An Overview of SEBI Takeover Regulations, 2011 & SEBI Insider Trading Regulations, 1992
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An Overview of SEBI Takeover Regulations, 2011 &
SEBI Insider Trading Regulations, 1992
SEBI TAKEOVER REGULATIONS, 2011
Need of SEBI Takeover Regulations
Announcement of Policy of Globalisation• Opportunity for Overseas Investors
Change in India Capital Market Scenario• Need for some regulations to protect the interest of
Investors
1994• Enactment of SEBI (SAST) Regulations, 1994
1997• Enactment of SEBI (SAST) Regulations, 1997
2011• Enactment of SEBI (SAST) Regulations, 2011
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SEBI Takeover Regulations, 2011
Chapter I –Preliminary
Key Definitions
Regulation
1-2
Chapter II – Substantial
Acquisition of Shares, Voting
Rights or Control
Provides threshold limit for open offers
and exemptions
Regulation
3 - 11
Chapter III - Open Offer
Process
Deals with Concepts
related to open offer
Regulation
12 - 23
Chapter IV - Other
Obligations
Obligations of Acquirer, TC,
Merchant Banker
Regulation
24 - 27
Chapter V - Disclosure of Shareholding and Control
Provides limits for making disclosure
Regulation
28 - 31
Chapter VI -
Miscellaneous
Deals with power of the Board to issue
directions
Regulation
32 - 35
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The Takeover Regulations
are applicable on the acquisition
of Voting Rights or
Control over the Listed
Company
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Voting Rights Control
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ACQUIRER
Who
With PACs
Or
Or
Over
Target Company
Voting rights
Or through
Acquires
Directly Indirectly
Agrees to Acquire
Shares Or Or Control
By Himself
Whether
Or with
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ACQUISITION
means
Directly Indirectly
AcquiringAgreeing to
Acquire
OR
OR
Shares Voting Rights ControlOROR
Target Company
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CONTROL
Director or officer of Target Company shall not be considered to be in control over target company merely by virtue of holding such position
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Regulations on the same?
Exemption Rejected in the matter of acquisition of shares of Daikaffil Chemicals India Limited (Order dated 14.02.2007)
UNANSWERED ISSUE
• Acquirer Proposes to acquire 25.10% voting rights through Preferential
Allotment.
• Increase in shareholding from Nil to 25.10%.
• Exemption Rejected as the acquirer will acquire Negative Control over the
Company.
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SHARES
•Equity Share capital carrying voting rights
Means
•Security which entitles the holder to exercise voting rights
•Depository receipts carrying an entitlement to exercise voting rights
Includes
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FREQUENTLY TRADED SHARES
• 10%• 12 calendar months preceding the
calendar month in which the PA is madeTrading Turnover
For instance:Month of PA: July 2012
Trading Turnover: July 2011 to June 2012
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IDENTIFIED DATE
A date falling on the 10th
business day prior to
tendering period
Identified Date
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Date of acquisition of shares/control triggering PA
Date of payment to shareholders or withdrawal
Offer Period
10 working days within which shareholders tender their
shares
10th working day prior to
commencement of tendering
Period
IMPORTANT EVENTS
Identified Date
Te n d e r i n g P e r i o d
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PERSON ACTING IN CONCERT
Persons who for a common objective acquire
shares or voting rights or control
over Target Company,
pursuant to an agreement or understanding,
formal or informal,
directly or indirectly
co-operate for acquisition of shares or voting
rights or control over the Target Company.
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PERSON ACTING IN CONCERT
In general Promoters of the Company are Person acting in Concert (PAC) subject to the existence of element of shared common objective.
[SAT Order in the matter of Nikhil Mansukhani (MAN Industries (India) Limited) v SEBI (2012)]
[Bombay High Court order in the matter of K. K. Modi vs SAT (2003)]
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ENTERPRISE VALUE
value calculated as
Market Capitalization of
a Company
DebtMinority Interest
Preferred shares
Total CashCash
Equivalents
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A significant but non-controlling ownership of less than 50% of a company's voting shares by either an investor or another company.
Cash equivalentInvestment securities that are short-term, have high credit quality and are highly liquid.
Preferred stockCapital stock which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation. E.g. Preference Shares
ENTERPRISE VALUE
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ENTERPRISE VALUE
Paid up capital (No. of shares) (1) 10,000
Closing Price of preceding day (2) 10
Market Capitalization (3=1*2) 1,00,000
Debt (4) 5,000
Minority Interest (5) 25% (2500*10)
25,000
Preferred shares (1000*10) (6) 10,000
Cash and Cash equivalents (7) 4,000
Enterprise Value (3+4+5+6-7) 1,36,000
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VOLUME WEIGHTED AVERAGE MARKET PRICE
“Volume weighted average market price” means the product of the number of equity shares traded on a stock exchange and the price of each equity share divided by the total number of equity shares traded on the stock exchange;
Number of shares traded on the Stock Exchange on a particular day: XMarket Price: Y
X1*Y1+X2*Y2+X3*Y3………Volume weighted Average Market Price =
X1+X2+X3……………..
