[Deergha Meena is a fourth year student at NALSAR University of Law]
India’s framework for monitoring post-acquisition control remains largely reactive, leaving a critical gap in tracking the evolution of control after transactions close. Although the Securities and Exchange Board of India’s (SEBI’s) Takeover Regulations and SEBI’s Listing and Disclosure Requirements (LODR) Regulations introduce essential disclosure measures, they do not ensure full visibility into post-acquisition operations. This post analyses established regulatory approaches mainly from the United States (US), European Union (EU), United Kingdom (UK), and Singapore to develop a practical roadmap for modifying India’s system from reactive oversight to proactive surveillance.
The Continuous Disclosure Imperative
Continuous disclosure is the cornerstone of effective post-acquisition surveillance, as it shifts the focus from a single, point-in-time report to an ongoing monitoring mechanism. Under the U.S. Securities Exchange Act, sections 13(d) and 13(g) mandate not only initial beneficial ownership filings but also prompt amendments whenever material changes occur. This mechanism is essential for preventing ‘bait and switch’ scenarios after transaction closings. During the integration period, the Securities Exchange Commission (SEC) monitors the merging of operations, accounting practices, and governance, while Regulations S-X and FD (Fair Disclosures) ensure timely disclosure.
While recent amendments in India have shortened disclosure timelines, the US SEC rules remain more stringent. Companies are required to file Form 8-K within four-business days of a material event, which is significantly faster than many current Indian provisions. The 2012 Facebook-Instagram acquisition illustrates this, with Facebook filing form reports over 16 months to verify that pre-acquisition promises were met. In contrast, India’s system relies on periodic reporting, leaving gaps in real-time monitoring. Despite the amendments in 2024 to the LODR Regulations lowering disclosure thresholds under regulation 30, the regulatory provision still lacks specific taxonomies for integration disclosures, creating blind-spots during key post-acquisition phases. SEBI should refine the requirements with phased disclosures and explicit categorization of post-integration events, such as deviations from synergy targets, operational-changes, restructuring activities, and integration-related impairments.
Strengthening regulation 31 of the Takeover Regulations is also critical; while currently acquirers must disclose shareholding patterns within two working days after crossing the specified thresholds, no mechanism exists for reporting changes in acquisition intentions. The UK’s Takeover Code mandates binding intention disclosures under rule 19.6 about the target’s future, such as plans for business operations, employee retention, or asset management for at least 12-months, a model India could emulate.
The European Commission’s approach further requires merged entities to submit clear and comprehensive implementation plans detailing how remedies and commitments will be executed. For instance, in the Dow-DuPont merger (2017), the plan specified divestiture details along with structured reporting requirements such as quarterly compliance reports for the first two-years after closing, semi-annual reports thereafter, immediate notifications of material changes, and annual executive certifications. This systematic framework ensures ongoing accountability after closing without constant regulatory intervention.
Contract-Based Governance and Consultation Mechanisms
Building on the continuous information flow via enhanced disclosure requirements, contract-based governance transforms voluntary commitments into legally enforceable obligations. Contract-based governance approaches from three jurisdictions offer complementary models for India. Singapore embeds accountability within transaction agreements themselves, as demonstrated when SoftBank’s Grab acquisition included enforceable commitments on data governance and operational location. The UK formalizes this concept through post-offer undertakings (rule 19.5), creating regulatory enforcement mechanisms for acquirer promises regarding employment maintenance and strategic investment. For critical sectors, countries’ special share arrangements maintain governmental oversight through retained voting rights on foundational decisions. These arrangements allow the government to maintain specific voting rights in privatized companies of strategic importance.
Contract-based mechanisms establish accountability frameworks which India needs, but they also require verification systems to ensure compliance. This need is to be addressed through both stakeholder consultation and independent trustees, without necessitating a proportional expansion of regulatory resources. The EU has established systematic stakeholder consultation mechanisms that form a distributed monitoring network after significant acquisitions. For instance, in the 2018 Bayer-Monsanto merger, the Commission set up formal channels for farmers, agricultural organizations, and competitors to raise concerns about access to key technologies. This promises enhanced visibility.
On the other hand, Singapore leverages public-private partnerships for stakeholder engagement, as seen when Vodafone acquired major telecommunications operations. In that case, the country’s Infocomm Media Development Authority implemented an independent verification mechanism that conducted quarterly assessments of network quality, pricing practices, and customer service, reporting directly to regulators. Complementing this, the US reinforces oversight with a whistleblower program under the Dodd Frank Act, which offers financial incentives for individuals to report securities violations, thereby bolstering post-acquisition monitoring.
