SEBI recently put out a set of FAQs relating to the Takeover Regulations, 2011 that came into effect on October 22, 2011. While a substantial part of the FAQs relate to either explanation of matters or elaboration of certain aspects of process and mechanics, they also address substantive issues on a few counts. We had earlier discussed the issue as to whether hostile takeovers are permissible...
Buybacks and open offer – recent decision of SAT
Recently, on 21st November 2011, the Securities Appellate Tribunal (SAT) held that the increase in percentage holding of a person consequent to buyback of shares does not amount to acquisition and thus cannot result in an open offer. This is, in my view, a correct legal interpretation of the law (as also argued by me in an earlier post here). But SEBI had, in practice, taken a view that such...
Supreme Court’s Silence on “Control” Under the Takeover Regulations
Early last year, the Securities Appellate Tribunal (SAT) had passed an order in the Subhkam case holding that protective provisions in shareholders’ agreements (such as affirmative rights) adopted by investors do not amount to “control” for purposes of the SEBI Takeover Regulations. Although SEBI had initiated an appeal before the Supreme Court, the matter has now been disposed off by the Supreme...
Hostile Takeovers under the New Code
The new SEBI Takeover Code is set to come into force on October 22, 2011. One of the issues that has received great attention is the ability (or otherwise) of acquirers to carry out a hostile acquisition of an Indian listed company under the new Code. A recent press report has the background. As far as the Takeover Code of 1997 is concerned, we have previously seen (here and here) that the...
New Takeover Regulations Notified
In July this year, SEBI accepted most of the recommendations of the Takeover Regulations Advisory Committee (TRAC). The key changes have been listed here. Yesterday, SEBI formally notified the new version in the form of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 that will come into effect on the 30th day from its publication in the Official Gazette. SEBI has also...
No Takers for Takeover Offers
Historically, the response of public shareholders to takeover offers in Indian companies has been lukewarm. This is primarily due to the fact that the market price of the company’s shares following the takeover announcement tends to be higher than the offer price. However, a report in the Business Line contains a study of recent offers indicating that shareholders who did not exit in the offers...
CSX/TCI: Appellate Court on Disclosures and Takeover Law
Sometime ago, we had the opportunity to discuss a decision of the U.S. District Court for the Southern District of New York pertaining to the use of cash-settled total-return equity swaps by acquirers and whether that would trigger disclosure requirements under appropriate U.S. regulations governing takeovers. Now an appellate court has pronounced its decision in which the majority of the judges...
Changes to Takeover Regulations
SEBI has approved most of the changes suggested by the Takeover Regulations Advisory Committee (TRAC) last year to the Takeover Regulations. The key changes are summarized in SEBI’s board note: a) Initial trigger threshold increased to 25 % from the existing 15 %. b) There shall be no separate provision for non-compete fees and all shareholders shall be given exit at the same price. c) In cases...
Pledge of Demat Shares: Implications Under Takeover Regulations
A somewhat peculiar situation came up for consideration of the Securities Appellate Tribunal (SAT) in Liquid Holdings Private Limited v. SEBI, on which SAT passed its order on March 11, 2011. Background Liquid Holdings Private Limited (Liquid) was one of the promoters of Blue Coast Hotels Limited (the Target). Morepen Laboratories Limited, a group company of Liquid, obtained loans from two banks...
Literature on Takeover Regulations
I recently came across two papers dealing with the SEBI Takeover Regulations and other related legislation in India, and a discussion of issues that arise in takeovers of Indian companies. 1. The Emerging Market for Corporate Control in India: Assessing (and Devising) Shark Repellants for India’s Regulatory Environment by Abhinav Chandrachud. Abstract: Inbound and domestic hostile takeover...
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