u!ic
shareho!ding-
Such %o!untar/ offer .ou!d e for ac#uisition of a nu,er of shares as .ou!d entit!e the
"c#uirer to exercise a ,ini,u, additiona! '2@ of the tota! shares of the Target Co,+an/-
This .ou!d faci!itate the sustantia! shareho!ders and +ro,oters to conso!idate their
shareho!ding in a Target Co,+an/- Since no shareho!der .i!! e gi%en +referentia! treat,ent&
a !o.er offer siBe of '2@ has een ,entioned-
" %o!untar/ offer cannot e ,ade .here an "c#uirer or ;"C has ac#uired shares of the
Target Co,+an/ in the +receding ?1 .ee$s .ithout attracting the o!igation to ,a$e an o+en
offer- 8urther& during the %o!untar/ offer +eriod such "c#uirer sha!! not e entit!ed to ac#uire
an/ shares other.ise than under the o+en offer- The "c#uirer is restricted fro, ac#uiring an/
further shares in the Target Co,+an/ for a +eriod of six ,onths after co,+!etion of the o+en
offer / .a/ of %o!untar/ o+en offer or co,+eting offer-
T.o %ie.s are +ossi!e in inter+reting the +ro%isions re!ating to %o!untar/ o+en offer under the
Ta$eo%er Code& 12''- One %ie. is that %o!untar/ offers .ith a ,ini,u, offer siBe of '2@ can
e ,ade on!/ / +ersons .ho a!read/ ho!d at !east 1?@ sta$e- The coro!!ar/ is that there is
no +rohiition on %o!untar/ offers / +ersons ho!ding !ess than 1?@ so !ong as the ,ini,u,
offer siBe is 1H@- The second %ie. is that a %o!untar/ o+en offer / +ersons .ho ho!d !ess
than 1? +er cent (and .ho ha%e not ,ade a ,andator/ offer in +ast) is not +er,itted at a!!-
"ccording to the !atter %ie.& the +ro%isions re!ating to %o!untar/ o+en offers ha%e ,ade
ac#uisition atte,+ts / outsiders difficu!t and ti,e5consu,ing& / +ro%iding s+ecific
conditions& ,ost significant!/ the re#uire,ent of +rior ho!ding of at !east 1?@ and !i,its on
,ar$et +urchases- The +ro%ision see,s to e inad%ertent as the "chuthan Co,,ittee did not
necessari!/ fro.n u+on hosti!e ac#uisitions- The Ta$eo%er Code& 12'' does ,a$e +ro%isions
for co,+eting offers (descried suse#uent!/) / "c#uirers .here an o+en offer has a!read/
een ,ade / another "c#uirer triggering the re#uire,ents-
In the e%ent the shareho!ding of the "c#uirer is et.een )?@ to '22@ (or (2@ to '22@ for
so,e co,+anies) after the o+en offer& the "c#uirer .ou!d e re#uired to either ring his
ho!ding do.n to ensure co,+!iance .ith the !isting agree,ent& or +ro+ortionate!/ reduce oth
his ac#uisitions under the agree,ent that triggered the o+en offer and the ac#uisitions under
EXCEEDING
DELISTING
THE MAXIMUM PERMISSIBLE NON-PUBLIC SHAREHOLDING &
the o+en offer- 6here +ost o+en offer shareho!ding of the "c#uirer and ;"C is in excess of
the ,axi,u, +er,issi!e non5+u!ic shareho!ding& it ,ust e reduced .ithin ' /ear-
If an "c#uisition causes the +u!ic shareho!ding in the Target Co,+an/ to e reduced e!o.
the !i,its s+ecified in the !isting agree,ent entered into .ith the stoc$ exchanges / the
co,+an/ at the ti,e of !isting& an/ further "c#uisition of shares of such co,+an/ ,ust
necessari!/ e in accordance .ith the SEBI (De!isting of E#uit/ Shares) Regu!ations& 122(
(De!isting Regu!ations)- The Target Co,+an/ sha!! not e e!igi!e to ,a$e a %o!untar/
de!isting offer under the De!isting Regu!ations for '1 ,onths fro, the date of the co,+!etion
of the offer +eriod-
The "chuthan Co,,ittee had reco,,ended the introduction of the conce+t of a Ide!isting
thresho!dI to ,ean a shareho!ding entit!ing exercise of (2@ of the %oting rights in a Target
Co,+an/& exc!uding %oting rights on shares he!d / a custodian and against .hich de+ositor/
recei+ts ha%e een issued o%erseas- The de!isting thresho!d .as +ro+osed to e ca!cu!ated
.ith reference to the shareho!ding +attern of the Target Co,+an/ as of the !ast da/ of the
tendering +eriod-
The "chuthan Co,,ittee reco,,ended that if the "c#uirer crosses the de!isting thresho!d
through the o+en offer there shou!d e no further re#uire,ent to ,a$e a se+arate de!isting
offer under the De!isting Regu!ations- :o.e%er& SEBI has re<ected this reco,,endation& and
this +ro%ision is not inc!uded in the Ta$eo%er Code& 12''-
The fo!!o.ing diagra,s i!!ustrate the $e/ shareho!ding thresho!ds under the Ta$eo%er Code&
12'' and the erst.hi!e Ta$eo%er Code& '(()-
Figure 1: Take!er C"e #$11 - S%are%&"i'g T%re(%&"(
Figure #: Take!er C"e) 1**+ - S%are%&"i'g T%re(%&"(
T:E O;EN O88ER
Offer SiBe
The Ta$eo%er Code& '(() re#uired an ac#uirer& o!igated to ,a$e an o+en offer& to offer for a
,ini,u, of 12@ of the 9%oting ca+ita! of the Target Co,+an/ as on 9ex+iration of '? da/s
after the c!osure of the +u!ic offer - The Ta$eo%er Code& 12'' no. ,andates an ac#uirer to
+!ace an offer for at !east 1H@ of the 9tota! shares of the Target Co,+an/ & as on the 9'2
th
.or$ing da/ fro, the c!osure of the tendering +eriod - The tota! shares accounted for this
+ur+ose sha!! inc!ude a!! +otentia! increases in the nu,er of outstanding shares during the offer
+eriod conte,+!ated as on the date of the +u!ic announce,ent (as discussed e!o.)-
The increase in the siBe of the o+en offer fro, 12@ to 1H@& a!ong .ith increase in the initia!
