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Module 6

 SEBI (substantial Acquisition of shares &Takeovers)


Regulations 1997.
 The Securities and Exchange Board of India Act,1992 .
 Security Contract Regulation Act ,1956 .
 The Depositories Act,1956.
 SEBI Disclosure and Investor Protection Guidelines
2000.
 Securities and Exchange Board of India (Prohibition of
Insider Trading Regulation ),1992.
 Securities and Exchange Board of India (Merchant
Bankers) Rules/Regulation 1992.
 SEBI (Delisting of Securities )Guidelines,2003.
 Foreign Exchange Management Act,1999.
 Companies Act,1956.
SEBI (substantial Acquisition of shares
&Takeovers) Regulations 1997.
 Reg-7:Disclosuure to company and to stock
exchange by any person who acquire more than
5%,10% or 14% shares

 Reg-10: NO acquirer shall acquire 15% or more


shares unless such acquirer makes a public
announcement to acquire shares of such company
as per SAST,1997.
 Reg-11: If (15%-75%) shares acquired as per
Law then no acquirer can acquire additional
shares which entitle him to exercise 5% or
more in any financial year, unless public
announcement is made.

Acquisition :-
 Direct Acquisition in a listed company to which
the Regulation apply.
 Indirect acquisition by virtue of acquisition of
companies, whether listed or unlisted, whether
in India or aboard.
 Reg-13:Before making public announcement
merchant banker is to be appointed

 Reg-14:Timing of Public Announcement Offer not


later than 4 working days after agreement for
acquisition of shares.

 Reg-15: Public Announcement of offer to be made in


newspaper, Hindi, regional and mostly traded area.
Public Announcement shall be submitted to: SEBI
through merchant Banker
 Reg-18:Within 14 days from the date of Public
Announcement draft letter of offer to be filed with
SEBI through Merchant Banker.

 The letter of Offer to be dispatched to share-


holders not earlier than 21days.

 Reg-19: Public announcement shall specify a date


for the purpose of determining the name of the
shareholder to whom Letter of Offer will be sent
shall not be later than 30th day.
 Reg-21: Minimum number of shares to be
acquired by Public offer-20%.

 If the public shareholding goes below 10%,


delisting of securities guidelines will apply.

 Reg-28: ESCROW- The acquirer by way of


security performance of his obligation, deposit in
ESCROW account sum as under
 For consideration (C) payable under the public
offer upto and including C=<100 cr - 25%
 C>100 cr - 25% upto Rs.100 cr &10%
thereafter.
 Reg-29: PAYMENT OF CONSIDERATION
7days from closure of offer open special
account with Banker to an issue and
deposit sum as would together with 90% of
lying in ESCROW make up entire sum due
and payable to shareholders.
 Section 391 – 394 of the Companies Act, 1956 deals with
Compromises, Arrangements and Reconstructions and
other related issues through schemes of arrangement
approved by the High Courts. A resolution to approve the
scheme of arrangement has to be passed by the
shareholders in the general meetings. The shareholders
have to vote on the resolutions on the schemes of
arrangement on the basis of the disclosures in the
notice/explanatory statement. Section 393 of the
Companies Act, 1956 specifies the broad parameters of
the disclosures which should be given to the shareholders
/ creditors, for approving a scheme of arrangement.
 Amendment in the Companies Act, 1956 in year 2002 gave
powers to National Company Law Tribunal to review and to
allow any compromise or arrangement, which is proposed
between a company and its creditors or any class of them or
between a company and its members or any class of them.
However, because of non formation of National Company Law
Tribunal, these powers still lie with High Courts and the parties
concerned can make applications to high courts.

 If the Creditors, Members present at a General meeting


representing three fourth of total number agree to any
compromise or arrangement, it becomes binding on the rest of
the members or creditors provided the tribunal sanctions the
compromise or arrangement.

 The order made by Tribunal will come in to effect only after the
filing of certified copy with the Registrar of Companies.
Court’s power under the section are very wide and has discretion to
allow any sort of arrangement between the company and members.
Scope and ambit of the Jurisdiction of the Court:
 The sanctioning court has to see to it that all the requisite
statutory procedure for supporting any scheme has been
complied with along with requisite meetings.
 That the scheme put up for sanction of the court is backed up by
the requisite majority vote.
 That the concerned meetings of the creditors or members or any
class of them had the relevant material to enable the voters to
arrive at an informed decision for approving the scheme.
 That the proposed scheme is not found to be violative of any
provision of law and is not contrary to public policy.
 Under this section, the court has power to supervise the
carrying out of the compromise or an arrangement; and
may, at the time of making such order or at any time
thereafter, give such directions in regard to any matter
or make such modifications in the compromise or
arrangement as it may consider necessary for the proper
working of the arrangement.

If the court is of the view that a compromise


/arrangement sanctioned under section 391 cannot be
worked satisfactorily with or without modifications, it
may on it own motion or on the basis of an application
made by an interested party may order winding up of
the company under section 433 of the Act.
This section prescribes the procedure required for convening the
meeting of the members or creditors called under section 391.

The notice for the meeting should be sent along with a statement
setting forth the terms of the compromise and or arrangement and
explaining its effect and in particular, the statement must state all
material interest of the directors, managing directors of the company,
whether in their capacity as such or as members or creditors of the
company or otherwise.

Where the compromise or arrangement affects the rights of debenture


holders of the company, the statement shall give the information and
explanation in respects to the trustees of any deed for securing the
issue of the debentures as it is required to give in respect of directors.

Any default in complying with the requirements under this section


may lead to a fine of Rs. 50, 000 against the concerned official of the
company, who is found guilty.
Where the court is of the view that the proposed
arrangement/scheme is of such nature that
• the scheme is for the reconstruction of any company or for
amalgamation of any two or more companies; and
• that under the scheme the whole or any part of the undertaking
property or liabilities of any concerned company is to be transferred
to another company;

the court may make provision for all or any of the following matters.
The transfer to Transferee Company of the property or liabilities of
transferor company.
 The allotment or appropriation by the transferee company of any shares,
debentures or other like interest in that company which, under the arrangement,
are to be allotted or appropriated by that company to.
 The continuation of any legal proceeding against the transferee company by the
transferor company.
 The dissolution, without winding up, of any transferor company.
 The provisions for any dissenting persons. Who are opposing such scheme or
any other matter, which the court deems fit.