Takeover Code
Takeover Code
Takeover Code
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-