Interpreting the Takeover Regulations

With the current Takeover Regulations (that came into effect in October
2011) being fairly recent, they are being subjected to interpretation during
the course of their functioning. SEBI this week issued two sets of informal
guidance in the context of one takeover.
The first
pertains to whether an acquirer holding less than 25% can make a voluntary
offer and then acquire shares in the market during the course of the offer so
as to cross that limit. SEBI’s response is in the affirmative, as Reg. 22(1) (which
prevents completion of acquisitions before completion of the public offer)
applies only to acquisitions under an “agreement” and not through open-market
purchases. While this approach is consistent with the scheme of the
regulations, it could be subjected to abuse by acquirers in the manner detailed
in the company’s letter to SEBI.
The second
relates to the size of a competing offer, and whether that ought to have a
minimum of 26% similar to an original offer. SEBI confirmed that this was not
necessary in view of the specific provisions of Reg. 20(2).

Although the two sets
of informal guidance deal with technical (and somewhat minor) details, they can
make a significant difference in a takeover scenario, particularly one where
there is an element of hostility between and acquirer and promoters, or between
competing acquirers. The previous versions of the Takeover Regulations had
built up a significant body of interpretation through orders of the court, the
Securities Appellate Tribunal and SEBI. That looks set to continue under the
new dispensation as well. Since litigation during the course of a takeover can
result in considerable delays that may be disastrous to investors due to
adverse price movements in the interim, speedy decision-making is of the

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.


  • Sir
    I read the concerned guidance and no where it mentions voluntary offer ?
    Can you be a bit more clear as to that as regulation 6 specifically requires acquirer to have at least 25 % prior to making open offer.

  • Sir
    I have read the Guidance and nowhere it deals with Voluntary offer as mentioned by you. Regulation 6 requires at least 25% holding by acquirer before any open offer and the clarification sought be concerned company does not deal with the said regulation.
    Please clarify.

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