thresho!d fro, '?@ to 1?@& creates a uni#ue situation under the Ta$eo%er Code& 12''- "n
ac#uirer .ith '?@ shareho!ding and increasing it / another 12@ through an o+en offer .ou!d
ha%e on!/ got a 4?@ shareho!ding in the Target Co,+an/ under the Ta$eo%er Code of '(()-
:o.e%er& no. an ac#uirer .ith a 1?@ shareho!ding and increasing it / another 1H@ through
the o+en offer under the Ta$eo%er Code& 12'' can accrue ?'@ shareho!ding and there/ attain
si,+!e ,a<orit/ in the target co,+an/-
These .e!! thought out figures c!ear!/ sho.s the intention of the regu!ator to incenti%iBe
in%estors ac#uiring sta$es in a Target Co,+an/ / gi%ing the, an o++ortunit/ of attaining
si,+!e ,a<orit/ in a Target Co,+an/- Those +ro,oters ho!ding et.een 1?@ and ?2@ .ou!d e
a!e to ac#uire ?@ a /ear under the cree+ing ac#uisition !i,it and .ou!d& thus& face sustantia!!/
!ess threat of a co,+eting hosti!e ac#uisition& c!oser the/ get to the ?2@ ,ar$-
=i%en that under the Co,+anies "ct& '(?H& the !argest shareho!der or a ?2@ shareho!der contro!s
not ?2@ of the oard of directors& ut the entire oard of directors C assu,ing su++orting
inde+endent directors 5 this c!ear!/ is a suita!e nu,er- The +ro,oters ho!ding et.een ?2@
and )?@ are a!read/ secure against a hosti!e id& .hich .ou!d e futi!e exce+t ha%ing nuisance
%a!ue& as an outsider .ith 1?@ cou!d !oc$ s+ecia! reso!utions f!oated / the +ro,oters- Such
+ro,oters ,a/ not see$ an increased nu,er of shares exce+t in extre,e cases or .here the/
de!ierate!/ see$ to conso!idate their ho!dings-
The Ta$eo%er Code& 12'' +ro%ides that the offer +eriod starts on the date of entering into an
agree,ent to ac#uire shares& %oting rights in& or contro! o%er a Target Co,+an/ re#uiring a
+u!ic announce,ent& or the date of the +u!ic announce,ent& .hiche%er is ear!ier and ends on
the date on .hich the +a/,ent of consideration to shareho!ders .ho ha%e acce+ted the o+en
offer is ,ade- Thus& un!i$e in the case of the Ta$eo%er Code& '(() this definition of offer +eriod
under the Ta$eo%er Code& 12'' is no. ,ore descri+ti%e .ith the addition of an ex+!anation of
the e%ents .hen the +eriod .i!! start and ex+ire- The definition in the Ta$eo%er Code& '(() .as
co,+arati%e!/ %ague as it stated the offer +eriod starts .hen the ,e,orandu, of understanding
is signed or the +u!ic announce,ent is ,ade and ends on the date of co,+!etion of a!! the
for,a!ities under the Ta$eo%er Code& '(()-
Offerees
"n/ o+en offer is re#uired to e ,ade to a!! shareho!ders of the Target Co,+an/& other than the
"c#uirer& ;"C and the +arties to an/ under!/ing agree,ent inc!uding +ersons dee,ed to e ;"C
.ith such +arties& for the sa!e of shares of the Target Co,+an/-
"++oint,ent of 0erchant Ban$er
The "c#uirer is re#uired to a++oint a 0erchant Ban$er as the ,anager of the o+en offer
(0anager) +rior to ,a$ing the +u!ic announce,ent in re!ation to sa,e-
0ini,u, O+en Offer ;rice
The Ta$eo%er Code& 12'' +ro%ides a different ,ethodo!og/ for the co,+utation of offer +rice as
co,+ared to the Ta$eo%er Code& '(()- " $e/ de%iation in this regard fro, the Ta$eo%er Code&
'(()& is that the Ta$eo%er Code& 12'' +ro%ides that instead of the higher of the a%erage of
.ee$!/ high and !o. of c!osing +rices for 1H .ee$s and a%erage of dai!/ high and !o. of !ast t.o
Offer ;eriod
.ee$sD the a%erage ,ar$et +rice of H2 trading da/s +rior to the date of the +u!ic announce,ent
.i!! e ta$en- This is ex+ected to ,a$e the ,ar$et +rice ,ore rea!istic-
Offer Price in Case of Direct Acquisition and Deemed Direct Acquisition of Shares, Voting
Rights or Control of the Target Company
The ,ini,u, o+en offer +rice sha!! e the highest of the fo!!o.ingG
:ighest negotiated +rice +er share of the Target Co,+an/ under the agree,ent that
attracted the o+en offer-
:ighest .eighted a%erage +rice +aid or +a/a!e for ac#uisitions / the "c#uirer or ;"C
during ?1 .ee$s +receding the date of the +u!ic announce,ent-
:ighest +rice +aid or +a/a!e for an/ ac#uisition / the "c#uirer or ;"C during 1H
.ee$s +receding the date of the +u!ic announce,ent.