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SEBI Takeover
Regulations, 1997
SEBI Takeover Regulations,2011
Weeks Quantity Traded
Average of weekly high and low of
closing prices
Traded Price(A)
Quantity Traded
(B)
A (X) B= C
WAP(C/B)
1 100 10 10 100 1000 11.67
1 500 12 12 500 6000
----
----
----
----
----
----
----
26 500 15 15 500 7500 13.85
26 150 10 10 150 1500
47 1150 16000 25.51
Offer Price/WAP 6.25 12.76
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VOLUME WEIGHTED AVERAGE PRICE
“Volume weighted average price” means the product of the number of equity shares bought and price of each such equity share divided by the total number of equity shares bought;
Number of shares bought on a particular day: AMarket Price: B
A1*B1+A2*B2+A3*B3………Volume weighted Average Price =
A1+A2+A3……………..
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WEIGHTED AVERAGE NUMBER OF TOTAL SHARES (WAN)
“Weighted average number of total shares” means the number of shares at the beginning of a period, adjusted for shares cancelled, bought back or issued during the aforesaid period, multiplied by a time-weighing factor;
01.04.2011
Preferential allotment of 20
shares
01.06.2011 01.10.2011 As on Date
Reduction of share capital
10 shares
Capital 120 90 90 100
100*61/365 16.71
120*122/36540.11
90*182/36544.88 101.70WAN
TRIGGERED POINTS FOR OPEN OFFER
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TYPES OF OFFER
OPEN OFFER
MANDATORY/ TRIGGERED OFFER
Initial Threshold Creeping Acquisition
Change in Control
Indirect acquisition
VOLUNTARY OFFER
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INITIAL THRESHOLD
Acquirer along with PAC
• 25% or more shares or voting rights
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CREEPING ACQUISITION ZONE
Acquirer with PAC holding
25% - 75%
• Creeping Acquisition - 5% in each F.Y.
No Netting off Allowed*
Individual shareholding to be considered for Open Offer
KEY POINTS
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NO NETTING OFF ALLOWED
Dates Shares /Voting Rights
No. of shares held as on 01.04.2012 35%
Shares acquired on 22.05.2012 4%
Shares sold on 10.10.2012 2%
No. of shares that can be acquired under the Creeping Acquisition during the financial year 2011-12
1%
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INCREMENTAL VOTING RIGHTS IN FRESH ISSUE
Particulars Pre shareholding Shares to be allotted pursuant to
preferential allotment
Post shareholding Changes
No. of shares
% * No. of shares
% ^ No. of shares
% ^ No. of shares
%
Promoters 70 58.33 16 11.99 86 63.33 16 5Non
promoters50 41.67 50 36.67 0 (5)
Total 120 (X) 100 136 (Y) 100 16 0.00
* - No. of shares / X * 100^ - No. of shares / Y * 100
In the present case, the incremental increase in voting right is 5%, although the fresh allotment constitutes 11.99% of the expanded capital of the Company.
Accordingly, the incremental increase in voting rights is within the creeping acquisition limit.
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INDIVIDUAL SHAREHOLDING OF ACQUIRER TO BE CONSIDERED FOR OPEN OFFER
Promoter Pre Holding Creeping Acquisition
Post Holding
Applicability of SEBI Takeover
Regulations, 2011
A 23% 3% 26% Open Offer Obligations
B 7% 2% 9% -
Total 30% 5% 35% -
• Increase in total promoter shareholding- within the creeping acquisition limit.
• However, A’s shareholding has goes beyond 25%, resulting into triggering of Open Offer obligation.
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A.O. ORDER IN THE MATTER OF S KUMARS.COM LTD
A. O. held that since the shareholding of the individual promoter increased by 6.25%, thus he had violated the provision of Regulation 11(1) of the SEBI (SAST) Regulations, 1997.
Although the increase in total promoter shareholding is within the creeping acquisition limit.
The important point to be noted here that the consideration of individual shareholding of the promoter was not prescribed in the SEBI Takeover Regulations, 1997.
Particulars Pre shareholding Shares to be allotted
pursuant to preferential allotment
Post shareholding Change in %
No. of shares % No. of shares
%
Promoters-Allotee
9,447,814 36.62 2,825,000 12,272,814 42.87 6.25
Other Promoters
3,353,196 13.00 3,353,196 11.72
Total 12,801,010 49.62 2,825,000 15, 626,010 54.59 4.97
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CHANGE IN CONTROL
• Through Shareholder
ApprovalSEBI (SAST) Regulations,
2011
• Through Shareholder
ApprovalSEBI (SAST) Regulations,
1997
Through Open offer Only Irrespective
of acquisition
of shares or voting rights
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INDIRECT ACQUISITION
Acquisition of Voting Rights or control over other entity
that enable the Acquirer
to exercise of such percentage of
voting or control over Target Company
Acquirer B UK Ltd.
