[The following post is contributed by Yogesh Chande, who is an Associate
Partner with Economic Laws Practice, Advocates & Solicitors. Views of the
author are personal.
Partner with Economic Laws Practice, Advocates & Solicitors. Views of the
author are personal.
SEBI
has with effect from 24 March 2015 amended the following regulations:
has with effect from 24 March 2015 amended the following regulations:
(a) SEBI
(Delisting of Equity Shares) Regulations, 2009 (“Delisting Regulations”);
(Delisting of Equity Shares) Regulations, 2009 (“Delisting Regulations”);
(b) SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011 (“Takeover Regulations”); and
Takeovers) Regulations, 2011 (“Takeover Regulations”); and
(c) SEBI (Buy-Back of Securities) Regulations (“Buy-Back
Regulations”).
Regulations”).
Following
are the highlights of the amendments to the Delisting Regulations:
are the highlights of the amendments to the Delisting Regulations:
i. A
promoter or promoter group cannot propose delisting of equity shares of a
company, if any entity belonging to the promoter or promoter group has sold
equity shares of the company during a period of six months prior to the date of
the board meeting in which the delisting proposal was approved in terms of
Regulation 8(1B).
promoter or promoter group cannot propose delisting of equity shares of a
company, if any entity belonging to the promoter or promoter group has sold
equity shares of the company during a period of six months prior to the date of
the board meeting in which the delisting proposal was approved in terms of
Regulation 8(1B).
ii. Prior
to granting its approval to delisting, the board of directors is obliged to:
to granting its approval to delisting, the board of directors is obliged to:
(a) make disclosure to the recognized stock
exchanges that the promoters/acquirers have proposed to delist the company;
exchanges that the promoters/acquirers have proposed to delist the company;
(b) appoint a merchant banker to carry out
due-diligence and make a disclosure to this effect to the recognized stock
exchanges;
due-diligence and make a disclosure to this effect to the recognized stock
exchanges;
(c) obtain details of trading in shares of the
company for a period of two years prior to the date of board meeting by top
twenty five shareholders as on the date of the board meeting convened to
consider the proposal for delisting, from the stock exchanges and details of
off-market transactions of such shareholders for a period of two years, and
furnish the information to the merchant banker for carrying out due-diligence.
company for a period of two years prior to the date of board meeting by top
twenty five shareholders as on the date of the board meeting convened to
consider the proposal for delisting, from the stock exchanges and details of
off-market transactions of such shareholders for a period of two years, and
furnish the information to the merchant banker for carrying out due-diligence.
iii. The
board of directors of the company while approving the proposal for delisting
has to certify the following after taking into account the due diligence report
of the merchant banker:
board of directors of the company while approving the proposal for delisting
has to certify the following after taking into account the due diligence report
of the merchant banker:
(a) the company is in compliance with the applicable
provisions of securities laws;
provisions of securities laws;
(b) the acquirer or promoter or promoter group or
their related entities, are in compliance with Regulation 4(5) which broadly
deals with them adopting any fraudulent or unfair or manipulative practice;
their related entities, are in compliance with Regulation 4(5) which broadly
deals with them adopting any fraudulent or unfair or manipulative practice;
(c) the delisting is in the interest of the
shareholders.
shareholders.
iv. The
merchant banker appointed by the board of directors of the company is obliged
to carry out due-diligence upon obtaining details from the board of directors
of the company. The merchant banker can also call for additional details from
the board of directors of the company for such longer period as may be deemed
fit.
merchant banker appointed by the board of directors of the company is obliged
to carry out due-diligence upon obtaining details from the board of directors
of the company. The merchant banker can also call for additional details from
the board of directors of the company for such longer period as may be deemed
fit.
v. The
report of the merchant banker should contain following details:
report of the merchant banker should contain following details:
(a) the trading carried out by the entities
belonging to acquirer or promoter or promoter group or their related entities
was in compliance or not, with the applicable provisions of the securities
laws; and
belonging to acquirer or promoter or promoter group or their related entities
was in compliance or not, with the applicable provisions of the securities
laws; and
(b) entities belonging to acquirer or promoter or
promoter group or their related entities have carried out or not, any
transaction to facilitate the success of the delisting offer which is not in
compliance with the provisions of Regulation 4(5).