6here shares are fre#uent!/ traded 5 %o!u,e .eighted a%erage ,ar$et +rice of the Target
Co,+an/ during H2 trading da/s i,,ediate!/ +receding the date of the +u!ic
announce,ent-
6here shares are infre#uent!/ traded 5 the +rice deter,ined / the "c#uirer and 0anager
to the o+en offer ta$ing into account %a!uation +ara,eters& inc!uding& oo$ %a!ue&
co,+ara!e trading ,u!ti+!es and such other +ara,eters as are custo,ar/ for %a!uation of
shares of such co,+anies-
In case of Dee,ed Direct "c#uisition .here net assets %a!ue or sa!es turno%er or
,ar$et ca+ita!iBation of the Target Co,+an/ is ,ore than '?@ of the conso!idated net
asset or sa!es turno%er or the enter+rise %a!ue of the entit/ or usiness eing ac#uired as
+er the !atest audited annua! financia! state,ents& the +er share %a!ue of the Target
Co,+an/ co,+uted / the "c#uirer-
Offer Price in Case of Indirect Acquisition of Shares, Voting Rights or Control of the Target
Company
The ,ini,u, o+en offer +rice sha!! e the highest of the fo!!o.ingG
:ighest negotiated +rice +er share& if an/& of the Target Co,+an/ under the agree,ent
that attracted the o+en offer-
Fo!u,e5.eighted a%erage +rice +aid or +a/a!e for ac#uisitions / the "c#uirer or ;"C
during ?1 .ee$s +receding the ear!ier ofG (a) the date on .hich the +ri,ar/ ac#uisition is
contracted& and () the date on .hich intention or decision to ,a$e +ri,ar/ ac#uisition is
announced in +u!ic do,ain-
:ighest +rice +aid or +a/a!e for an/ ac#uisition / the "c#uirer or ;"C during 1H
.ee$s +receding the ear!ier ofG (a) the date on .hich the +ri,ar/ ac#uisition is
contracted& and () the date on .hich intention or decision to ,a$e +ri,ar/ ac#uisition is
announced in +u!ic do,ain-
6here shares are fre#uent!/ traded 5 %o!u,e .eighted a%erage ,ar$et +rice of the
Target Co,+an/ during H2 trading da/s i,,ediate!/ +receding the ear!ier ofG (a) the
date on .hich the +ri,ar/ ac#uisition is contracted& and () the date on .hich
intention or decision to ,a$e +ri,ar/ ac#uisition is announced in +u!ic do,ain-
6here ,ini,u, offer +rice cannot e co,+uted as +er an/ of the +ara,eters& it sha!! e
fair +rice deter,ined / the "c#uirer and the 0anager to the o+en offer ta$ing into
account %a!uation +ara,eters inc!uding& oo$ %a!ue& co,+ara!e trading ,u!ti+!es& and
such other +ara,eters as are custo,ar/ for %a!uation of shares of such co,+anies
6here net assets %a!ue or sa!es turno%er or ,ar$et ca+ita!iBation of the Target
Co,+an/ is ,ore than '?@ of the conso!idated net asset or sa!es turno%er or the
enter+rise %a!ue of the entit/ or usiness eing ac#uired as +er the !atest audited
annua! financia! state,ents& the +er share %a!ue of the Target Co,+an/ co,+uted /
the "c#uirer-
:ighest +rice +aid or +a/a!e for an/ ac#uisition / the "c#uirer or ;"C during the
ear!ier ofG (a) the date on .hich the +ri,ar/ ac#uisition is contractedD () the date on
.hich intention or decision to ,a$e +ri,ar/ ac#uisition is announced in +u!ic
do,ainD and (c) the date on .hich the +u!ic announce,ent is ,ade under the
Ta$eo%er Code& 12''-
Other actors in Computation of Offer Price
Con%ersion Rate for Con%erti!e Instru,entsG 6here the "c#uirer or ;"C has an/
outstanding con%erti!e instru,ents con%erti!e into shares of the Target Co,+an/ at a
s+ecific +rice& the +rice at .hich such instru,ents are to e con%erted sha!! e
considered-
>oo$ Bac$ ;eriodG 6here the "c#uirer or ;"C has ac#uired an/ shares of the Target
Co,+an/ during the +eriod of 1H .ee$s after the tendering +eriod at a +rice higher than
the offer +rice +aid& the "c#uirer and ;"C sha!! +a/ the difference et.een the highest
ac#uisition +rice and offer +rice& to a!! the shareho!ders .hose shares .ere acce+ted in
the o+en offer& .ithin H2 da/s fro, the date of such ac#uisition exce+t .here ac#uisitions
are +ursuant to the De!isting Regu!ations or o+en ,ar$et +urchases ,ade in the ordinar/
course on the stoc$ exchanges .hich
are not negotiated dea!s or u!$ dea!s or !oc$ dea!s or in an/ other for,-
Non 5 Co,+ete 8ees and Contro!!ing ;re,iu,G In !ine .ith the s+irit of e#ua! treat,ent
of a!! shareho!ders& the Ta$eo%er Code& 12'' +ro%ides for the o,ission of the se+arate
non5co,+ete fees to the +ro,otersJse!!ers& .hich .ere +re%ious!/ under the Ta$eo%er
Code& '(() a!!o.ed to e +aid to the contro!!ing shareho!ders to an extent of 1?@ of the
offer +rice- The Ta$eo%er Code& 12'' +ro%ides that an/ direct or indirect non5co,+ete
fees or contro! +re,iu, +aid to the contro!!ing shareho!ders .ou!d e added to the offer
+rice- This change is targeted to enefit the +u!ic shareho!ders of a co,+an/ .ho .i!!