Global Offer
100% 72.93%
Control
Indirect acquistion of 72.93% of the Target Company
Trigger Open Offer
Target Company
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VOLUNTARY OPEN OFFER
•Prior holding of atleast 25% or more shares;
•No acquisition during the preceding 52 weeks without attracting the obligation to make a public announcement.
Eligibility
•The aggregate shareholding not exceeds the maximum permissible non-public shareholding.
Condition
•No further acquisition of shares for a period of six months after completion of the open offer except by way of another voluntary open offer or competing offer.
Restriction
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CAN PERSON HOLDING <25% MAKE VOLUNTARY OFFER
Yes.
But the advantage of minimum offer size of 10% is not available and
The minimum offer size should be of 26%
OPEN OFFER AND ITS RELATED CONCEPTS
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MINIMUM OFFER SIZE
Mandatory Offer -
26%
Voluntary Offer -
10%
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OFFER PRICE
Offer Price – Specific Criteria for
Direct Acquisition
Frequently Traded Shares
Infrequently Traded Shares
Indirect Acquisition
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OFFER PRICE – Direct Acquisition – Frequently Traded shares
Highest Price paid per share under the Agreement
Volume-weighted average price for acquisition made during 52 weeks preceding date of PA
Highest price paid for acquisition made during 26 weeks preceding date of PA
Volume-weighted average market price for 60 trading days preceding date of PA
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Volume-weighted average price for acquisition made during 52 weeks preceding date of PA
Date of acquisition
Price per share (1)
No. of shares acquired (2)
Consideration (3=1*2)
10.06.2011 26.04 500 13020
22.08.2011 15.63 200 3126
06.01.2012 14.58 100 1458
05.02.2012 24.62 400 9848
16.03.2012 16.96 200 3392
Total 1400 30844
Volume-Weighted Average Price (Total of 3/Total of 2)
22.03
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Highest price paid for acquisition made during 26 weeks preceding date of PA
Date of acquisition Price per share No. of shares acquired
11.11.2011 16.98 200
20.12.2011 15.60 100
14.02.2012 20.00 400
19.03.2012 24.92 200
Highest Price Paid 24.92
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Volume-weighted average market price for 60 trading days preceding date of PA
Date WAP---
---
04.06.2012 20.1205.06.2012 22.6806.06.2012 21.1107.06.2012 22.00
Total of WAP 1230Volume-weighted average
market price (WAP/60)20.5
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Minimum Offer Price shall be highest of Price
Highest Price paid per share under the
AgreementRs. 24
Volume-weighted average price for acquisition
made during 52 weeks preceding date of PARs. 22.03
Highest price paid for acquisition made during
26 weeks preceding date of PARs. 24.92
Volume-weighted average market price for 60
trading days preceding date of PARs. 20.5
MINIMUM OFFER PRICE RS. 24.92
OFFER PRICE – Direct Acquisition – Frequently Traded shares
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OFFER PRICE – Direct Acquisition – Infrequently Traded shares
Highest Price paid per share under the Agreement
Volume-weighted average market price for acquisition made during 52 weeks
Highest price paid for acquisition made during 26 weeks
Other Valuation Parameters - Book Value, Comparable trading multiples, Earning per share and other parameters
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OFFER PRICE – Indirect Acquisition
Highest Price paid per share under the Agreement
Volume-weighted average price for acquisition made during 52 weeks preceding earlier of • Date of the primary acquisition• Date on which the intention or the decision to make the
primary acquisition is announced
Highest price paid for acquisition made during 26 weeks preceding earlier of • Date of the primary acquisition• Date on which the intention or the decision to make the
primary acquisition is announced
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OFFER PRICE – Indirect Acquisition
Highest price paid for acquisition between the earlier of• Date of the primary acquisition• Date on which the intention or the decision to make the primary
acquisition is announcedand the date of the Public Announcement
Volume-weighted average market price for 60 trading days preceding date of PA preceding earlier of • date of the primary acquisition• date on which the intention or the decision to make the primary
acquisition is announced
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Control Premium / Non-Compete Fees
To be included in the Offer Price
NON COMPETE FEES
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ESCROW ACCOUNT
Opening of Escrow Account – Not later than two working days prior to the date of DPS
On first Rs. 500 Crores 25% of the consideration
On balance amount Additional 10% of balance consideration
Amount of Escrow Deposit
Forms of Escrow Account
Cash Bank Guarantee Freely transferable equity shares or securities
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Mode of Payment
Cash
(A)
Shares of acquirer company
(B)
Secured debt
instrument
(C)
Convertible debt
securities
(D)
Combination of A, B, C or
D
(E)
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Obligation to bring down the shareholding
Ineligibility to make voluntary delisting offer
for a period of 12 months from the completion of
Offer Period
INCREASE IN SHAREHOLDING BEYOND MAXIMUM PERMISSIBLE NON PUBLIC SHAREHOLDING AFTER THE
OPEN OFFER
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ACQUISITION AFTER THE TENDERING PERIOD
Acquisition during 26 weeks after
Tendering Period
At a price higher than offer price
Payment of difference
between highest price and offer
price
To the shareholders
whose shares are accepted in the
offer
Within 60 days from such acquisition
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TIMING OF MAKING OPEN OFFER
Public Announcement
• On the same day or as specified under the Regulation 13
Detailed Public Statement
• Within 5 working days from PA
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TIMING OF PUBLIC ANNOUNCEMENT (PA)
Triggering Event Time
Agreement On the same day
Market Purchase of shares Prior to the placement of purchase
order with the stock broker.
