New Takeover Regulations Notified

In July this year, SEBI accepted most of the recommendations of the Takeover Regulations Advisory Committee (TRAC). The key changes have been listed here. Yesterday, SEBI formally notified the new version in the form of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 that will come into effect on the 30th day from its publication in the Official Gazette. SEBI has also prescribed consequential amendments to the listing agreement and the formats for disclosure and reporting under the Takeover Regulations.

Among the various changes to the Regulations, the key ones are the increase in the initial mandatory public offer trigger from 15% to 25% and the increase in the minimum offer size from 20% to 26%. The increase in the initial trigger for mandatory public offer would mean that persons holding below 15% can now shore up their holdings up to below 25% without obligations to make an offer. The increase in the minimum offer size might mean that acquirers must commit additional financial resources for acquiring a higher number of shares, but it is not certain if this will make any impact in practice because the track record of acceptances in mandatory public offers has not been substantial, as we have seen here. If that trend were to continue, this change in the Regulations is unlikely to impose additional financial burden on acquirers in practice given that response sizes in offer may be quite low.

A quick look at the new Regulations also indicates a reorganization of its provisions and their ordering that will require its users to familiarize themselves with the new structure.