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compliance in takeover
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SEBI (SAST) Regulation, 2011 Presented by Nitesh Bhati
Terminology
• SAST - Substantial Acquisition of Shares and Takeover
• Takeover
• Acquisition
• Control – 2(e)
• Target Company
• Acquirer
• Persons acting in concert – Reg. 2(q)
Disclosures on acquisition or disposal of shares – Reg. 28
Disclosure of holding of shares/convertibles toStock Exchange and Target Company
• If crosses 5% of shares or Voting rights
• If holds >5%, disclose sale/purchase of >=2%
Annual Disclosure
Disclosure about holding to Stock Exchange and Target Company within seven working days from end of financial year
• By every person holding 25 % shares
• Promoter(s) of company
Disclosure of encumbered shares
• Disclosure by promoter to Stock Exchange and Target Company
– On creation of encumbrance
– On release of encumbrance
– On invocation of encumbrance
Open offer
• What is open offer?
– Offer to buy out shares of shareholders.
– Made by acquirer who is taking control or acquiring substantial stake
• Why open offer?
Shareholders need an exit opportunity at fair terms
• If there is a change in control ( promoters)
• If there is substantial increase in shareholding of a share holder.
Mandatory Open Offer -Trigger points
SEBI (SAST) Regulation, 2011
Acquisition of 25% or more shares or voting rights (Initial trigger- Reg 3(1))
Acquisition of more than 5% p.a. by shareholders holding more than 25% shares(Subsequent trigger-Reg 3(2))
Change in control as a trigger point
Voluntary open offer
Eligibility of making voluntary offer:
• The acquirer(s) is a promoter
• Holding is between 25% to Maximum permissible non-public shareholding (75%/90%)
• The acquirer has not acquired shares of the TC in the preceding 52 weeks
• Shall not be entitled to acquired any shares of the TC for a period of 6 month after completion of the open offer except pursuant to another voluntary open offer
Offer Size
Number of shares to be acquired from public:
• Mandatory offer : Minimum 26% of the share capital
If post offer holding >maximum permissible non public shareholding (MPNPS), acquirers to undertake to bring it back within 1 year.
• Voluntary offers- Minimum 10% of the share capital
Size shall not be such so as to cross MPNPS.
Offer Price
Offer price shall be the highest of:
• Highest negotiated price
• Volume weighted average price paid or
payable for acquisitions by acquirer during
last 52 weeks
• Highest price paid or payable for
acquisitions by acquirer during last 26
weeks
• Volume weighted average market price for
period of sixty trading days
• Not frequently traded shares – price
determined based on fundamental of
company
Offer process
• Public Announcement (PA) on the date of agreement to acquire.
• Detailed Public Statement (DPS) with 5 working days of PA
• Draft Letter of offer to SEBI within 5 working days of DPS
• SEBI to give comments within 15 working days
• Dispatch of letter of offer within 7 wkg days of SEBI’s letter.
• Offer to open within 10 wkg days from SEBI’s letter.
• Offer to remain open for 10 working days
• Payment to be made within 10 wkg days from closure of offer.
• Underlying acquisition to be completed within 26 weeks from date of payment.
Exempted transactions – Reg. 10
• Inter-se transfer amongst
– Immediate relatives
– Promoters
– Companies under same control
– Persons acting in concert for not less than 3 yrs
• Acquisition in ordinary course of business
• Acquisition pursuant to Scheme
• Pursuant to Corporate Debt Restructuring Scheme
• Pursuant to Buy Back subject to some conditions.
• Pursuant to rights issue subject to some conditions.
• Acquisition of shares by promoters from VCFs/ State Level Financial institutions pursuant to an angreement
Exemptions by Board
• SEBI may grant exemption for transactions not covered under “exempted transactions.
• SEBI may take help of panel of experts.
• SEBI to pass a reasoned order.
Thank you