INTER-SE TRANSFER - TakeoverCode.com TRANSFER Understanding the Concept … Updated as per last amendment in SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997

INTER-SE TRANSFER

Understanding the Concept …

Updated as per last amendment in SEBI (Substantial

Acquisition of Shares and Takeover) Regulations, 1997

dated 13.02.2009

Meaning of Exemption …

Regulation 3:

“Nothing contained in regulations 10, 11 and 12 of these regulations shall

apply to...” contd..

Thus, the term exemption means non-applicability of regulation 10, 11 and 12

which requires the acquirer to make open offer.

Exemption from OPEN OFFER

An insight into Regulation 10, 11 and12

Regulation Existing holding (Any person already holding…) Shall not

acquire

shares or

voting

rights

entitling

him to

exercise

Maximum Allowable Holding

10 0-15% 15% or more voting rights

11(1) 15%-55% Additional 5% or more voting

rights

11(2) 55%-75% Additional 5% or more voting

rights by way of open market

acquisition or Buy-Back, or

Any Single additional voting

right through any other mode.

12 Shall not acquire control over the target company

Unless such person makes a PUBLIC ANNOUNCEMENT OF OPEN OFFER to

acquire such shares in accordance with the regulations.

What is Open Offer

An Exit Opportunity in the form of an offer to the shareholders of the target

company to sell their shares to the acquirer if they don’t want to continue

with the new management [acquirer].

Appointment

of Merchant Banker

Opening of

Escrow Account

Public

Announcement of offer

Submission of Letter of Offer to SEBI and its

Clearance

Issue of

Corrigendum to the offer

Opening of

offer

Closing of

Offer

Payment of

consideration

Issue of Post-offer public

announcement

Open offer

Process

Inter-se transfer

Categories of Inter-se transfer

IST amongst GROUP

IST amongst RELATIVES

IST amongst Foreign

Collaborator shareholder

and Qualifying Promoters

IST amongst QUALIFYING ROMOTERS

IST amongst ACQUIRER &

PAC

Inter-se Transfer amongst Group

Meaning of Group

(As defined under MRTP Act, 1959)

Group

Joint Exercise of Control over any Body Corporate, firm or trust, by

Two or more

Individuals, AOI, Firms, Trust, Trustee, Body Corporate

Combination of above.

Associated Persons

Next slide

Group

Associated Persons

Director of a Body

Corporate

Relative of Director

Firm, in which such

director/relative is partner

Trust in which such director/relative is trustee

Company of which such director, whether independently or together with his

relatives, constitutes one-fourth of its board of directors

A body Corporate at which min. 1/4th directors are appointed by such

director/relative

Partner of a Firm

Other Partners

Relative

Trustee of a Trust

Other trustees

IST amongst Group – Eligibility Criteria

• The transferor and transferee falls within the definition of Group

• The transferor and transferee have been shown as group in Last Published Annual

Report of the Target Company.

• The transferor and transferee have made due disclosures under regulation 6, 7

and 8, as may be applicable.

IST Amongst Group - Compliances

• The transferor and transferee have made due disclosures under regulation 6, 7

and 8, as may be applicable, pursuant to this acquisition.

• The transferee has given an advance intimation to the stock exchange u/r 3(3)

atleast 4 working days in advance of acquisition, where such acquisition exceeds

5% of the voting share capital of the Target Company.

• The transferee has filed a report toSEBI u/r 3 (4) within 21 days of the date of

acquisition, where such acquisition, taken together with the shares or voting

rights already held, entitles the acquirer to exercise 15 per cent or more of the

voting rights in the Target company.

• Alongwith the report, the transferee has paid a fee of Rs. 25000 to the Board

Inter-se transfer amongst Relatives

Meaning of Relative

(As defined under Section 6 of the Companies Act, 1956)

Relatives defined under Schedule 1A includes Father, Mother (including step-mother), Son (includingstep-son), Son's wife, Daughter (including step-daughter), Father's father, Father's mother, Mother'smother, Mother's father, Son's son, Son's Son's wife, Son's daughter, Son's daughter's husband,Daughter's husband, Daughter's son, Daughter's son's wife, Daughter's daughter, Daughter's daughter'shusband, Brother (including step-brother), Brother's wife, Sister (including step-sister), Sister's husband.

Relatives

Spouse Members of HUFRelatives defined

under Schedule 1A

IST amongst Relatives – Eligibility

Criteria

• The transferor and transferee falls within the definition of Relative

• The transferor and transferee have made due disclosures under regulation 6, 7

and 8, as may be applicable.

IST Amongst Relatives- Compliances

• The transferor and transferee have made due disclosures under regulation 6, 7

and 8, as may be applicable, pursuant to this acquisition.

• The transferee has given an advance intimation to the stock exchange u/r 3(3)

atleast 4 working days in advance of acquisition, where such acquisition exceeds

5% of the voting share capital of the Target Company.

• The transferee has filed a report toSEBI u/r 3 (4) within 21 days of the date of

acquisition, where such acquisition, taken together with the shares or voting

rights already held, entitles the acquirer to exercise 15 per cent or more of the

voting rights in the Target company.

• Alongwith the report, the transferee has paid a fee of Rs. 25000 to the Board

IST Amongst Foreign Collaborators and Qualifying

Promoters or amongst Qualifying Promoters

Meaning of Qualifying Promoter

As defined under Explanation to Regulation 3 (1) (e) (iii)

Who is a Qualifying Promoter?