A multi-pronged strategy should integrate contract-based governance and commitments with robust stakeholder consultation to reinforce accountability. Additionally, it is necessary to establish contact points, clear investigation timelines, and regular stakeholder forums for transparency. By mandating formal shareholder approval and barring voting by parties seeking reclassification, the revised LODR regulation 31 reinforces binding commitments. Integrating these measures will drive sustained accountability and mitigate rapid control shifts in the post-acquisition phase.
The Independent Trustee Framework
While stakeholder consultation provides broad market feedback, independent trustees offer focused, transaction-specific oversight, creating the third pillar of the integrated framework. The European Commission’s independent trustee system under Regulation 139/2004 (ECMR) is a standout mechanism for monitoring post-acquisition compliance. Trustees, appointed based on Article 8(2), oversee both structural and behavioural commitments with broad powers of accessing company data, interviewing personnel, and engaging experts, to ensure ongoing adherence to merger conditions. The European model distinguishes between Monitoring Trustees and Divestiture Trustees, the latter holding an irrevocable mandate to sell assets at any price, creating powerful incentives for timely compliance with structural remedies.
The Bayer-Monsanto merger again exemplifies this approach, where Bayer was required to divest assets worth six billion euros while trustees, funded by merging parties yet reporting directly to regulators, ensured independent oversight. India would do well to adopt this framework by amending the Competition Act and the Takeover Regulations to authorize the appointment of monitoring trustees. This approach would be particularly valuable for cross-border acquisitions like Walmart-Flipkart (2018), where SEBI currently faces jurisdictional limitations in monitoring post-acquisition developments, which could have been resolved by this suitable incorporation.
Dynamic Control Monitoring and Tiered Approach
The trustee framework establishes independent verification channels that strengthen the component-based monitoring approach described next, providing trustee-verified data for the influence scoring system. SEBI’s revised Schedule III mandates forensic audit disclosures to detect post-acquisition control shifts through financial manipulation, suggesting that audits be expanded to capture multidimensional aspects. However, SEBI’s current post-acquisition monitoring relies mainly on fixed shareholding disclosures that miss the nuanced evolution of control. To bridge this gap, India should adopt a two-pronged strategy that component-based dynamic monitoring with a phased surveillance process.
The component-based approach would transform post-acquisition surveillance by evaluating de facto control through four-key dimensions: Ownership Influence-Score (assessing shareholder ownership with differential voting powers and rights that translate to actual control), Voting Behaviour (analysing patterns in shareholder decisions), Board Influence-Index (assessing appointee impact on governance-decisions), and Strategic Decision-Making Influence (tracks critical corporate decisions against pre-acquisition plans).
This introduces a structured three-phase surveillance process that addresses the current gaps in India’s post-acquisition monitoring timeline. During the Integration Transparency phase (first year), regulators would track governance changes, management transitions, and compliance with pre-acquisition commitments, similar to how the European Commission monitoring works. The Strategic Influence Audit phase (years 1-2) would evaluate evolving decision-making processes and control dynamics, while the final Minority Protection Assessment phase (year 3) would ensure adequate safeguards remain for minority shareholders.
Technology-Enhanced Surveillance
Technology serves as the enabling infrastructure that unifies and amplifies all previously discussed mechanisms, processing the data flows from disclosure requirements, contractual commitments, stakeholder feedback, and trustee reports. The US SEC has developed sophisticated technological tools that enhance the structure. The Corporate Issuer Risk Assessment (CIRA) program uses machine learning algorithms to analyse corporate filings, flagging unusual patterns that might indicate disclosure issues and simultaneously using natural language processing to identify inconsistencies between current and previous filings. These tools detect subtle changes in filings that may signal shifts in strategy or integration issues, as seen in the Kraft-Heinz merger case where SEC ultimately charged the company with accounting misconduct related to procurement practices by tech-assisted identification of patterns.
India has already established technological foundations through SEBI’s Network Security Operations Centre (NSOC)and Data Warehousing and Business Intelligence System (DWBIS) to monitor market activities following acquisitions, and detecting market manipulation. Moreover, amended regulation 50(4) of the LODR Regulations mandating XBRL-format disclosures based on the Kotak Committee recommendations aligns with the technological enhancement approach. Thus, SEBI should enhance these platforms with specialized post-acquisition monitoring modules focused on three priority areas: tracking governance changes through filing analysis, monitoring integration milestone adherence, and flagging deviations from disclosed integration plans.
Conclusion
This post has presented an integrated surveillance framework where each component reinforces the others: continuous disclosures provide the information that trustees verify; contract-based mechanisms create the obligations that stakeholders help monitor; and multidimensional monitoring along-with technology enables the analysis that makes the entire system function effectively. The recommended actionable steps show promise in positioning India to effectively navigate the dynamic landscape of post-acquisition control surveillance pro-actively without expanding regulatory bureaucracy.
– Deergha Meena