Conversion of securities without
fixed date of conversion
On the same day of exercise of option
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Triggering Event Time
Conversion of securities with
fixed date of conversion
Second working day preceding the
date of conversion
Disinvestment On the same day of executing the
agreement
Preferential Allotment Date of passing Special Resolution
TIMING OF PUBLIC ANNOUNCEMENT (PA)
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Triggering Event Time
Buy-back not qualifying for
exemption under Regulation 10
Not later than 90th day from the date
of increase in voting rights.
Acquisition of shares and
control beyond the control of
acquirer
Not later than 2 working days from
receipt of intimation having acquired
such control
Voluntary Offer On the same day when the Acquirer
decides to make Voluntary Offer
TIMING OF PUBLIC ANNOUNCEMENT (PA)
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OPEN OFFER FOR ANDHRA CEMENTS LIMITED
SSSPA dated 15.11.2011
Acquisition from promoters of TC
Date of SPA
Preferential allotment
Date of passing Special
Resolution
Actual Date of PA
15.11.2011 (Date of SPA)
Offer Size26% of expanded capital
Recalculation of offer price considering date of
passing SR
Legal trigger date Legal trigger date
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COMPLETION OF ACQUISITION UNDER THE AGREEMENT
• Completion of acquisition of shares, voting rights or control NOT ALLOWED until the expiry of offer period.
Regulation 22(1)
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EXCEPTION TO REGULATION 22(1)
Regulation 22(2)
After a period of 21 working days from
PA
Deposit of 100% consideration in the
Escrow Account
Informal Guidance in matter of R System
International Ltd.
Completion of Acquisition under Market Purchase
allowed
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RECOMMENDATION ON THE OFFER BY BOARD
• MandatoryRecommendation on Offer by the Committee
of Independent Directors
Constitution of Committee of Independent Directors (IDC). Recommendation on the Open offer, as to whether the offer , is or is not, fair
and reasonable. Publication of the recommendations in newspapers at least two working
days before the commencement of the tendering period.
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KEY POINT
Once a shareholder has tendered
his shares in the open offer made
by the Acquirer, than he/ she
CANNOT WITHDRAW or REVISE
his/her request.
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COMPETING OFFER
Open Offer by any other person (Competitor Acquirer) after an offer has already been given by an acquirer to the shareholders of the Target
Company.
Existing Holding of Competitive Acquirer along with PAC’s
+
Number of shares to be acquired through Competitive OfferCompetitive OfferCompetitive Acquirer
Shall atleast equal to
Existing Holding of First Acquirer
+Number of shares proposed to be acquired under the offer
+Underlying Agreement for the acquisition of shares
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TIMING UNDER COMPETING OFFERS
Public Announcement
Within 15 Working days of the date of
DPS issued by the first acquirer
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WITHDRAWAL OF OPEN OFFER
Offer once made cannot be withdrawn EXCEPT in the following circumstances
Statutory Approvals required have been refused.
Acquirer, being natural person, has died.
Any condition in the agreement is not met for reasons outside the reasonable control of the acquirer
Circumstances as in the opinion of the Board, merit withdrawal
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TIMELINE OF OPEN OFFER
Particulars Timeline (Legal)
Public Announcement through notice to Stock Exchange X
Opening of Bank Escrow & Securities Escrow X+2 Working Days
Deposit of Escrow Amount in Escrow A/c
Detailed Public Statement in newspapers X+5 Working Days
Draft letter of offer to be submitted to SEBI and sent to Target Company X+10 Working Days
Receipt of comments from SEBI on draft letter of offer X+25 Working Days
Identified date for determining name of shareholders to whom the Letter of Offer
should be sent
X+27 Working Days
Dispatch of the Letter of Offer to shareholders X+32 Working Days
Upward revision in offer X+33 Working Days
Comments on the offer by independent directors of target company X+34 Working Days
Issue of advertisement announcing the schedule of activities for open offer X+36 Working Days
Date of opening of offer X+37 Working Days
Date of closing of offer X+46 Working Days
Payment of Consideration X+56 Working Days
Filing of report to SEBI by Merchant Banker X+61 Working Days
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NO APPOINTMENT OF ACQUIRER ON THE BOARD OF TARGET COMPANY
No induction of Acquirer or his representative on Board of Target Company
Offer Period
Exception:
• After 15 working days from DPS, and
• Deposit 100% consideration in the Escrow Account
x
EXEMPTION FROM OPEN OFFER
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Exemptions from Open Offer/ Procedural
Requirements relating to Open Offer
Regulation 10- Automatic Exemption
Regulation 11- Exemptions by the
Board
Regulation 11(1)
Exemption from the Open Offer obligations
Regulation 11(2)Relaxation from
Procedural Requirements of Open Offer
EXEMPTION FROM OPEN OFFER
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• Open Offer on crossing initial threshold, i.e. 25%.Reg. 3 (1)
• Open offer for crossing creeping acquisition limit, i.e. 5%Reg. 3 (2)