get the sa,e +rice as offered to the +ro,otersJse!!ers-
"d<ust,ents to 0ini,u, Offer ;riceG The Ta$eo%er Code& 12'' +ro%ides for ad<ust,ent
to the ,ini,u, o+en offer +rice in the fo!!o.ing casesG (a) If during the offer +eriod& the
"c#uirer direct!/ or through ;"C agrees or ac#uires an/ shares or %oting rights in the
Target Co,+an/ in an/ ,anner at a +rice higher than the ,ini,u, offer +rice& the
,ini,u, offer +rice sha!! stand re%ised to such higher +rice- () 6here the o+en offer is
su<ect to ,ini,u, !e%e! of acce+tances and the o+en offer does not recei%e the
,ini,u, acce+tance& the "c#uirer ,a/ indicate !o.er +rice for ac#uiring a!! the
acce+tances- (c) 8or cor+orate actions !i$e rights issueJ onus issueJ stoc$ s+!itsJ
di%idendJ de5,ergersJ reduction of ca+ita! etc- .here the record date for effecting the
sa,e fa!!s 4 usiness da/s +rior to the co,,ence,ent of the tendering +eriod
Interest in Case of De!a/ed ;u!ic State,entsG In case of an indirect ac#uisition& the
,ini,u, offer +rice .ou!d stand increased / '2@ +-a- for the +eriod co,,encing on
the ear!ier ofG (a) the date on .hich +ri,ar/ transaction is contracted& or () the date on
.hich the intention J decision to ,a$e +ri,ar/ ac#uisition is announced in +u!ic
do,ain& and ending on the date of detai!ed +u!ic state,ent& +ro%ided such +eriod is
,ore than ? .or$ing da/s-
O+en Offer ;rocess
;u!ic "nnounce,ent
The date of +u!ic announce,ent de+ends on the nature of "c#uisition- The fo!!o.ing ta!e
su,,ariBes the res+ecti%e dates on .hich the +u!ic announce,ents are re#uired to e ,ade for
different t/+es of "c#uisitions-
Such +u!ic announce,ent sha!! e ,ade to a!! such stoc$ exchanges on .hich the shares of the
Target Co,+an/ are !isted so that these stoc$ exchanges disse,inate the infor,ation to the
+u!ic- 6ithin one da/ of the +u!ic announce,ent& a co+/ of the sa,e sha!! e sent to SEBI and
to the Target Co,+an/- So,e of the detai!s that ha%e to e +ro%ided in the +u!ic announce,ent
are as fo!!o.s:
(i) Na,e and identit/ of the "c#uirer and the ;"C
(ii) Na,e and identit/ of the se!!ers& if an/
(iii) Nature of the +ro+osed "c#uisition& such as +urchase of shares or a!!ot,ent of shares
(i%) The consideration for the +ro+osed "c#uisition that attracted the o!igation to ,a$e an o+en
offer for ac#uiring shares& and the +rice +er share& if an/
(%) The offer +rice and ,ode of +a/,ent of consideration
(%i) Offer siBe and conditions as to ,ini,u, !e%e!s of acce+tance& if an/-
Creation of Escro. "ccount
Under the Ta$eo%er Code& 12''& the "c#uirer is re#uired to de+osit an a,ount to secure
+erfor,ance of the "c#uirer s o!igations& in an escro. account in the for, of cash de+osited
.ith a schedu!ed co,,ercia! an$ or an$ guarantee in fa%our of the 0anager or de+osit of
acce+ta!e securities .ith a++ro+riate ,argin .ith the 0anager- The escro. a,ount is re#uired
to e +!aced in escro. no !ater than t.o da/s +rior to the detai!ed +u!ic state,ent (descried
e!o.)- The a,ount re#uired to e +!aced in escro. is to e ca!cu!ated in accordance .ith the
fo!!o.ing ta!eG
6here an o+en offer is ,ade conditiona! u+on ,ini,u, !e%e! of acce+tance& '22@ of the
consideration +a/a!e in res+ect of ,ini,u, !e%e! of acce+tance or ?2@ of the consideration
+a/a!e under the o+en offer& .hiche%er is higher& is re#uired to e de+osited in cash in the
escro. account-
The 0anager to the o+en offer sha!! not re!ease the escro. account unti! the ex+ir/ of 42 da/s
fro, the co,+!etion of +a/,ent of consideration to shareho!ders .ho ha%e tendered their shares
in acce+tance of the o+en offer- In case& the "c#uirer fai!s to fu!fi! his o!igations under the
Ta$eo%er Code& 12''& SEBI ,a/ direct the 0anager to forfeit the escro. account and distriute
the +roceeds in the fo!!o.ing .a/-
'J4 of a,ount to target co,+an/
'J4 to the In%estor ;rotection and Education 8und esta!ished under the SEBI (In%estor
;rotection and Education 8und) Regu!ations& 122(D and
'J4 to e distriuted on +ro rata asis a,ong the shareho!ders .ho ha%e acce+ted the
offer-
Besides forfeiture of escro. account& SEBI can initiate se+arate action against the "c#uirer
.hich ,a/ inc!ude +rosecutionJ arring the ac#uirer fro, entering the ca+ita! ,ar$et for a
s+ecified +eriod etc-
;u!ic State,ent
The "c#uirer sha!! +u!ish a detai!ed +u!ic state,ent .ithin ? .or$ing da/s of the +u!ic
announce,ent through the 0anager of the o+en offer in a!! editions of at !east one each of an
Eng!ish nationa! dai!/& :indi nationa! dai!/ and a regiona! dai!/ .ith .ide circu!ation& at the
+!ace .here the registered office of the Target Co,+an/ is situated and one regiona! dai!/
.here the stoc$ exchange .here the ,axi,u, %o!u,e of trading in the shares of the Target
Co,+an/ are recorded during the H2 da/s +receding the +u!ic announce,ent-
Si,u!taneous!/& a co+/ of the said +u!ic state,ent sha!! eG
(a)su,itted to the SEBI through the 0anagerD
() sent to a!! the stoc$ exchanges on& .hich the shares of the co,+an/ are !isted for
eing notified to the genera! +u!ic D and
(c) sent to the Target Co,+an/ at its registered office for eing +!aced efore the Board
of Directors of such co,+an/-
Draft >etter of Offer
6ithin ? da/s of the +u!ication of the detai!ed +u!ic state,ent& the 0anager sha!! a!so
furnish to SEBI a due di!igence certificate a!ong .ith the draft !etter of offer- Si,u!taneous!/
.ith the fi!ing of the draft !etter of offer .ith SEBI& the "c#uirer sha!! send a draft !etter of offer
to the Target Co,+an/- 6ithin '? da/s of the su,ission of the draft !etter of offer to SEBI& in
the e%ent SEBI does not gi%e co,,ents& it sha!! e assu,ed that SEBI does not ha%e an/
co,,ents to offer-
>etter of Offer
The !etter of offer is re#uired to e sent to a!! the shareho!ders of the Target Co,+an/ .hose
na,es a++ear on the register of ,e,ers of Target on the Identified Date so as to reach the,
.ithin ) .or$ing da/s fro, the recei+t of co,,ents fro, SEBI- The +ur+ose of Identified Date
is to deter,ine the na,es of the shareho!ders to .ho, the !etter of offer .ou!d e sent and an
exit o++ortunit/ .ou!d e +ro%ided- The Identified Date has een fixed
as the date fa!!ing on the '2 usiness da/ +rior to the co,,ence,ent of the tendering +eriod on
the asis of the TR"C argu,ent that the sa,e shou!d not e too !ong efore the a++ro%a! of
