following is a guest post from Yogesh
Chande. Yogesh is a Consultant with
Economic Laws Practice, Advocates & Solicitors. The views expressed by the
author are personal.]
the Corporation Finance Department of SEBI issued a “no-action
letter” in terms of SEBI (Informal Guidance) Scheme, 2003 for proposed
acquisition by the promoters/promoter group of the target company up to 75%
(from the existing shareholding of 50.32%) of the shares carrying voting
rights, while the request for “no-action letter” was actually for acquiring
shares with voting rights which would take the promoter/promoter group
shareholding in the target company beyond 75%.
may be noted that, an informal guidance in the form of a “no-action letter” or
an “interpretive letter” is issued by a department of SEBI and constitutes the
view of the department, and is not binding on SEBI, though SEBI may generally
act in accordance with such a letter. An informal guidance cannot be construed
as an order of SEBI and is not appealable before the Securities Appellate
Tribunal under section 15T of the SEBI Act, 1992.
the present facts, the application
for “no-action letter” was made because, while the proposed acquisition was a
permitted and an exempted [from an open offer] acquisition under regulation
10(4)(f) of the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011 (Takeover Regulations), the same was not in
terms of the proviso to regulation 3(2) of the Takeover Regulations.
terms of regulation 10(4)(f) of the Takeover Regulations, acquisition of shares
in a target company from a venture capital fund (VCF) or category
I Alternative Investment Fund (AIF) or a foreign venture capital
fund investor (FVCFI) registered with SEBI, by promoters pursuant
to an agreement between such VCF and AIF or FVCFI and such promoters, is
exempted from the obligation to make an open offer under regulation 3 and
regulation 4 of the Takeover Regulations, subject to fulfilment of certain
terms of the proviso to regulation 3(2) of the Takeover Regulations, an
acquirer falling under regulation 3(2) of the Takeover Regulations, is not
entitled to acquire or enter into any agreement to acquire shares or voting
rights exceeding the maximum permissible non-public shareholding i.e. 75%.
term “no action letter” as described in clause 5(i) of the SEBI (Informal
Guidance) Scheme, 2003 reads as follows:
indicates that the Department would or would not recommend any action
under any Act, Rules, Regulations, Guidelines, Circulars or other legal
provisions administered by SEBI to the Board if the proposed transaction
described in a request made under para 6 is consummated.
that the applicant had specifically sought a “no-action letter” from the department
of SEBI, one would ideally expect a response from the department stating that
it would either recommend or not recommend any action to SEBI if the proposed
acquisition was consummated i.e. acquisition from 50.32% to 95.15% (being more
than 75%), instead of issuing the present “no-action letter” for acquiring up
to 75% [clause 4(iv) of the response to the applicant], which never warranted
seeking a “no-action letter” under the SEBI (Informal Guidance) Scheme, 2003,
as acquisition from 50.32% to 75% is in any event permitted and exempted in
terms of regulation 10(4)(f) of the Takeover Regulations, read with the proviso
to regulation 3(2) of the Takeover Regulations.
informal guidance effectively means that, the department would have recommended
an action, if the proposed acquisition by the promoter/promoter group beyond
75% was consummated.
– Yogesh Chande