• Change in Control
Reg. 4
OPEN OFFER REQUIREMENT
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Inter-se-transfer
Acquisition in the ordinary course of
business
Disinvestment agreement
BIFR and Merger Schemes
SARFAESI , Delisting
Transmission, succession or
inheritance
Section 87(2) of Companies Act, 1956
Reg 3
CDR Scheme
Reg 3 (1)
Buy Back under Regulation 3(1)
Reg 3(2)
Right Issue
Buy Back
Acquisition in exchange of shares
Acquisition from state-level financial
institutions
Acquisition from a venture capital fund or a foreign venture capital
investor
AUTOMATIC EXEMPTIONS FROM OPEN OFFER
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Inter-se transfer amongst Immediate Relatives
• Immediate Relative
Immediate Relative
Means
Person's Spouse
Includes
Person Parents / Spouse Parents
Person Brother/ Spouse Brother
Person Sister/
Spouse Sister
Person and Spouse
Child
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Inter-se transfer amongst Promoters
Persons shown as Promoters
Listing Agreement
SEBI Takeover Regulations
Atleast 3 years
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Inter-se transfer amongst Qualifying Parties being
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for minimum 3 years prior to the proposed
acquisition, and
disclosed as such pursuant to filings under the
listing agreement.
Inter-se transfer amongst PAC
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Target CompanyTarget Company
Shareholder 1Shareholder 1 Shareholder 2Shareholder 2 Shareholder 3Shareholder 3
Company A Company A
100% capital in same ratio as their shareholding in Target Company
PAC PAC
Inter-se transfer amongst Shareholders of Target Company
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Acquisition in ordinary course of business
Underwriter Stock Broker
Merchant Banker or investor in
market making process
Scheme of Safety Net under Reg 44 of SEBI
(ICDR) Reg, 2009
Merchant Banker acting as Stabilisation Agent
Scheduled Commercial
Bank
Invocation of pledge by SCB
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Acquisition pursuant to agreement of disinvestment
Acquisition at different stages.
Open offer is required only once; provided
Acquirer and the seller are the same at
all the stages of acquisition
Acquirer had made disclosures
regarding all the stages of acquisitions,
if any, in the public announcement and
letter of offer
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Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
SEBI Delisting Regulations, 2009
Transmission, succession or inheritance
Voting Rights or of preference shares carrying voting rights under Section 87(2) of the Companies Act, 1956
ACQUISITION PURSUANT TO
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No change in control
Shareholders’ Approval by way of Special Resolution passed by Postal Ballot.
ACQUISITION-CORPORATE DEBT RESTRUCTURING
Conditions
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ACQUISITION-BUY BACK
Pre Holding
<25%
Exemption
(Subject to Acquirer Reducing Its
Shareholding Below the threshold within a
period of Ninety Days from the date of such increase)
Pre Holding between 25-75%
Shareholders Resolution/Board Resolution, as the case may be.
Acquirer not voted in favor of resolution
No change in control.
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ACQUISITION-PREFERENCE SHARES CARRYING VOTING RIGHTS
Acquisition of Voting Rights
Preference shares carrying
voting rights
In terms of Section 87(2) of the Companies Act, 1956
Similar view was also given by Hon’ble SAT in the matter of Weizmann Ltd. and PACs vs. SEBI wherein voting rights have been accrued on preference shares on account of non payment of dividend in terms of Section 87 of the Companies Act, 1956.
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Regulation 10(5) – Acquirer shall give advance intimation to the stock
exchange atleast 4 working days prior to the proposed acquisition
Regulation 10(6) – Any acquirer seeking exemption shall file a report with the
stock exchanges not later than four working days from the acquisition.
Regulation 10(7) - The Acquirer shall file a report to SEBI within 21 working
days of the date of acquisition along with supporting documents to the Board
giving all details in respect of acquisitions and fee of Rs 25,000
COMPLIANCES FOR EXEMPTION
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COMPLIANCES DETAILS – 10(5)
Inter se transfer of shares
Acquisition from State Level Financial
Institution
Acquisition from VCF or a foreign venture
capital investor
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COMPLIANCES DETAILS – 10(6)
All the automatic exemptions
from the open offer
as specified under Regulation 10
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Scheme of Arrangement not directly involving Target Company
Acquisition of voting rights or of preference shares carrying voting rights
Acquisition through CDR scheme
Buy Back of shares
Acquisition through Right Issue
Acquisition from VCF or a foreign venture capital investor
COMPLIANCES DETAILS – 10(7)
DISCLOSURES LIMITS
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DISCLOSURE LIMITS
Encumbered Shares
On the encumbrance, Invocation or release of encumbrance
Continual Disclosures
Persons holding ≥25% Every Promoter
Event Based Disclosure
Acquisition of ≥5% Change of ≥ 2% after the 5%
No obligation on the Target Company to give the disclosure
to Stock Exchange.