!etter of offer and initiation of the offer +eriod for tendering the shares- The +ur+ose of this
reco,,endation is to cur the effect of transfer of shares / +u!ic shareho!ders after the date of
+u!ic announce,ent ut efore the o+ening of the offer +eriod- The definition of Identified Date
re+!aces the S+ecified Date .hich according to the o!d Ta$eo%er Code& '(() referred to a date
not !ater than the thirtieth da/ fro, the date of the +u!ic announce,ent-
Si,u!taneous!/& the "c#uirer is a!so re#uired to send the !etter of offer to the custodian of shares
under!/ing de+ositor/ recei+ts- " co+/ of the !etter of offer is re#uired to e sent to .arrant
ho!ders& .hose +eriod of exercise of o+tion or con%ersion fa!!s .ithin the offer +eriod-
The +u!ic announce,ent& !etter of offer& circu!ar& rochure or an/ other ad%ertising or +u!icit/
,ateria! issued to the shareho!ders of the Target Co,+an/ in connection .ith the +u!ic offer
,ust not contain an/ ,is!eading infor,ation and ,ust state that the directors of "c#uirer acce+t
res+onsii!it/ for the infor,ation contained therein-
Tendering ;eriod
The tendering +eriod sha!! start .ithin '1 .or$ing da/s fro, the date of recei+t of co,,ents
fro, SEBI and sha!! re,ain o+en for '2 .or$ing da/s- The "c#uirer sha!! .ithin '2 .or$ing
da/s fro, the !ast date of the tendering +eriod co,+!ete a!! re#uire,ents under the Ta$eo%er
Code& 12''-
;ost Offer "d%ertise,ent
The "c#uirer is re#uired to issue a +ost offer ad%ertise,ent .ithin ? .or$ing da/s after the offer
+eriod& gi%ing detai!s inc!uding aggregate nu,er of shares tendered& acce+ted and date of
+a/,ent of consideration-
6ithdra.a! of shares tendered in O+en Offer
The Ta$eo%er Code& 12'' has .ithdra.n the o+tion of .ithdra.ing shares tendered in an o+en
offer& .hich .as ear!ier a%ai!a!e to shareho!ders under the Ta$eo%er Code& '(()- This has een
done .ith the rationa!e that shareho!ders are +ro%ided .ith a!! the necessar/ +articu!ars for the,
to ,a$e an infor,ed decision aout the shares tendered and hence the/ shou!d not e +er,itted
to .ithdra. the shares& once the/ are tendered-
Co,+!etion of the "c#uisition
The Ta$eo%er Code& 12'' +ro%ides that an "c#uirer is a!!o.ed to co,+!ete an "c#uisition under
an/ agree,ent (for instance share +urchase agree,ent) .hich has resu!ted in the triggering the
O+en Offer o!igations after a +eriod of 1' da/s fro, the date of +u!ic announce,ent- The
sa,e .as a!!o.ed under the Ta$eo%er Code& '(() ut on!/ after the co,+!etion of a!! the offer
for,a!ities- The co,+!etion of the "c#uisition .i!! e su<ect to the "c#uirer de+ositing '22@
of the consideration +a/a!e under the o+en offer in an escro. account- The Ta$eo%er Code&
12'' further +ro%ides that in cases .here the "c#uisition is not co,+!eted efore the ex+ir/ of
the offer +eriod& the "c#uirer is a!!o.ed to do so after the ex+ir/ of the offer +eriod ut not !ater
than 1H .ee$s fro, the ex+ir/ of such +eriod- This +ro%ision .i!! a!!o. the "c#uirer to ha%e a
re+resentation in the Target Co,+an/ and exercise contro! o%er it e%en efore the co,+!etion of
the o+en offer-
;OST O;EN O88ER OB>I="TIONS
Dis+osa! of "ssets
;re%ious!/ under the Ta$eo%er Code& '(()& the "c#uirer .as dearred fro, dis+osing of assets
of the Target Co,+an/ other than in ordinar/ course of usiness for a +eriod of 1 /ears fro, the
c!osure of the o+en offer& un!ess such intention to dis+ose assets .as ,entioned u+front in +u!ic
announce,ent- Under the Ta$eo%er Code& 12''& the "c#uirer can dis+ose of assets of the Target
Co,+an/ in s+ite of not stating such intention in +u!ic announce,ent& if a++ro%a! of
shareho!ders of the Target Co,+an/ is otained through a s+ecia! reso!ution-
;ost Offer O!igations of the 0anager
The 0anager is re#uired to fi!e a re+ort on the o+en offer .ith SEBI .ithin '? usiness da/s
fro, the ex+ir/ of tendering +eriod- ;re%ious!/ under the Ta$eo%er Code& '(() the 0anager .as
free to dea! .ith the shares of the Target Co,+an/ on!/ after '? da/s fro, the c!osure of offer
+eriod- Under the Ta$eo%er Code& 12''& the 0anager is free to dea! .ith the shares of the Target
Co,+an/ i,,ediate!/ after the c!osure of offer +eriod-
CO0;ETIN= O88ER
U+on +u!ic announce,ent of an o+en offer& an/ +erson other than the "c#uirer can ,a$e a
+u!ic announce,ent for an o+en offer .ithin '? .or$ing da/s of the date of the detai!ed +u!ic
state,ent ,ade / the "c#uirer .ho has ,ade the first +u!ic announce,ent- E%er/ such offer
a!ong .ith the first ,ade offer& are $no.n as co,+eting offers- No such co,+eting offer is to e
regarded as a %o!untar/ o+en offer for the +ur+ose of the Ta$eo%er Code& 12''- No such +u!ic
announce,ent can e ,ade or transactions .hich ,a/ attract an o!igation of ,a$ing a +u!ic
announce,ent can e entered into et.een the +eriod co,,encing on the said '?th da/ and
unti! the co,+!etion of the offer +eriod-
The co,+eting offer sha!! e for such nu,er of shares .hich& .hen ta$en together .ith shares
he!d / such "c#uirer a!ong .ith ;"C& sha!! e at !east e#ua! to the ho!ding of the first offering
"c#uirer& inc!uding the nu,er of shares +ro+osed to e ac#uired / hi, under the offer and an/
under!/ing agree,ent for the sa!e of shares of the Target Co,+an/ +ursuant to .hich the o+en
offer is ,ade-
U+on the +u!ic announce,ent of a co,+eting offer& an "c#uirer .ho had ,ade a +receding
co,+eting offer sha!! e entit!ed to re%ise the ter,s of his o+en offer +ro%ided the re%ised ter,s
are ,ore fa%oura!e to the shareho!ders of the Target Co,+an/- The co,+eting "c#uirers can
a!so ,a$e further u+.ard re%isions of the offer +rice at an/ ti,e u+ to 4 .or$ing da/s +rior to
the co,,ence,ent of the tendering +eriod-
"C7UISITION 8RO0 OT:ER CO0;ETIN= "C7UIRER
The Ta$eo%er Code& 12'' ,a$es +ro%isions a!!o.ing a co,+eting "c#uirer to ac#uire shares
(as the successfu! idder) ac#uired / another co,+eting "c#uirer in the o+en offer& either /
hi,se!f or through or .ith ;"Cs- The sa,e .i!! not attract the o!igation to ,a$e another
O+en Offer +ro%ided thatG
The "c#uisition has een ,ade at a +rice not exceeding the offer +rice go%erning the
co,+eting offer ,ade / the ac#uire ac#uiring the shares-
The "c#uisition has een ,ade .ithin 1' da/s fro, the ex+ir/ of the offer +eriod of such
co,+eting offer-
DISC>OSURES
Disc!osure of "c#uisition or Dis+osa!