promoter group or their related entities have carried out or not, any
transaction to facilitate the success of the delisting offer which is not in
compliance with the provisions of Regulation 4(5).
vi. The
stock exchange is now required to issue the in-principle approval for delisting
within five working days, as against thirty working days.
stock exchange is now required to issue the in-principle approval for delisting
within five working days, as against thirty working days.
vii. The
public announcement should now be made within a period of one working day of
the receipt of in-principle from stock exchange.
public announcement should now be made within a period of one working day of
the receipt of in-principle from stock exchange.
viii. No
entity belonging to the acquirer, promoter and promoter group of the company
can sell shares of the company during the period from the date of the board
meeting in which the delisting proposal was approved till the completion of the
delisting process.
entity belonging to the acquirer, promoter and promoter group of the company
can sell shares of the company during the period from the date of the board
meeting in which the delisting proposal was approved till the completion of the
delisting process.
ix. The
letter of offer should be dispatched to the shareholders within two working
days of the date of the public announcement, as against forty five working
days.
letter of offer should be dispatched to the shareholders within two working
days of the date of the public announcement, as against forty five working
days.
x. The
bidding period should now open within seven working days from the date of the
public announcement.
bidding period should now open within seven working days from the date of the
public announcement.
xi. Tendering
of shares in a delisting offer and settlement will now have to be facilitated
through the stock exchange mechanism.
of shares in a delisting offer and settlement will now have to be facilitated
through the stock exchange mechanism.
xii. The
bidding period should remain open for a period of five working days.
bidding period should remain open for a period of five working days.
xiii. The
floor price for delisting will have to be now determined in terms of regulation
8 of the Securities and Exchange Board of India (Substantial Acquisition of
Shares and Takeovers) Regulations, 2011.
floor price for delisting will have to be now determined in terms of regulation
8 of the Securities and Exchange Board of India (Substantial Acquisition of
Shares and Takeovers) Regulations, 2011.
xiv. A
delisting offer shall now be considered successful only if following conditions
are satisfied:
delisting offer shall now be considered successful only if following conditions
are satisfied:
(a) the post offer promoter shareholding (along with
the persons acting in concert with the promoter) taken together with the shares
accepted through eligible bids at the final price determined as per Schedule
II, reaches ninety per cent of the total issued shares of that class excluding
the shares which are held by a custodian and against which depository receipts
have been issued overseas; and
the persons acting in concert with the promoter) taken together with the shares
accepted through eligible bids at the final price determined as per Schedule
II, reaches ninety per cent of the total issued shares of that class excluding
the shares which are held by a custodian and against which depository receipts
have been issued overseas; and
(b) atleast twenty five per cent of the public
shareholders holding shares in the demat mode as on date of the board meeting
referred to in Regulation 8(1B) had participated in the Book Building Process.
shareholders holding shares in the demat mode as on date of the board meeting
referred to in Regulation 8(1B) had participated in the Book Building Process.
This requirement [mentioned in xiv (b) above] shall
not be applicable to cases where the acquirer and the merchant banker
demonstrate to the stock exchanges that they have delivered the letter of offer
to all the public shareholders either through registered post or speed post or
courier or hand delivery with proof of delivery or through email as a text or
as an attachment to email or as a notification providing electronic link or
Uniform Resource Locator including a read receipt.
not be applicable to cases where the acquirer and the merchant banker
demonstrate to the stock exchanges that they have delivered the letter of offer
to all the public shareholders either through registered post or speed post or
courier or hand delivery with proof of delivery or through email as a text or
as an attachment to email or as a notification providing electronic link or
Uniform Resource Locator including a read receipt.