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KEY POINT
Acquisition and Holding of any convertible security shall
also be regarded as shares and disclosures of such
acquisitions and holdings shall be made accordingly.
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FOR EXAMPLE
Company A 100 equity shares
50 PCDs 10 GDRs Total Shares: 160
Total Voting Rights: 110
Disclosure
B holding in Company A
8 Shares 7 PCDs 1 GDR 16 Shares (10%)
9 Voting Rights (8%)
Scenario I
“B” Acquires 2 Shares 2 PCDs - 4 Shares (2.5%)
2 Voting Rights (1.8%)
Disclosure under regulation 29(2).
Scenario II
“B” Acquires - 20 PCDs - 20 Shares (12.5%)
- Disclosure under regulation 29(2)
Scenario III
“B” Acquires 2 Shares - - 2 Shares (1.25%)
2 Voting Rights (1.8%)
No Disclosure under regulation 29(2).
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KEY POINT
“Encumbrance” shall include a pledge, lien or any such transaction, by whatever name called.”
In other words, those encumbrances which entail a risk of the shares held by promoters being appropriated or sold by a third party, directly or indirectly, are required to be disclosed to the stock exchanges in terms of the Takeover Regulations, 2011.
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TAKEOVER OFFERS
Total Open Offers
43*
Mandatory Open Offer –
38
Voluntary Open Offer –
5
*In terms of SEBI (SAST) Regulations, 2011
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04/08/202393
• Beneficial for Private Equity Players and Investors.
• More protection for the small shareholders.
• Simplification in the provisions.
• More transparency and removal of ambiguity.
• At par with Global Practices prevalent for M&As.
IMPACT
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04/08/202394
• Negative Control
• No Transitional Provision for person holding less than 25%
shares
• Applicability of regulations on acquisition of partly paid up
shares
• Exemption from open offer on account of forfeiture of
Shares
ISSUES UNADDRESSED
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For any clarification on SEBI Takeover Regulations
Log on to www.takeovercode.com
Write to [email protected]
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Highlights of TAKEOVERCODE.COM
Download completely filled Public Announcement in minutes
Know your compliances and downloaded completely filled disclosure documents.
Online calculators for calculation of offer size, escrow account deposit, timeline for
open offer, fee calculator, tentative cost of offer
On-line Takeover Audit from the year 1997 till date.
Online advisory on intricacies of SEBI Takeover Code from a team of experts.
Brief and summarizing synopsis of all legal judgments of Takeover Code up-to-the-
minute.
Up-to-the minute inventory of all open offers with concise synopsis
Advanced search engines to facilitate you a variety of search options.
24X7 discussion forum on all topics related to takeovers & acquisitions.
Customized section to feed your distinctive needs
SEBI INSIDER TRADING REGULATIONS, 1992
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Investigation
Agenda
Prohibition on dealing, communicating or counseling
Key Terms
Procedure for Investigation
Direction by SEBI
Disclosures to be made
Action in case of Default
Model Code of Conduct
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WHAT IS INSIDER TRADING????
INSIDER TRADING
means
dealing in the securities
by a Insider,
who has the knowledge of
material “inside” information
of the company
which is not
available in the
Public domain.
Who Is an INSIDER ?????
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INSIDER - REGULATION 2(e)
is wasOR connected with the company, OR deemed to have been connected with the company
AND
is expected to have access to UNPUBLISHED PRICE SENSITIVE INFORMATION
Has Received Has Had Access TO
UNPUBLISHED PRICE SENSITIVE INFORMATION
OR
Any Person
Who
OR(ii)
(i)
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CONNECTED PERSON
is a director under section 2(13) of the Companies Act, 1956, or
deemed to be a director of that company under section 307(10) of the Act
may reasonably to have an access to Unpublished Price Sensitive Information
Professional relationship
Business relationship
Any Person
an officer an employee
Who
OR
Whether TEMPORARY or PERMANENT
Holds the position Involving
or or
AND
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PERSON DEEMED TO BE CONNECTED -REGULATION 2(h)
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PERSON DEEMED TO BE CONNECTED -REGULATION 2(h)
What Is Price Sensitive Information ?????
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Price Sensitive Information means:
information which relates directly or indirectly
to a company
AND
which if published is likely to
materially affect the price of securities of company.
PRICE SENSITIVE INFORMATION-REGULATION 2(ha)
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Intended declaration of dividend;
Issue of securities or buy back of securities;
Major expansion plan OR Execution of new projects;
Amalgamations, merger, takeovers;
Disposal of whole or substantial part of the undertaking;
Changes in policies, plans or operations
DEEMED PRICE SENSITIVE INFORMATION
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Change in the general character or nature of business.
Disruption of operations due to natural calamity.
Commencement of Commercial Production/ Commercial Operations.
Litigations/ dispute with a material Impact.
Revisions in Ratings.