Primary Category:

(i) Any person who is directly or

indirectly in control of the

company; or

(ii) Any person named as

promoter in any document for

offer of securities to the

public or existing shareholders

or in the shareholding pattern

disclosed by the company

under the provi-sions of the

Listing Agreement, whichever

is later.

Body CorporateIndividual

Relative Its subsidiary or holding

company

Firm or Company

controlled by

Qualifying

Promoter

Qualifying

Promoter of

the Body

corporateRelative, Firm or HUF in

which the of Promoter

is a partner or

coparcener

Secondary Category

Qualifying Promoter

IST Amongst Foreign Collaborators and Qualifying Promoters

or amongst Qualifying Promoters – Eligibility Criteria

• The transferor and transferee falls within the definition of Qualifying Promoter

• The transferor and transferee have a prior shareholding for atleast 3 years in the

Target Company.

• The price of inter-se transfer does not exceed 25% of the price as determined in

terms of sub-regulations (4) and (5) of regulation 20.

• The transferor and transferee have made due disclosures under regulation 6, 7

and 8, as may be applicable.

IST Amongst Foreign Collaborators and Qualifying

Promoters or amongst Qualifying Promoters – Compliances

• The transferor and transferee have made due disclosures under regulation6, 7 and 8, as may be applicable, pursuant to this acquisition.

• The transferee has given an advance intimation to the stock exchange u/r3(3) atleast 4 working days in advance of acquisition, where suchacquisition exceeds 5% of the voting share capital of the Target Company.

• The transferee has filed a report to SEBI u/r 3 (4) within 21 days of thedate of acquisition, where such acquisition, taken together with theshares or voting rights already held, entitles the acquirer to exercise 15per cent or more of the voting rights in the Target company.

• Alongwith the report, the transferee has paid a fee of Rs. 25000 to theBoard

IST Amongst Acquirer and PAC

Meaning of Acquirer and PAC:

The term Acquirer and PAC here means the persons who have been shown

as Acquirer and PAC in any public offer previously made by them under these

regulations.

IST Amongst Acquirer and PAC –

Eligibility Criteria

• The transferor and transferee have been shown as Acquirer and PAC in any public

offer previously made by them under these regulations.

• The transfer of shares takes place 3 years after the date of closure of such public

offer.

• The price of inter-se transfer does not exceed 25% of the price as determined in

terms of sub-regulations (4) and (5) of regulation 20.

• The transferor and transferee have made due disclosures under regulation 6, 7

and 8, as may be applicable.

IST Amongst Acquirer and PAC –

Compliances• The transferor and transferee have made due disclosures under regulation

6, 7 and 8, as may be applicable, pursuant to this acquisition.

• The transferee has given an advance intimation to the stock exchange u/r3(3) atleast 4 working days in advance of acquisition, where suchacquisition exceeds 5% of the voting share capital of the Target Company.

• The transferee has filed a report to SEBI u/r 3 (4) within 21 days of thedate of acquisition, where such acquisition, taken together with theshares or voting rights already held, entitles the acquirer to exercise 15per cent or more of the voting rights in the Target company.

• Alongwith the report, the transferee has paid a fee of Rs. 25000 to theBoard

Comparative Analysis of Eligibility

Criteria for Inter-se TransferConditions Category I

(Group)

Category II

(Relative)

Category III

(Qualifying

Promoter)

Category IV

(Acquirer &

PAC)

Meaning of Category Section 2

(ef) of MRTP

Act, 1969

Section 6 of

the

Companies

Act, 1956

Explanation to

regulation 3

(1) (e) (iii) of

SEBI Takeover

Code

Regulation

3 (1) (e)

(iv) of SEBI

Takeover

Code

Disclosure in Last Published

Annual Report

Yes No No No

3 years’ holding of shares by

Transferor & Transferee

No No Yes Yes

Price Restriction of 25% No No Yes Yes

Compliance of Regulation 6,

7 & 8.

Yes Yes Yes Yes

Other Automatic Exemptions under SEBI

Takeover Code

Automatic Exemptions

Exemptions requiring no compliance

By underwriters

In ordinary course of business

Pursuant to public offer

By transmission on succession or inheritance

From VC funds

Pursuant to Merger of Scheme under SICA

Under SARFESI Act

Shares in Unlisted Company

Under Delisting Guidelines

Exemptions Requiring Compliance

Compliance of Regulation 3 (3)

Inter-se Transfer

Acquisition by Govt. Company

From State Level Financial Institution

Compliance of Regulation 3 (4) & 3(5)

In public issue

In Right Issue

Inter-se transfer

From State Level Financial Institution

Compliance for Automatic Exemption –

Compliance Details• Regulation 3 (3) - The transferee shall give an advance intimation to the stock

exchange atleast 4 working days in advance of acquisition, where such acquisition

exceeds 5% of the voting share capital of the Target Company.

• Regulation 3 (4) - The transferee shall file a report toSEBI u/r 3 (4) within 21 days

of the date of acquisition, where such acquisition, taken together with the shares

or voting rights already held, entitles the acquirer to exercise 15 per cent or more

of the voting rights in the Target company.

• Regulation 3 (5) - Alongwith the report, the transferee shall pay a fee of Rs. 25000

to the Board

For any Clarification

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