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Chapter-ISEBI (Substantial Acquisition of Shares & Takeover) Regulations 1997

Regulation-2 Definitions

Acquirer

A Person who directly or indirectly acquires or agrees to acquire the shares of the targetcompany either by himself or through person acting in concert and includes promoter of thetarget company.

Person Acting in concert

Persons who for a common objective or purpose of substantial acquisition of shares of the targetcompany join hands together directly or indirectlyand includes:

Holding Companies Subsidiaries Companies Companies under the same management Directors of the above all companies Relatives, Family trusts and HUF, of the above directors, as per section 6 of the

Companies Act, 1956

Promoter & Promoter Group

Every person who is in control of the target company and who is named in the shareholdingpattern filed with stock exchange and includes promoter group.

Promoter Group shall consist of:

If the promoter is a body corporate:

Holding /Subsidiary Company A Company in which promoter holds 10% or more of the equity capital or vice versa. A Company of which such shareholders either individually or jointly holding 20% or

more of equity capital, also holds either individually or jointly 20% or more of the equitycapital in the target company.

If the promoter is an Individual:

Promoters Spouse, Promoters Parents

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Promoters Brother & Sister Promoters Children Promoters spouses Parents Promoters spouses Brother & Sister A company in which promoter/his immediate relative/firm or HUF in which the

promoter or his immediate relative is member, holds 10% or more of the share capital ofsuch company.

A company, in which the company referred above, holds 10% or more of the sharecapital.

A Firm/HUF in which the aggregate holding of the promoter and his immediate relativeis 10% or more of the capital of such firm/HUF.

Shares

Shares mean the shares carrying voting rights and include any security which is convertible intoshares carrying voting rights but shall exclude preference shares.

Working daysWorking days means the days of the Board.

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Regulation-3 Exemption from the applicability of Regulations 10, 11 & 12

Nothing contained in Regulations 10, 11 & 12 shall apply i.e. the Acquirer shall not be required

to make the public announcement in the following cases:

Acquisition by way of allotment in a Public issue.

Acquisition by way of allotment in a Right issueto the extent of his entitlement but postacquisition shareholding not exceeding beyond 75%.

Acquisition in the ordinary course of business by the Banks/PFIs as pledgees or byregistered stock brokerswith stock exchange on behalf of clients.

Acquisition under apublic offermade under these regulations.

Acquisition by way oftransmission.

Acquisition pursuant to a scheme of Merger/Amalgamation/demergerwhether in India orforeign.

Acquisition of shares of an Unlisted Companieswhether in India or abroad provided, byway of such acquisition, the acquirer not acquires control over/shares of a listedcompany. (i.e. known as indirect Acquisition of shares of a Listed Company)

Acquisition pursuant todelisting of shares.

Acquisition of Global Depository Receipts and American Depository Receipts unless theholders thereof become entitled to exercise voting rights on the underlying shares orexchange such depository receipts with the underlying shares carrying voting rights.

Acquisition by way ofinter se transferamongst:

i). Group as defined in the MRTP Act, 1969 and such group has been shown inthe last Published Annual Report of the Target Company;

ii)- Relatives (as per section 6 of the Companies Act, 1956) **(Note-2)

iii)- (a)- Qualifying Indian Promoters and Foreign Collaboration Shareholders

(b)- Qualifying Promoters ** (Note-1)

Provided that the transferor and transferee are holding shares in the target company fora period of at least 3 years prior to the proposed acquisition.

iv)- Acquirer and the persons acting in concert with him

Provided that such transfer takes place 3 years after the date of closure of the publicoffer made by them under these regulations.

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any person who is directly or indirectly in control of the company; Or

or existingn n

);

he

case of a partnership firm, the share of the qualifying promoter or his relative,

ed by qualifying

, the share of such qualifying promoter or his

(i)

(ii) any person named as promoter i)-- in any offer document to the publicshareholders Or ii)-- in the shareholding pattern disclosed by the compa y u der the

provisions of the Listing Agreement, whichever is later; and includes,

(a) Where the qualifying promoter is an individual,

(1) a relative of the qualifying promoter (as per section 6 of the Companies Act, 1956

(2) ny partnership firm or company, directly or indirectly, controlled by taqualifying promoter / his relative / his firm or HUF in which the qualifyingpromoter or his relative is a partner or a coparcener, or by a combinationthereof :

Provided that, in

as the case may be, in such firm should not be less than fifty per cent (50%);

(b) Where the qualifying promoter is a body corporate,

(1) a subsidiary or holding company of that body; or

(2) any partnership firm or company, directly or indirectly, controllpromoter of such body corporate / by his relative / a firm or HUF in which thequalifying promoter or his relative is a partner or coparcener, or by acombination thereof: (note:check thatcontrolled by the qualifying promoter of such bodycorporate, not by such body corporate itself)

