he former UTI chief U K Sinha will soon take charge as the SEBI chief
Sebi Take Over Code
Transcript of Sebi Take Over Code
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SEBI TAKE OVER CODE
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TITLESecurities Exchange Board of India
(Substantial Acquisition of Shares and
Takeovers) Regulations, 1997
(Regulations) as amended in 2002.
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THE CONCEPT OF TAKEOVER
An acquirer taking over the control or
management of the targetcompany.
When an acquirer, acquires substantial
quantity of shares or voting rights of the
target company, it results in theSubstantial acquisition of Shares.
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Meaning of substantial quantity
of shares or voting rights
1. A person who, along with persons acting
in concert (PAC), if any, acquires
shares or voting rights (which when taken
together with his existing holding) would
entitle him to more than 5% or 10% or
14% shares or voting rights oftargetcompany.
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Meaning of substantial quantity
of shares or voting rights
2. An acquirerwho holds more than 15%
shares or voting rights of the target
company,
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PUBLICANNO
UNCE
ME
NTA Public announcement is generally an
announcement given in the newspapers
by the acquirer, primarily to disclose hisintention to acquire a minimum of 20% of
the voting capital of the targetcompany
from the existing shareholders by meansof an open offer.
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CONTENTS OF PUBLIC
ANNOUNCEMENT the offer price,
the number of shares to be acquired from the public,
the identity of the acquirer
the purposes of acquisition,
the future plans of the acquirer, if any, regarding
the target company
the change in control over the target company, if any
the procedure to be followed by acquirer in accepting the
shares tendered by the shareholders and the period within
which all the formalities pertaining to the offer would be
completed.
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APPOINTMENT OF MERCHANT
BANKER
The Acquireris required to appoint a
Merchant Banker registered with SEBIbefore making a PA and is also required to
make the PA within fourworking days of
the entering into an agreement to acquireshares, through such Merchant Banker.
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Procedure to be followed after
the Public Announcement
1. Acquireris required to file a draft Offer
Document with SEBI within 14 days of
the PA through its Merchant Banker,along with filing fees of Rs.50,000/- per
offer Document
2. Merchant Bankeralso has to submit adue diligence certificate as well as
registration details
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Procedure to be followed after
the Public Announcement
3.The acquirerthrough its Merchant Banker
sends the offer document as well as the
blank acceptance form within 45 days fromthe date of PA, to all the shareholders
whose names appear in the register of the
Target company on a particular date
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Procedure to be followed after
the Public Announcement
4.The offer remains open for30 days. The
shareholders are required to send their
Share certificate (s) / related documents tothe Registrar or Merchant Banker as
specified in the PA and offer document
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Procedure to be followed after
the Public Announcement
5. The acquireris obligated to offer a
minimum offer price as is required to be
paid by him to all those shareholders ofthe target company, whose shares are
accepted under the offer, within 30 days
from the closure of offer
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MINIMUM OFFERPRICE AND
PAYMENTS MADEThe offer price shall be the highest of:
Negotiated price under the agreement Price paid by the acquirer by way of public
rights/ preferential issue during the 26-weekperiod prior to the date of the PA
Average of weekly high & low of the closingprices of shares as quoted on the Stockexchanges, where shares of Target companyare most frequently traded during 26 weeks priorto the date of the Public Announcement
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MINIMUM OFFERPRICE AND
PAYMENTS MADEIn case the shares oftarget company are not frequentlytraded, then the offer price shall be determined by relianceon the following:
the negotiated price under the agreement,
highest price paid by the acquirer by way of public rights/
preferential issue during the 26-week period prior to the
date of the PA
return on net worth, book value of the shares of the target company,
earning per share,
price earning multiple vis a visthe industry average.
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PAYMENT Acquirers are required to pay the consideration
to shareholders who have accepted the offerwithin 30 days from the date of closure of theoffer.
In case the delay in payment is not due to willfuldefault or neglect on part of the acquirer, theacquirers would be liable to pay interest to the
shareholders for the delayed period inaccordance with Regulations. If the delay in payment of consideration is not
due to the above reasons, it would be treated asa violation of the Regulations.
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GUARANTEE FOR PAYMENTBefore making the Public Announcement the
acquirerhas to create an escrow account having25% of total consideration payable under the offerof size Rs. 100 crores (Additional 10% if offer sizemore than 100 crores). The Escrow could be in theform of:
cash deposited with a scheduled commercial bank,
bank guarantee in favor of the Merchant Banker deposit of acceptable securities with appropriate
margin with the Merchant Banker.
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PENA
LTIE
SRegulation 45 provides for penalties.
1. If the acquirerfails to carry out the
obligations under the Regulations, the
entire or part of the sum in the escrow
amount shall be liable to be forfeited and
the acquireror such a person shall also beliable for action in terms of the Regulations
and the Act.
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PENA
LTIE
S2.The board of directors of the target companyfailing to carry out the obligations under the
Regulations shall be liable for action in terms of
the Regulations and SEBI Act.
3.Initiate action for suspension or cancellation of
registration of Merchant Banker holding a
certificate of registration under section 12 of theAct.
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PENA
LTIE
S3. For any mis-statement to the shareholders
or for concealment of material information
required to be disclosed to the shareholders,
the acquirers, the directors of the target
company, the merchant banker would be
liable for action in terms of the Regulations
and the SEBI Act.
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PENA
LTIE
SThe penalties referred to in sub-regulation(1) to (5) may include -
criminal prosecution under section 24 of theSEBI Act;
monetary penalties under section 15 H of
the SEBI Act;
directions under the provisions of Section
11B of the SEBI Act.
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EXEMPTIONS
The following transactions are exempted from makingan offer and are not required to be reported to SEBI :
allotment to underwriter pursuant to any
underwriting agreement; acquisition of shares in ordinary course of business
by; Regd. Stock brokers on behalf of clients;
Regd. Market makers; Public financial institutions on their own account; banks & FIs as pledges;
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EXEMPTIONS
Acquisition of shares by way of transmission onsuccession or by inheritance
Acquisition of shares by Govt. companies;
Acquisition pursuant to a scheme framed undersection 18 of SICA 1985;
Out of arrangement/ restructuring includingamalgamation or merger or de-merger under
any law or Regulation Indian or Foreign; Acquisition of shares in companies whose
shares are not listed;