Substantial Acquisition
of Shares & Take
overs
PPT- 6
Introduction
• It is a framework for systematic acquisition of stake in listed
companies
• It safeguards interest of the shareholders
• They are treated fairly & equitably
Definitions
Acquisition” means “directly or indirectly, acquiring or agreeing to acquire shares or voting rights in, or
control over, a target company”
“Acquirer” as any person who, directly or indirectly, acquires or agrees to acquire whether by himself, or
through, or with persons acting in concert with him, shares or voting rights in, or control over a target company
Acquisition -
• Direct acquisition, as the name suggests, is an acquirer directly acquiring shares / voting rights or
control of the target company.
• Indirect acquisition is defined under Regulation 5(1) of the Takeover Code, as any acquisition of
shares or voting rights in, or control over, any company or other entity, that would enable any person and
PAC to exercise or direct the exercise of such percentage of voting rights in, or control over, a target
company.
The emphasis of the Takeover Code is on the acquisition of ‘voting rights’ attached with the shares.
Persons Acting in Concert Definitions
Persons acting in concert (“PAC”) as persons who, with a common objective or purpose of
acquisition of shares or voting rights in, or exercising control over a target company, pursuant
to an agreement or understanding, formal or informal, directly or indirectly co-operate for
acquisition of shares or voting rights in, or exercise of control over the target company.
Control
Control” to include the right to appoint majority of the directors or to control the management
or policy decisions exercisable by a person or persons acting individually or in concert, directly
or indirectly, including by virtue of their shareholding or
management rights or shareholders agreements or voting agreements or in any other manner:
Offer Period
The period between the date of entering the agreement, formal or informal to acquire shares,
voting rights or control over a target company and the date on which the payment of
consideration to shareholders who have accepted the open offer is made, or on the date on
Definitions
Open Offer
An ‘open offer’ in effect means making an offer to buy shares from the
public shareholders of the target company.
It is exit opportunity to the public / minority shareholders of a
company in the event of any substantial change in shareholding or
change in control of the company.
SAS, voting rights or control
• Regulation 3
• (1)- No acquirer to acquire shares more than 25% of
the target Company
• (2)- No acquirer with PAC holds or acquired shares
25% or more shall acquire within a a financial year
acquire 5% or more shares
• Incase doing so has to give a open offer
• Regulation 4 - Acquisition of Control
• Public announcement of an offer for acquiring shares of
the target company
• Regulation 5 - Indirect Acquisition
• Public announcement of an offer for acquiring shares of
the target company
Acquirer can delist shares
Delisting of Shares-
The acquirer if wants can declare delisting of shares when he goes
for acquisition.
• Delisting of shares takes place as per the delisting regulations
• Under the code they have to make a announcement of the same in
2 days
• When there is a competing offer , the acquirer cannot delist the
company.
Process of Acquisition
• Public Announcement
• Detailed Public Statement
• Offer Price
• Submission of draft of offer letter
• Dispatch of offer letter
Points to be noted for the
Process
• Opening of offer
• Completion of Requirements
• Provision for escrow
• Mode of Payment
• Withdrawal of Offer
Other Obligations
Obligations of Target Company
In addition to the acquirer, the target company
and the intermediaries are also saddled with obligations during an open offer.
The target company is not permitted to carry out certain corporate transactions during
this period unless the approval of shareholders of the target company by way of a special
resolution by postal ballot is obtained.
The manager to the offer is also prohibited from trading in shares of the target company
during the offer period.
Obligations ofAcquirer
Obligations of Manager
Thank You
Dr. Medha Shetye