PRICE SENSITIVE INFORMATION- AS PER CLAUSE 36 LISTING AGREEMENT
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Any other information having bearing on the operation/ performance of the Company as well as price sensitive information which includes but not restricted to;
Change in market lot / sub-division ;
Voluntary delisting by the company ;
Forfeiture of shares;
Alteration in terms of any securities ;
Information regarding securities issued abroad ;
Cancellation of dividend/ rights/ bonus etc.
PRICE SENSITIVE INFORMATION- AS PER CLAUSE 36 LISTING AGREEMENT
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OFFICER OF A COMPANY
Means
Person defined in Section 2(30) of the
Companies Act, 1956
Section 2(30) : "officer" includes
any director, manager or
secretary, or any person in
accordance with whose directions
or instructions the Board of
directors or any one or more of the directors is
or are accustomed to
act.
Includes
Auditor of the Company
OFFICER OF A COMPANY – REGULATION 2(g)
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Information which is not published by the company or its
agents and is not specific in nature.
Explanation
Speculative reports in print or electronic media shall not be
considered as published information.
UNPUBLISHED -REGULATION 2(k)
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DEALING IN SECURITIES - REGULATION 2(d)
“Dealing In Securities”means an act of
subscribing, buying,
selling or agreeing to subscribe, buy, sell
or deal in any securities by any person
either as principal or agent;
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“Working Day”
shall mean the working day when the
regular trading is permitted on the
concerned stock exchange where the
securities of the
company are listed
WORKING DAY – REGULATION 2(l)
PROHIBITION ON DEALING, COMMUNICATING OR COUNSELLING
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PROHIBITION ON INSIDER-REGULATION 3
NO INSIDER
On Other’s behalf Either on his own behalf
DEAL IN SECURITIES OF THE COMPANY
or
shall
IN POSSESSION OF ANY UPSI
Owhen
COMMUNICATE / COUNSEL / PROCURE
Directly Indirectly or
ANY UPSI TO ANY PERSON
or
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EXCEPTION TO REGULATION 3
Any communication which is required in the
Ordinary course of business, OR
Profession, OR
Employment, OR
Under any law.
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PROHIBITION ON COMPANY- REGULTAION 3A
NO COMPANY
Deal in Securities of
or
IN POSSESSION OF ANY
Other companyAssociate of that other company
UNPUBLISHED PRICE SENSITIVE INFORMATION
WHEN
SHALL
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NON APPLICABILITY OF REGULATION 3A
Proper arrangement in place to block the dissemination of UPSI; AND
Adequate Procedures are in place to demarcate the persons having UPSI & persons dealing in securities; AND
The information was not so communicated and no such advice was so given; OR.
The acquisition was in line with the SEBI
Takeover Regulations
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PROVISIONS RELATING TO VIOLATION – REGULATION 4
Any insider,
who
deals in securities
in contravention of the
provisions of Regulation 3 or 3A
shall be
guilty of Insider Trading..
INVESTIGATION
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POWER TO MAKE INQUIRIES AND INSPECTION- REGULATION 4A
If the Board Suspects any person has violated the provisions of these Regulations
It may Make enquiries, or
appoint person to inspect books & records of such persons
Form a prima facie opinion , whether there is violation of these regulations
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BOARD’S RIGHT TO INVESTIGATE -REGULATION 5
Where the Board, is of prima facie opinion that it is necessary to investigate and inspect
books of account, documents of
an insider or any person
On the basis of compliant received form investors, intermediaries or any other person,
Or suo-motu upon its own knowledge, to protect the interest of investors, it may
appoint an INVESTIGATING AUTHORITY
PROCEDURE FOR INVESTIGATION
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REGULATION 6 to 9
On Complaints/ Suo-moto
Appointment of
Invtg. Auth.
Notice IssuedInvestigation
Started
To provide all assistance
On ConclusionReport to
Board
Findings to suspected
person
Shall Reply within 21 days
Board will Issue
directions
DIRECTIONS BY SEBI
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REGULATION 6 to 9
Not to deal in securities ;
Not to dispose of any of the securities acquired in violation of these regulations;
Not to communicate or counsel any person to deal in securities;
Declaring the transaction(s) in securities as null and void;
Deliver the securities back to the seller :
To transfer proceeds to the investor protection fund of a recognized stock exchange.
DISCLOSURE TO BE MADE
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DISCLOSURE REQUIREMENT
Regulation No.
Particulars By whom To whom Time limit
Form
13(1) On the acquisition of >5%
Any Person Company 2 working
days
A
13(2) Disclosure of shares or voting rights held and positions taken in derivatives by such person and his dependents (as defined by the company) on becoming the Director or officer
Director or officer
Company 2 working
days
B
13(2A) Disclosure of shares or voting rights on becoming the promoter or part of promoter group
Promoter or person
belonging to promoter
group
Company 2 working
days
B
13(3) Change in shareholding of (±) >2% from the last disclosure made under sub regulation (1) or under this sub regulation.
Persons already
holding more than 5%
Company 2 working
days
C
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DISCLOSURE REQUIREMENT
Regulation No.
