Takeover Exemption: Inter Se Transfer Among Promoters

A few months ago, we had discussed
certain orders passed by SEBI that exempted parties from mandatory open offers
in certain specific circumstances.
Recently, SEBI passed an exemption
in a transfer involving the shares of GMR Infrastructure Limited (the
target company). In this case, 70.3% of the shares of the target company are
held by GMR Holdings Private Limited (GHPL). GHPL is in turn held nearly 100%
by Mr. G.M. Rao. The proposed transaction involves a settlement by way of gift of
the shares held by Mr. G.M. Rao in GHPL to several family trusts. This would
result in an indirect transfer of shares/control in the target company, and
thereby trigger a mandatory offer requirement under regulation 3(1) of the SEBI
Takeover Regulations, 2011 (as there is a transfer of more than 25% shares).
Based on an application made by the promoters and detailed
reasoning set out in the application, SEBI granted an exemption order. This is
because the transaction was merely a family arrangement involving a
restructuring of shareholding and did not necessary result in a change in
control of the underlying company. The transferor as well as the transferees
are also part of the promoter and promoter group of the target company.

Based on the facts set out in SEBI’s order, it appears to be
a valid case for grant of exemption since there is no change of control in
substance that requires invocation of the mandatory offer requirement.

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.

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