In case the delisting offer has been made in terms
of regulation 5A of the Takeover Regulations, the threshold limit of ninety per
cent for successful delisting offer will have to be calculated taking into
account the post offer shareholding of the acquirer taken together with the
existing shareholding, shares to be acquired which attracted the obligation to
make an open offer and shares accepted through eligible bids at the final price
determined as per Schedule II of the Delisting Regulations.
of regulation 5A of the Takeover Regulations, the threshold limit of ninety per
cent for successful delisting offer will have to be calculated taking into
account the post offer shareholding of the acquirer taken together with the
existing shareholding, shares to be acquired which attracted the obligation to
make an open offer and shares accepted through eligible bids at the final price
determined as per Schedule II of the Delisting Regulations.
xv. Across
the Delisting Regulations, the term “promoter” has been replaced with the term
“promoter/acquirer”.
the Delisting Regulations, the term “promoter” has been replaced with the term
“promoter/acquirer”.
xvi. The
post-offer public announcement now needs to be issued within five working days
of the closure of the offer, as against eight working days.
post-offer public announcement now needs to be issued within five working days
of the closure of the offer, as against eight working days.
xvii. SEBI
has now been conferred with powers to relax strict enforcement of the Delisting
Regulations, subject to certain conditions.
has now been conferred with powers to relax strict enforcement of the Delisting
Regulations, subject to certain conditions.
xviii. The
pre-requisites for delisting a “small company” have been modified.
pre-requisites for delisting a “small company” have been modified.
xix. Certain
disclosure requirements in schedule I (contents of the public announcement) have
also been amended to reflect the aforesaid amendments to the Delisting
Regulations.
disclosure requirements in schedule I (contents of the public announcement) have
also been amended to reflect the aforesaid amendments to the Delisting
Regulations.
xx. As
regards schedule II, para 1 to 11 shall not be applicable in respect of book
building process where settlement is carried out through stock exchange
mechanism.
regards schedule II, para 1 to 11 shall not be applicable in respect of book
building process where settlement is carried out through stock exchange
mechanism.
The
notification amending the Delisting Regulations is available at – https://indiacorplaw.in/wp-content/uploads/2015/03/1427261684807.pdf
notification amending the Delisting Regulations is available at – https://indiacorplaw.in/wp-content/uploads/2015/03/1427261684807.pdf
Following
are the amendments to the Takeover Regulations:
are the amendments to the Takeover Regulations:
i. Subject
to the acquirer declaring his intention upfront to delist the target company at
the time of making the detailed public statement, the target company can be
delisted in accordance with the Delisting Regulations (“Delisting Offer”).
to the acquirer declaring his intention upfront to delist the target company at
the time of making the detailed public statement, the target company can be
delisted in accordance with the Delisting Regulations (“Delisting Offer”).
ii. In
case of failure to delist the target company, the acquirer will have to make an
announcement within two working days in respect of such failure and will have
to comply with all applicable provisions of the Takeover Regulations. The
acquirer will have to accordingly file the draft letter of offer with SEBI
within five working days of the announcement.
case of failure to delist the target company, the acquirer will have to make an
announcement within two working days in respect of such failure and will have
to comply with all applicable provisions of the Takeover Regulations. The
acquirer will have to accordingly file the draft letter of offer with SEBI
within five working days of the announcement.
iii. The
shareholders who have tendered shares in the Delisting Offer will be entitled
to withdraw such shares tendered, within 10 working days from the date of the
announcement of failure to delist.
shareholders who have tendered shares in the Delisting Offer will be entitled
to withdraw such shares tendered, within 10 working days from the date of the
announcement of failure to delist.
iv. The
offer price shall stand enhanced by an amount equal to a sum determined at the
rate of 10% per annum for the period between the scheduled date of payment of
consideration to the shareholders and the actual date of payment of
consideration to the shareholders. “Scheduled date” means the date on which the
payment of consideration ought to have been made to the shareholders in terms
of the timelines in the Takeover Regulations.
offer price shall stand enhanced by an amount equal to a sum determined at the
rate of 10% per annum for the period between the scheduled date of payment of
consideration to the shareholders and the actual date of payment of
consideration to the shareholders. “Scheduled date” means the date on which the
payment of consideration ought to have been made to the shareholders in terms
of the timelines in the Takeover Regulations.