Particulars By whom To whom Time limit
Form
13(4) Change in holding in excess of Rs.5 Lakh in value or 25,000 shares or 1% of total shareholding or voting rights from the last disclosure made under sub regulation (2) or under this sub regulation.
Director or officer
Company as well as
Stock Exchange
2 working
days
D
13(4A) Change in holding in excess of Rs.5 Lakh in value or 25,000 shares or 1% of total shareholding or voting rights from the last disclosure made under Listing Agreement or under sub regulation (2A) or under this sub regulation.
Promoter or person
belonging to promoter
group
Company as well as
Stock Exchange
2 working
days
D
13(6) On the receipt of disclosure under 13(1), 13(2), 13(2A), 13(3), 13(4) and 13(4A)
Company Stock Exchange
2 working
days
A or B or C or D as the
case may be
ACTION IN CASE OF DEFAULT
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REGULATION 14
Action under Section 11 of SEBI Act, 1992
Directions under Section 11(4)
Directions under section 11B of the SEBI Act.
Cease and desist order in proceedings under section 11D of
the Act;
Penalty for failure to furnish information, return etc. under
section 15A of the SEBI Act, 1992
Monetary penalties under section 15G of SEBI Act, 1992
Criminal prosecution under section 24 of the SEBI Act.
MODEL CODE OF CONDUCT
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CODE OF CONDUCT TO BE ABIDE BY
ALL LISTED COMPANIES
Organizations Associated with Securities Markets including: All intermediaries AMC and trustees of mutual funds; The Self Regulatory Organizations; The Stock Exchanges / Clearing House / Corporations; The Public Financial Institutions The Professional Firms
Such as Auditors, Accountancy Firms, Law Firms, Analysts, Consultants, etc., assisting or Advising Listed Companies
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SCHEDULES – MODEL CODE OF CONDUCT
SCHEDULE I
MODEL CODE OF CONDUCT
FOR PREVENTION OF INSIDER TRADING
PART A - FOR LISTED COMPANIES
PART B – FOR OTHER ENTITIES
SCHEDULE II
CODE OF CORPORATE DISCLOSURE PRACTICES
FOR
PREVENTION OF INSIDER TRADING
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IMPORTANT TERMS- NEED TO KNOW
PSI should be disclosed only to those within the company who need the information to discharge their duty.
Limited access to confidential information
Files containing confidential information shall be kept
secure.
Computer files must have adequate security of login and pass word etc.
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PRE CLEARANCE OF TRADES
All D/O/E of the Co and their dependants as defined by the company who intend to deal in the securities beyond a limit should pre-clear the transactions.
An application to the Compliance officer indicating The estimated number of securities that the D/O/E and
their dependants intends to deal in, The details as to the depository with which he has a
security account,
The details of securities in such depository mode.
Other details as may be required by any rule made by the company in this behalf.
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TRADING WINDOW
Company shall specify a trading period, to be called "Trading Window", for trading in the company’s securities.
The trading window shall be closed during the time the Price Sensitive information is un-published.
When the trading window is closed, the D/ E shall not trade in the company's securities in such period.
The trading window shall be opened 24 hours after the Price Sensitive Information is made public.
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RESTRICTED /GREY LIST
To restrict trading in certain securities and designate such list as restricted / grey list.
Client Companies for which any assignment or appraisal report or credit rating assignments are going on.
Any security which is purchased or sold by the organisation / firm on behalf of its clients / schemes of mutual funds, etc. shall be put on the restricted / grey list.
As the restricted list itself is a highly confidential information, It shall be maintained by CO.
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CHINESE WALL
"Chinese Wall" policy demarcates “inside areas” from "public areas".
Those areas having access to confidential information,
considered “inside areas” and areas which deal with sales / marketing / investment considered "public areas".
The employees in the inside area shall not communicate any PSI to anyone in public area.
In exceptional circumstances employees from the public areas may be brought "over the wall" and given confidential information on the basis of "need to know" criteria, under intimation to the CO
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COMPLIANCE OFFICER (CO)
Compliance Officer means ‘Senior Level Employee’ who shall report to the MD / CEO.
The CO shall be responsible for
- setting forth policies, procedures
- monitoring adherence to the rules for the preservation of “PSI”,
- pre-clearing of designated employees’ and their dependents’ trades
- monitoring of trades and the implementation of the code of conduct
under the overall supervision of the Board of the listed company.
The CO shall maintain a record of the designated employees and any
changes made in the list of designated employees.
To Provide clarifications regarding the SEBI (Prohibition of Insider
Trading) Regulations, 1992 & the company's code of conduct to the Company’s employees.
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Lastly………….
It is easier to identify the beneficiaries of
insider dealing
But
the extent of losses occurred to the general investor is
impossible to calculate
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Corporate Professionals Capital Private Limited
D-28, South Extension –I, New Delhi-110 049Ph: +91.11.40622200; Fax: +91.11.40622201; E:
In case of any query, log on to www.takeovercode.com
PAVAN KUMAR VIJAY
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