"n "c#uirer ,a$ing an "c#uisition under the Ta$eo%er Code& 12'' in a Target Co,+an/ .here
the ac#uired shares and %oting rights together .ith an/ existing shares or %oting rights of the
"c#uirer and ;"C a,ount to ?@ or ,ore of the shareho!ding of the Target Co,+an/& sha!!
,a$e disc!osures of their aggregate shareho!ding and %oting rights in such Target Co,+an/ and
e%er/ "c#uisition or dis+osa! of shares of such Target Co,+an/ re+resenting 1@ or ,ore of the
shares or %oting rights in such Target Co,+an/-
The disc!osure re#uired under the Ta$eo%er Code& 12'' sha!! e ,ade .ithin 1 .or$ing da/s of
the recei+t of inti,ation of a!!ot,ent of shares& or the "c#uisition of shares or %oting rights in
the Target Co,+an/ toG
(i) e%er/ stoc$ exchange .here the shares of the Target Co,+an/ are !istedD and
(ii) the Target Co,+an/ at its registered office-
The Ta$eo%er Code& 12'' +ro%ides for ,ore fre#uent and stringent disc!osures on the +art of the
"c#uirer- There has een a significant a,end,ent in the +re%ious Regu!ation ) of the Ta$eo%er
Code& '(() .hich dea!t .ith the "c#uisition of ?@ and ,ore shares or %oting rights of a
co,+an/- Erst.hi!e Regu!ation ) sti+u!ated that disc!osures of shareho!ding ha%e to e ,ade on
the "c#uisition of ,ore than ?@ '2@& 'A@& ?A@ and )A@ shares in the Target Co,+an/- The
Ta$eo%er Code& 12'' re,o%es the disc!osure in ? stages- Regu!ation 1E of the Ta$eo%er Code&
12'' states that a disc!osure .i!! e ,ade at the ti,e of the "c#uisition of ?@ of the shares or
%oting rights in the co,+an/-
Under the Ta$eo%er Code& '(() disc!osure .as re#uired .hen there is a +rior 5ho!ding / the
"c#uirer of shares J %oting rights et.een '? to ??@ in the Target Co,+an/-
Continua! Disc!osures
The !i,it for continua! disc!osures has een increased in the Ta$eo%er Code& 12'' fro, '?@ to
1?@ .herein e%er/ +erson .ho ho!ds shares or %oting rights entit!ing hi, to exercise ,ore than
1?@ %oting rights .i!! ,a$e disc!osure of the aggregate shareho!ding of such "c#uirer and ;"C
e%er/ financia! /ear as of 4' 0arch- The +ro,oter of e%er/ Target Co,+an/ together .ith ;"C
sha!! ha%e the sa,e o!igation- In oth circu,stances& the disc!osure has to e ,ade .ithin )
.or$ing da/s fro, the end of each financia! /ear toG
(a) e%er/ stoc$ exchange .here the shares of the Target Co,+an/ are !istedD and
() the Target Co,+an/ at its registered office-
In cases of encu,rances on shares of Target Co,+an/& the +ro,oters are re#uired to ,a$e
disc!osures regarding the sa,e a!ong .ith detai!s of in%ocation or re!ease of such encu,rances
.ithin ) da/s of the creation& in%ocation or re!ease of the encu,rance& as the case ,a/ e to
ao%e,entioned +arties-
Indian +ro,oters& se%era! of .ho, had +re%ious!/ ,anaged to circu,%ent ru!es .hich ,a$e it
,andator/ for the, to disc!ose detai!s of shares +!edged / the,& .i!! no. find it difficu!t to
sideste+ such nor,s& .ith SEBI insisting on greater disc!osures under the Ta$eo%er Code& 12''-
The Ta$eo%er Code& 12'' has .idened the sco+e of disc!osures / re+!acing the ter, I+!edgeI
.ith Iencu,ranceI& .hich inc!udes +!edge- The Ta$eo%er Code& 12'' ,a$es it ,andator/ for a!!
shares encu,ered / +ro,oters or / their ;"C to e disc!osed- This .as not the case under
the Ta$eo%er Code& '(() .hen the re#uire,ent of disc!osure of +!edged shares .as incor+orated
in 122( after the sca, in%o!%ing :/deraad5ased Infor,ation Tehno!og/ fir, Sat/a,
Co,+uter Ser%ices >i,ited- Under regu!ation 1E(4) of the Ta$eo%er Code& 12'' it has een
ex+!icit!/ c!arified that an encu,rance sha!! inc!ude a +!edge& a !ien or an/ such transactions /
.hate%er na,e ca!!ed-
EKE0;TION 8RO0 0"LIN= O;EN O88ER
Exe,+tions under the Ta$eo%er Code& 12'' ha%e een ,ade under the fo!!o.ing categoriesG
Transactions& .hich trigger a statutor/ o+en offer due to sustantia! ac#uisition of sharesJ
%oting rights& or due to change in contro!