v. Delisting
of the target company is not permitted where a competing offer has been made.
of the target company is not permitted where a competing offer has been made.
vi. The
acquirer will have to facilitate tendering of shares in an open offer by the
shareholders and settlement of the same, through the stock exchange mechanism.
acquirer will have to facilitate tendering of shares in an open offer by the
shareholders and settlement of the same, through the stock exchange mechanism.
vii. In
case of a Delisting Offer, the completion of the acquisition of shares which
triggered an open offer can be completed by the acquirer only after making the
public announcement regarding the success of the delisting proposal.
case of a Delisting Offer, the completion of the acquisition of shares which
triggered an open offer can be completed by the acquirer only after making the
public announcement regarding the success of the delisting proposal.
The notification
amending the Takeover Regulations is available at – https://indiacorplaw.in/wp-content/uploads/2015/03/1427261613075.pdf
amending the Takeover Regulations is available at – https://indiacorplaw.in/wp-content/uploads/2015/03/1427261613075.pdf
Following
is the amendment to the Buy-Back Regulations:
is the amendment to the Buy-Back Regulations:
The
acquirer or promoter will have to facilitate tendering of shares by the
shareholders and settlement of the same, through the stock exchange mechanism.
acquirer or promoter will have to facilitate tendering of shares by the
shareholders and settlement of the same, through the stock exchange mechanism.
The notification
amending the Buy-Back Regulations is available at – https://indiacorplaw.in/wp-content/uploads/2015/03/1427261741142.pdf
amending the Buy-Back Regulations is available at – https://indiacorplaw.in/wp-content/uploads/2015/03/1427261741142.pdf
– Yogesh Chande
REACTION (instant, primarily common sense based)
To one’s mind, the point of intriguing poser of most concern is in regard to the declared effective date of 24th March 2015. That is an odd date; which is not in sync say with the normally adopted, or to-be-most- ideally preferred one, being the beginning date of 1st April, of a financial year, for fiscal matters; such as say, for tax laws.
Further, the said effective date is the same as that of the Gazette Notification (s); as such, despite the several drastic changes, of a highly complex nature hence requiring time to get a true grip, those are expected to be/have been complied with as on and from that date. To be precise, SEBI permits no time at all, much less a reasonable time for even the amendments to be read and understood, not to speak of compliance in letter and spirit.
The subject notified amendments, prima facie of a substantial /substantive nature, are seen to be in respect of those extant regulations, the earliest of them (i.e. the last mentioned one) dating as far back as to 1998. Further, that is purported to have been made in exercise of vested powers and in pursuance of clause (f) of sub-section (2) of section 68 of the Companies Act, 2013.As has been the common and widely aired genuine complaint in industry and legal circles, the new company law itself is riddled with several areas on which the enactment is incomplete or there is either no clarity or is potent with possible controversies and legal disputes.
In short, in one’s independent perspective, even without going into the merits or otherwise of the subject amendments,- apart from the difficulties likely to be faced in the matter of compliance by companies on one side, so also of implementation, monitoring and enforcement by the authorities on the other,- the wisdom in prescribing 24th March 2015 as the effective date, is highly questionable.
For an appreciation in proper light of the viewpoint projected above, recommended to study a similar intriguing situation brought about because of an amendment of tax law with an odd effective date. Reference is to the insertion of section 234 D of the IT Act, as critically analysed in (2008) 173 TAXMAN 80.< It may be added, the enactment came to be amended vide the Explanation 2 later inserted later; but, as perceived, not wholly to serve the expected purpose as canvassed in the cited article.
In the ultimate analysis, in profound public interest, to be precise for better, if not ideal, administration, what should be of the most concern, with natural justice in focus, crying for devoted thinking is this: – Is there no hope at all for any improvement in the obtaining state of affairs, in the matter of legislation, or making rules by regulatory authorities or of the kind?!