It is extremely crucial for each of the stakeholders in the institution in this highly competitive sector

to protect their institution interests against all forms of interference from third parties. Corporate
ownership and stockholding are today and around the world one of the most prized assets. States
have adopted numerous guidelines for securities to safeguard stakeholders' interests in an
enterprise. It is widely known that an effective and well-administered set of takeover rules is one of
the core components in every country's comprehensive corporate governance. The majority of the
country has enacted takeover legislation, laying down a consistent framework for the purchase of
stocks in listed companies, thereby ensuring that, in the event of an acquisition or takeover, no
compromises are placed on the interests of stocks of listed companies. A fundamental corporate
governance principle is to protect the interests of minority stockholders, and in the case of listed
companies it gains further importance. The administration and functioning of companies with
‘common people participation, as common people stockholders depend upon administration and
promoters while investing in the institution, should be subject to the exceptional quality of
corporate governance and clarity. In relation to a significant acquisition or acquisition of an enlisted
institution, the takeover laws makes sure that the common people stockholders of a listed
institution are tended to justly and equitably, thereby preserving stability on the securities market.
The takeovers guidelines also have the goal of ensuring that, when a sizable acquisition is made or a
change in the management of the listed institution; common people stockholders of a institution
have a way out from the institution at the best possible time.

The existing Indian Acquisition Guidelines also govern the acquisition of stakes in Indian listed
enterprises and makes sure that transparency in institution matters in accordance with
international law SEBI (substantial acquisition of stocks and take over) rules for 2011 (hereinafter
called the 'Takeover Code”) is maintained. In addition, by obliging acquirers to provide common
people stockholders with a mandatory exit possibility in the event of a takeover or substantial
acquisition, common people stockholders’ interests is protected by the Takeover Code. The
Takeover Code also aims to ensure the fair, equitable and transparent operation of the securities
market in India.

SEBI included in the adoption code most of the TRAC's recommendations and has endeavored to
maintain balance between the various parties' interests, including acquirers, stockholders and the
objective enterprise. Even under the Takeover Code the extensive ideology of safeguarding
common people stockholders' interests in takeover situations remains uncharted.

A 'open offer' made to the common people stockholders of the objective firm is a critical obligation
under the taking-over guidelines, when stocks or polling rights are substantially acquired or
authority over the objective institution is acquired. Acquisition limits were redefined under the
Takeover Code from those in accordance with the 1997 Code. Regardless of stockholder level,
control acquisition still triggers the commitment to offer an open offer.

Open offer = A min. of 26% of the objective institution's stockholder

1. Voluntary Open Offers

The Takeover Code provides for a voluntary open offer from an acquirer in possession of 25 % or
more of the stockholding of the objective firm. The obligatory open offer obligations are not
triggered by acquisitions in accordance with the voluntary open offer.

Open voluntary offer = A min. 10% of the objective institution's stocks

 In the Frequently Asked Questions dated 12 December 2011, SEBI has clarified that a individual
holding less than 25 per cent has also the right to offer voluntarily subject to the conditions
specified.

2. Competing Offers

Similar to the 1997 Code, the Code gives competitive propositions to be made for the acquisition of
stocks in the objective institution within 15 working days of an intricate common people
declaration.

“Competing offer = At least such number of stocks equal to stocks held by acquirer in
objective institution + stocks to be acquired as part of open offer + stocks to be acquired vide
the primary transaction”

Making a "open offer" actually means offering to buy stocks from the objective institution's
common people stockholders. One goal of the Takeover Code is, in accordance with its Terms and
Conditions, to allow common people stockholders a chance to leave their investments in the
objective institution if there is a significant acquisition of stocks or takeover of the objective
institution. The Takeover Code describes more precisely how the open offer is to be implemented.
Key amendments of the Takeover Code include: I bid estimating cost; (ii) bid timing especially in
the case of indirect procurement; (iii) the wise execution and withdrawal of open bids and (iv) role
and intermediary responsibilities in the open bid procedure.

Although the main purpose of the Takeover Code is the safeguarding of investors, the Takeover
Code such as the 1997 code includes a few exceptions from the obligation to open offer without
digressing from its purpose. In order to accomplish better economic product and better
administration, promoters and companies often undertake institution restructuring. Such
reorientation by the listed companies is often at peril of triggering the obligation of an open offer
under the Code of Takeover. The mercantile benefit of a corporate restructuring cannot be at the
risk of common people stockholders, but it will also be a draconian measure to introduce a clear
ban on this type of structure.

Additionally, acquisitions could be made which are not meant to give the acquirer ownership of
rights but take place in the ordinary course of the acquirer's business. In the same vein, it may not
be a positive tendency to oblige stockholders to make a compulsory open offer to increase polling
rights unintentionally and inadvertently.