Transactions& .hich trigger a statutor/ o+en offer due to ac#uisition of sharesJ %oting
rights exceeding +rescried thresho!ds& +ro%ided that there is no change in contro!
"c#uisition ;ursuant to Rights Issue
"c#uisition of shares / the shareho!der of a Target Co,+an/ u+ to his entit!e,ent u+on a rights
issue is exe,+t fro, the o+en offer re#uire,ent- E%en ac#uisition of shares / such a
shareho!der e/ond his entit!e,ent& +ursuant to a rights issue is +er,itted if the "c#uirer has not
renounced an/ of his entit!e,ent under the rights issue and the +rice at .hich the rights issue has
een ,ade does not exceed the +rice of the shares of the Target Co,+an/ +rior to the rights issue
ca!cu!ated in the ,anner +ro%ided in Regu!ation '2(A) of the Ta$eo%er Code& 12''-
Inter5se Transfers
The Ta$eo%er Code& '(() used to recogniBe inter5se transfer of shares a,ongst the fo!!o.ing
grou+s C
a) =rou+ co,ing .ithin the definition of grou+ as defined in the 0ono+o!ies and Restricti%e
Trade ;ractices "ct& '(H(-
) Re!ati%es .ithin the ,eaning of section H of the Co,+anies "ct& '(?H-
c) 7ua!if/ing Indian +ro,oters and foreign co!!aorators .ho are shareho!ders& etc-
The categoriBation of such grou+s has een a,ended in the Ta$eo%er Code& 12'' and transfer
et.een the fo!!o.ing #ua!if/ing +ersons has een ter,ed as inter5se transferG
a) I,,ediate re!ati%es-
) ;ro,oters& as e%idenced / the shareho!ding +attern fi!ed / the target co,+an/ not !ess
than 4 /ears +rior to the +ro+osed ac#uisition-
c) " co,+an/& its susidiaries& its ho!ding co,+an/& other susidiaries of such ho!ding
co,+an/& +ersons ho!ding not !ess than ?2@ of the e#uit/ shares of such co,+an/& etc-
d) ;ersons acting in concert for not !ess than 4 /ears +rior to the +ro+osed ac#uisition& and
disc!osed as such +ursuant to fi!ings under the !isting agree,ent-
To a%ai! exe,+tion fro, the re#uire,ents of o+en offer under the Ta$eo%er Code& 12''& the
fo!!o.ing conditions .i!! ha%e to e fu!fi!!ed .ith res+ect to an inter5se transferG
(a) If the shares of the target co,+an/ are fre#uent!/ traded C the ac#uisition +rice +er share
sha!! not e higher / ,ore than 1?@ of the %o!u,e5.eighted a%erage ,ar$et +rice for a
+eriod of H2 trading da/s +receding the date of issuance of notice for such inter5se
transfer-
() If the shares of the target co,+an/ are infre#uent!/ traded& the ac#uisition +rice sha!! not
e higher / ,ore than 1?@ of the +rice deter,ined / ta$ing into account %a!uation
+ara,eters inc!uding& oo$ %a!ue& co,+ara!e trading ,u!ti+!es& etc-
"c#uisition under a Sche,e
The Ta$eo%er Code& 12'' +ro%ides that "c#uisition of shares or %oting rights +ursuant to a
sche,e ,ade under section 'E of the Sic$ Industria! Co,+anies (S+ecia! ;ro%isions) "ct& '(E?
or under a sche,e of arrange,ent in%o!%ing the Target Co,+an/ as a transferor co,+an/ or as a
transferee co,+an/& or reconstruction of the Target Co,+an/& inc!uding a,a!ga,ation& ,erger
or de,erger& +ursuant to an order of a court or a co,+etent authorit/ under an/ !a. or
regu!ation& Indian or foreign& sha!! e exe,+ted fro, the o+en offer re#uire,ents- "s regards a
sche,e of arrange,ent& not direct!/ in%o!%ing the Target Co,+an/ as a transferor co,+an/ or as
a transferee co,+an/& or reconstruction of the Target Co,+an/& inc!uding a,a!ga,ation& ,erger
or de,erger& exe,+tion .ou!d e a%ai!a!e on!/ if such sche,e satisfies the fo!!o.ing
conditionsG
a) the co,+onent of cash and cash e#ui%a!ents in the consideration +aid eing !ess than
t.ent/5fi%e +er cent of the consideration +aid under the sche,eD and
() .here after i,+!e,entation of the sche,e of arrange,ent& +ersons direct!/ or indirect!/
ho!ding at !east thirt/5three +er cent (44@) of the %oting rights in the Target Co,+an/ are
the sa,e as the +ersons .ho he!d the entire %oting rights efore the i,+!e,entation of
the sche,e-
It ,a/ e noted here that under the Ta$eo%er Code& '(()& "c#uisition of shares or %oting rights
+ursuant to an/ sche,e of arrange,ent or reconstruction inc!uding a,a!ga,ation or ,erger or
de,erger under an/ !a. or regu!ation& Indian or foreign& had a !an$et exe,+tion fro, the o+en
offer re#uire,ents& irres+ecti%e of the nature of the sche,e-
The "c#uisition of shares of a Target Co,+an/& not in%o!%ing a change of contro! o%er such
Target Co,+an/& +ursuant to a sche,e of cor+orate det restructuring in ter,s of the Cor+orate
Det Restructuring Sche,e notified / the Reser%e Ban$ of India is exe,+t fro, the
re#uire,ent of ,a$ing an o+en offer& if the sa,e has een authorised / shareho!ders / .a/ of
a s+ecia! reso!ution +assed / +osta! a!!ot-
Bu/5Bac$ of Shares
The Ta$eo%er Code& '(() did not +ro%ide for an/ exe,+tion for increase in %oting rights of a
shareho!der due to u/ac$s- The Ta$eo%er Code& 12'' ho.e%er +ro%ides for exe,+tion for
such increase-
In a situation .here the "c#uirer s initia! shareho!ding .as !ess than 1?@ and exceeded the 1?@
thresho!d& there/ necessitating an o+en offer& as a conse#uence of the u/ac$& the Ta$eo%er
Code& 12'' +ro%ides a +eriod of (2 da/s during .hich the "c#uirer ,a/ di!ute his sta$e e!o.
