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Presented by

o Niveeta Meshram-12107A0010 o Aditya Bhujbal-12107A0033 o Samir Gopal-12107A0035


Introduction Background of Takeover Regulations SEBI (Substantial Acquisition of Shares and Takeover)
Guidelines, 1997

Transition to the New Takeover Code, 2011 SEBI (Substantial Acquisition of Shares and Takeover)
Guidelines, 2011

Impact on Industry

What is Takeover?
Takeover signifies a transaction or a series of transactions whereby a person acquires control over the assets of a company, either directly by becoming the owner of those assets or indirectly by obtaining control of the management of the company.

What does Code mean?

A set of rules outlining the responsibilities of or proper practices for an individual, party or organization

Background The laws relating to takeovers in India where not very organized until the year


for certain provisions of the Companies Act, 1956 (Section 372, regarding inter-corporate loans by Companies and Section 395, regarding acquisition of the shares of dissentient shareholders) there was hardly anything solid enough to be called as organized takeover laws. of the Securities and Exchange board of India (Substantial acquisition of shares and takeover), 1994 was a maiden Indian attempt towards an organized set of laws for regulating takeovers in India. under the chairmanship of Justice P.N. Bhagwati was constituted to review the regulations and suggest the necessary changes required under the act. The regulations were amended in 1997 and they finally were implemented. Since then the regulations have been known as the TAKEOVER CODE.

The guidelines

A need was certain changes in the regulation had been felt and so a committee

SEBI (Substantial Acquisition of Shares and Takeover) Guidelines, 1997

The objective of the Takeover Code, 1997 was to regulate in an organized manner the substantial acquisition of shares and takeovers of a company whose shares are quoted on a stock exchange i.e. a listed company. Important Provisions of the Takeover Code, 1997: Substantial Acquisition: Substantial acquisition as such has not been defined under the regulations, nor has it been defined in any other related Acts. Nevertheless, if we read through regulations 10 and 11 of the code, the question as to what constitutes substantial acquisition is made relatively very clear.

(a) Regulation 10: Threshold limit of 15% To make a public announcement for an open offer if shares acquired (b) Regulation 11 (Creeping Acquisition): beyond the threshold limit

From 15% to 55% - additional acquisition by 5% in a financial year without making a public announcement From 55% to 75% - Public announcement required in case of additional acquisition
Public Announcement: To acquire a minimum of 20% of the voting capital of the target company from the existing shareholders by means of an open offer. (c) Regulation 12: No requirement to make an open offer to any change in control which takes place pursuant to a special resolution passed by the shareholders in a General Meeting.

Transition to the New Takeover Code, 2011

The SEBI (SAST) Guidelines, 1997 formed under the guidance of the Justice P. N. Bhagwati remained in force for a period of almost 13 years. The New Takeover Code was the brainchild of the Takeover Regulations Advisory Committee (TRAC) constituted under the Chairmanship of Shri. C. Achuthan, Former Presiding Officer, Securities Appellate Tribunal Chairman, who submitted its report to SEBI Chairman Shri. C. B. Bhave on July 19, 2010. These Regulations had then been released by SEBI for Public comments from July 19, 2010 to August 31, 2010. SEBI at their Board Meeting held on July 28, 2011, had considered the report of TRAC and had then, on 23 September 2011, notified SEBI (SAST) Regulations, 2011; also known as the New Takeover Code. Finally, the New Code came into force on October 22, 2011.

The New Takeover Code, 2011

Increase in Initial Threshold Limit from 15% to 25% Creeping Acquisition Limit raised from 15%-55% to 25%-75% Increase in Offer Size from 20% to 26%

Abolition of Non-compete fees

Definition of Control modified Deletion of Regulation 12 of the Old Takeover Code, 1997

Voluntary Open Offer

Eligibility Conditions Restrictions

Detailed provisions relating to Indirect Acquisitions Provisions introduced relating to Recommendation on Open Offer by the Board of Target Company Reduction in timeline for completion of open offer (95 calendar days to 57 business days)

Impact on Industry & the way forward !

The impact of the New Takeover Code, which came into force on October 22, 2011, on the Indian industry can be analyzed by evaluating the positive and negative comments as offered by eminent professionals on the same describing its features and its effects on the field of commerce and industry.
Lesser number of Hostile Takeover Attempts.
Balance Interest of all stakeholders.

Increase in the Offer size which means exit opportunity to all the shareholders.
More Stringent and frequent disclosure requirement on the part of the

... acquirer.
Clarity in Provisions. a level playing field created for Indian acquirers by fixing the open offer size at 26 per cent.

Too Expensive for Indian Promoters due to insufficient bank funds for acquisitions.

Effect on Promoter Holdings in the Company.

Disruptive Shareholders intention to block substantial shareholding in the Company.

Evidently, SEBI has carefully attempted to juggle the interest of all stakeholders and strike a balance that is not very easy to achieve. As always, the market reaction seems to be mixed ranging from excitement to displeasure. But what is certain is that the Indian takeovers scene is set to see a lot of action good, bad and ugly.