The Takeover Code recognizes certain specific derogations from the obligation to make available an
open offer in order to even out these clashing interests. The exceptions in the Takeover code are
less but more modernised compared to the 1997 Code. Few very common derogations often
depended upon by acquirers within the 1997 Code such as the inter-sectioning of a "group" as
established in the 1969 Law on monopolies and confining business practice and the transmission
between an enterprise or institution, and controlled by its relative in the latest printed yearly
report by the objective institution.

The exceptions made available to purchasers and PAC pursuant to the take-over Code are
segregated into exceptions for open-off duties pursuant to Guidelines 3 and 4 I exceptions for open-
off liabilities pursuant to Guidelines 3(iii) and (iv) open-off obligations pursuant to Guidelines 3(1)
and (ii) (2).

As is currently the case in the Takeover code, the 1997 Code exceptions were not bifurcated. In
accordance with the 1997 Code, the guidelines itself did not bear on to the business deal if a
transaction was exempted. Besides the bifurcations provided for within the Takeover Code
regarding exceptions from particular business deals and the correlated laws, Regulation 10
indicates that the open offer obligation that would be withdrawn would be applicable in the event
of an exempt transaction. It is therefore not clear if the other limitations, such as the limitations of
the maximum stockholder quantity, which can be acquired under Regulation 3(2), continue to
apply.

Essentially, this means that if any of the transactions leads to one or more people acquiring more I
25% of the objective institution's stocks or polling rights, or (ii) more than 25% of the objective
institution's stocks or polling rights in the objective institution, or (ii) more than 5% of the target
firm's share or polling rights, in the financial year.

According to Regulation 3 and Regulation 4 only limited transactions are exempt, i.e. if they cross
over the stockholder thresholds or lead to a change in authority. Those are as follows:

i. Inter se stocks between qualified individuals are transferred.

Qualifying individuals are:

a. Immediate family members

b. The proponents recognized for not less than 3 years prior to the suggested purchase in the
stockholder pattern filed by the objective institution under the listing agreement, or the takeover
code;

c. The institution, subsidiaries thereof, its holding undertaking, the other subsidiaries thereof,
individuals holding a minimum of 50% of the stockholdings of the institution, other companies
holding a minimum of 50% of the equity stocks of such individuals and their subsidiaries subject to
the discretionary authority of such qualifying individuals holding only the same people;

d. Individuals acting together no later than 3 years prior to the suggested acquisition and as
similarly divulged under the listing agreement in accordance with the filings;

e. Stockholders of a objective institution who have been individuals acting in concert for not less
than three years before the suggested acquisition and who are divulged as such under the listing
agreement and any institution owned by such stockholders as a whole as their holdings in the
objective institution with no difference in value.

The exception for qualifying individuals is subject to:

A. For most regularly traded stocks, the purchase cost will not, for more than 60 business days prior
to the date of issuance of a notification for the suggested intersection, exceed the volume-weighted
average market price by more than 25 percent.
b. The acquisition price for the stocks which are not frequently traded shall maximum of 25 percent
the price determined by the Takeover Code; and

c. Requirements for disclosure have been fulfilled.

ii. Acquisition by a SEBI registered underwriter, a stock courier recorded with SEBI, a business bank
recorded with SEBI, a planned commercial bank substituting as an escrow agent, a registered
business bank or common people commercial institutions as pledgee, a recorded stock market
owner and anyone acquiring stocks under a SEBI scheme. Guidelines under certain conditions are
exempt from the obligation to open offer.

iii. Acquisitions at subsequent stages, as set out in that agreement, by an acquirer who has made a
common people declaration of open bidding on the acquisition of stocks.

iv. Scheme acquisition: iv.

a. or any statutory change made or re-establishment of rights under Article 18 of the Law of SICs
(Special Provisions) 1985 (1 of 1986)

b. The organization of a target enterprise, either as a transferee institution or in the course of the
reconstruction of or under any legislation or regulation, if Indian or foreign, including an
amalgamation, merger or dismemberment;

C. An arrangement which, under a court order or a qualified official in the purview of any law or
guidelines, does not imply a direct involvement of the objective institution as a transferring firm or
a redevelopment undertaking, including a merger, amalgamation or merger subject to (a) the
money and money correspondent component in the consideration and (b) when individuals
holding a minimum of 33% of the polling rights in the joint organisation after the implementation
of an arrangement are the same as individuals holding full polling rights prior to the
implementation of the arrangement.

v. Acquisition of financial assets and enforcement of security interest legislation, 2002, pursuant to
the provisions of Securitization and Recovery of Financial Assets;

b. In accordance with the Delisting Guidelines;

c. Transmission, inheritance or succession;

d. Polling rights or inclination share rights arising from the operation of paragraph (2) of paragraph
87 of the Act concerning companies.