Provided that, in case of a partnership firmrelative, as the case may be, in such firm should not be less than fifty per cent (50%);

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LIST OF RELATIVES

Relationship *Name

(Section 6 & Schedule IA)

1. Wife /H

usband

2. Father3. Mother (including step-mother)4. Son (including step-son)

5. Sons wife

6. Daughter (including step-daughter)7. Fathers father8. Fathers mother9. Mothers mother10. Mothers father

11. Sons son12. Sons sons wife

13. Sons daughter

14. Sons daughters husband15. Daughters husband16. Daughters son17. Daughters sons wife18. Daughters daughter19. Daughters daughters husband.20. Brother (including step-Brother)21. Brothers wife22. Sister (including step-sister)23. Sisters Husband24. Members of HUF

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Regulation-8 Yearly disclosure by the Acquirer / PAC / Promoter(s) / Target

Company

y Every Per r than PromoterB son othe

31st March to the Company about thenumber and the percentage of shares held by himself and/or with the person acting in

Within 21 days from the financial Year ending onconcert as on 31st March.

By the Promoter

Within 21 days from the financial Year ending on 31st March andof dividend

t with theers a

Within 21 days from the record date for the purpose of declaration

to he Company about the number and the percentage of shares held by himself and/or

on cting in concert as on 31p st March.

By the Target Company

Within 30 days from the financial Year ending on 31st March andof dividend

to t her thanromoters and also holdings of the promoters as on 31st March.

Within 30 days from the record date for the purpose of declaration

he all Stock Exchanges the changes, if any in the holdings of the persons otp

Regul moter / Promoter Group /ation-8A Disclosure of Pledged Shares by Pro

Target Company

By a Promoter/Every Person forming part of the Promoter Group

Creation of Pledge of Shares:

Within 7 days of creation of pledge, to the Company.

Invocation of Pledge of Shares:

n 7 days of invocation of pledg , toWithi e the Company.

By the Target Company

If during any quarter ending on Marnumber of pledged shares of a promot

ch, June, September and December of any year, aggregateer or person forming part of the Promoter group are lower

f:

)- If Pledged shares exceeds 1% of the total shareholding of the Company, then

e Company shall disclose to all Stock Exchanges within 7 days of the receipt of the informationled

oi)- If Pledged shares exceeding 25,000; Or

iithfor p ged shares either for creation or invocation.

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Chapter-IIISEBI (Substanti gulations 1997 al Acquisition of Shares & Takeover) Re

Substanti quirer al Acquisition of Shares and Public Announcement by the Ac

Th

at level-I, level-II &

ere are three levels, when the Acquirer shall make the Public Announcement.

The Acquirer shall not acquire shares either himself or through PAC by which he becomes entitledto exercise the percentage of the voting rights of the target company as specifiedlevel-III as below directly or indirectly, unless he makes a public announcement except in case ofacquisition under regulation 3 :

Level-I---Regulation-10

In case to become entitled to exercise 15 % or more voting rights directly or indirectly.

Level-II---Regulation-11 (Creeping Acquisition)

Between 15% but less than 55%the Acquirer acquires, directly or indirectlymore than 5% voting rights in a financial year

range.

ditional shares upto 5% in a financial yearMarch without making a p ng condition

Bet

Ifending on 31st March within the above said

An acquirer who together with the person acting in concert holds 15% or more shares may acquireeither himself or through persons acting in concert, adending on 31that:

st ublic announcement subject to the followi

1. the post acquisition shareholding of the acquirer together with persons acting in concert

shall not increase beyond 55% .

ween 55% but upto 75%the Acquirer acquires directly or indirectlyany voting rights within the above said range.

ho together with the person acting in concert holds 55% or more shares may acquirea

[II Proviso of Regulation 11(2)

If

An acquirer weither himself or through persons acting in concert, additional shares upto 5% without making

public announcement subject to the following conditions: ]:

1. such additional shares are acquired through the open market purchase on the stock

exchange but not through bulk deal/block deal/negotiated deal/preferentialallotment and

2. the post acquisition shareholding of the acquirer together with persons acting inconcert shall not increase beyond 75% .

Lev III---el- Regulation-12

case to become entitled to control over the Target Company either directly orInindirectly.

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Regul ration-13 Appointment of Merchant Banker as Manager to Offe

Appointment

The Acquirer shall appoint Category-I Merchant Banker as Managerfore making public announcement under regulations 10,

should not be associated with the Acquirer / TargetCompany.

to Offer be11 & 12.

Such Merchant Banker should be registered with the Board (SEBI).Such MB

Regulation-14 Time of Public Announcement of Offer

In case ofDirect Acquisition:

ithin 4 working days either from entering into agreement for acquisition oreciding to acquire shares as the case may be.