1?@ .ithout re#uiring an o+en offer- 6here an "c#uirer s initia! shareho!ding .as ,ore than
1?@ and the increase in shareho!ding due to u/ac$ is e/ond the +er,issi!e cree+ing
ac#uisition !i,it of ?@ +er financia! /ear& the "c#uirer can sti!! get an exe,+tion fro, ,a$ing
an o+en offer& su<ect to the fo!!o.ingG
such "c#uirer had not %oted in fa%our of the reso!ution authorising the u/5ac$ of
securities under section ))" of the Co,+anies "ct& '(?HD
in the case of a shareho!der reso!ution& %oting .as / .a/ of +osta! a!!otD and
the increase in %oting rights did not resu!t in an ac#uisition of contro! / such "c#uirer
o%er the Target Co,+an/-
In case the ao%e conditions are not fu!fi!!ed& the "c#uirer ,a/& .ithin (2 da/s fro, the date
of increase& di!ute his sta$e so that his %oting rights fa!! e!o. the thresho!d .hich .ou!d
re#uire an o+en offer-
"c#uisition under O+eration of >a.
"c#uisition +ursuant to the +ro%isions of the Securitisation and Reconstruction of 8inancia!
"ssets and Enforce,ent of Securit/ Interest "ct& 1221 and the De!isting Regu!ations are
exe,+ted fro, the o+en offer re#uire,ent-
Disin%est,ent
"c#uisitions at suse#uent stages& / an "c#uirer .ho has ,ade a +u!ic announce,ent of an
o+en offer for ac#uiring shares +ursuant to an agree,ent of disin%est,ent in a +u!ic sector
underta$ing is a!so exe,+t under certain conditions +ro%ided for in the Ta$eo%er Code& 12''-
"c#uisition in the Ordinar/ Course of Business
"c#uisition of shares in the ordinar/ course of usiness / stoc$ ro$ers acting on eha!f of their
c!ients& ,erchant an$ers or a no,inated in%estor in the +rocess of ,ar$et ,a$ing or
suscri+tion to the unsuscried +ortion of issue in ter,s of Cha+ter KB of the Securities and
Exchange Board of India (Issue of Ca+ita! and Disc!osure Re#uire,ents) Regu!ations& 122(&
schedu!ed co,,ercia! an$s acting as an escro. agent& +erson ac#uiring shares +ursuant to a
sche,e of safet/ net in ter,s of regu!ation AA of the Securities and Exchange Board of India
(Issue of Ca+ita! and Disc!osure Re#uire,ents) Regu!ations& 122(& a ,erchant an$er registered
.ith SEBI acting as a stai!iBing agent& a,ongst others& ha%e a!so een exe,+ted fro, the o+en
offer re#uire,ent-
Foting Rights of ;reference Shareho!ders
6hen %oting rights accrue to +reference shareho!ders on account of non5+a/,ent of di%idend&
the sa,e is exe,+t fro, re#uire,ent of ,a$ing an o+en offer-
"c#uisition fro, State5!e%e! 8inancia! Institutions
"c#uisition of shares in a Target Co,+an/ fro, state5!e%e! financia! institutions or their
susidiaries or co,+anies +ro,oted / the,& / +ro,oters of the Target Co,+an/ +ursuant to
an agree,ent et.een such transferors and such +ro,oter are exe,+t fro, o+en offer
re#uire,ents-
Exchange of Shares
"c#uisition of shares in a Target Co,+an/ / an/ +erson in exchange for shares of another
Target Co,+an/ tendered +ursuant to an o+en offer for ac#uiring shares under the Ta$eo%er
Code& 12'' is exe,+ted-
"c#uisition fro, Fenture Ca+ita! 8und
"c#uisition of shares in a Target Co,+an/ fro, a %enture ca+ita! fund or a foreign %enture
ca+ita! in%estor registered .ith SEBI& / +ro,oters of the Target Co,+an/ +ursuant to an
agree,ent is a!so exe,+t fro, the re#uire,ents of the o+en offer-
Case5S+ecific Exe,+tion granted / SEBI
SEBI ,a/ exe,+t an "c#uirer fro, ,a$ing an o+en offer or grant re!axation fro, ,eeting
certain +rocedura! re#uire,ents under the Ta$eo%er Code& 12'' on the asis of reasons .hich
ha%e to e recorded in .riting in the interest of in%estors in securities or the securities ,ar$et-
RES;ONSIBI>ITM O8 DIRECTORS "ND INDE;ENDENT DIRECTORS O8 T:E T"R=ET
CO0;"NM
There is a significant change in the genera! o!igations of the Board of Directors of a Target
Co,+an/ under the Ta$eo%er Code& '(() and the Ta$eo%er Code& 12''- The Ta$eo%er Code&
'(() had gi%en a discretionar/ o+tion to the oard of directors to send their reco,,endations on
the o+en offer to the shareho!ders and for the +ur+ose the Board cou!d see$ the o+inion of an
inde+endent ,erchant an$er or a co,,ittee of inde+endent directors-
The Ta$eo%er Code& 12''& ho.e%er& ,a$es it ,andator/ for the oard of directors of the Target
Co,+an/ to constitute a co,,ittee of inde+endent directors (.ho are entit!ed to see$ externa!
+rofessiona! ad%ice on the sa,e) to +ro%ide .ritten reasoned reco,,endations on such o+en
offer& .hich the Target Co,+an/ is re#uired to +u!ish-
CONC>USION
The Ta$eo%er Code of 12'' is a ti,e!/ and +rogressi%e regu!ation that .ou!d faci!itate
in%est,ents and attract in%estors- E%en though SEBI has not i,+!e,ented a!! the suggestions of
the "chuthan Co,,ittee& it has sti!! ta$en into consideration so,e of the ,a<or issues that had
een +!aguing the industr/ ti!! no.- It has tried to ,aintain a a!ance et.een the concerns of the
in%estors as .e!! as that of the +ro,oters-

You might also like