Wd

In case ofIndirect Acquisition:quisition of the parent company or

e company holding shares of the target company in India.Within 3 months of the completion of the acth

Regul heation-15 Publication of the Public Announcement in tNewspapers & its submission simultaneously

In all editions of the following newspapers:

One Hindi National dailyplace where the

Registered office of the Target Company is situated.

ily of the place of thee where the shares of the

Submission: Sub it

anker To the Concerned Stock Exchanges

stered office

Publication:

One English National daily One Regional language daily of the One Regional language da

concerned stock exchangTarget Company most frequently traded.

m simultaneously to the following:

To the Board (SEBI) through Merchant B

To the Target Company at its regi

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Regulation-18 Submission of Letter of Offer to the Board & to theSh ear holders of the Target Company

To the Board (SEBI) by Manager to Offer

ent draft Letter of Offer to the Board within 14 days from the date of Publicnnouncement along with the following documents:

F

SA

- ee as per Table belowi)ii)- Due Diligence Certificate

Fee Table:Offe er siz Fee (Rs.)

Less than or equal to 10 crore rupees. One lakh rupees (Rs. 1,00,000)

More than 10 cr1,000 crore rupees.

ore rupees, but less than or equal to 0.125 per cent of the offer size.

More than 1,000 crore rupees, but less5,000 crore rupees.

than or equal to (Rs. 1,25,00,000)on of the offer size incrore rupees (Rs.

One crore twenty five lakh rupeeslus 0.03125 per cent of the portip

excess of one thousand000,00,00,000).1

More than 5,000 crore rupees. A flat charge of 3 crore rupees (Rs. 3,00,00,000).

To the Shareholders of the Target Company

spatched to the sha y e SEBI.

hareholders of the

rget company only after 21 days from the date of its submission to the SEBI.

ally, this is sent to the shareholders only after being approved by SEBI.

Letter of Offer to be di reholders is that has been approved bth

As per this regulation, Letter of offer can be dispatched to the s

taBut practic

Regul g theation-19 Specified Date for the purpose of determininname of Shareholders for sending them LoO.

Such date can not be later than 30 days from the date of public announcement.

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Regulation-25 Competitive Bid

Competitive Bid: means

nt rred as Competitive Bidder) other than thequirer (hereinafter referred as First Bidder) who has made the first announcement.

f the public announcement by first bidder.

der the last subsisting competitive bid. i.e. the offer under all the subsisting bidsall close on the same date.

A Public Announceme by the person (hereinafter refeacCompetitive bid shall be made within 21 daysoCompetitive bid shall be equal to the holding of the first bidder and including the number ofshares for which the offer has been made by such first bidder.

Revising the offer by the First Bidder upon competitive bid

The First Bidder shall have the option to revise the offer upon competitive bid, within 14 days of

such competitive bid.

Closing date of the Offer where there is a Competitive bid

The date of closure of the original bid as well as of all the subsequent competitive bids shall bethe date of closure unsh

Regul heation-25(6) & 26 Upward Revisions by the First Bidder & tCompetitive Bidder(s)

Upward Revisions by the First bidder & Competitive bidder(s)

Both the bidders i.e. the first bidd have the option to make thepward revisions in their offers su s:

i .

i)- no change in any terms & conditions except mode of payment.

)- making the public announcement in all the newspapers in which the original public announcement was

y at its registered office simultaneously.

er & the competitive bidder, shallbject to the following conditionu

)- upward revision can be made only up to 7 working days prior to the date of closure of the offerii)- upward revision can be made only in respect of the shares & the number of shares to be acquired.

ii

ivmade.

v)- informing the Board, Stock Exchanges & the Target Companvi)- increasing the value of the Escrow account as per regulation 28(9).

Regulation-28 & 29 Escrow Account-Normal & Special

Normal Escrow Account-Regulation-28

Amount to be deposited in Normal Escrow Account

The Acquirer shall open an Escr Ac t efwith and deposit in an esc

ow coun b ore making the public announcementrow account the following sum as a

security on the basis of the total consideration payable assuming full acceptance of the

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offer irrespective of whether the consideration payable is in cash or otherwconsideration payable is:

ise, where the

Upto Rs. 100 crores 25% of the consideration payableExceeding Rs. 100 crores 25% upto Rs. 100 crores and 10% thereafter

{In caseinimum ideration payable in cash shall be deposited in the escrow account.}

where the offers are subject to Minimum level of acceptance and the acquirer does not want to acquireof 20% , then 50% of the consm

I m unt in upwardrevision

ableupon such revision.

ncreasing the a o Escrow Account in case

The amount shall be increased to equal to at least 10% of the extra consideration pay

Components of Escrow Account

Where Public Offer is not subject to minimum level of acceptance

The Escrow account shall consist of: **

mmercial bank Or{In such case the acquirer shall simultaneously issue DD or Cheque of the same

nker Or{In such case, the Bank Guarantee shall be valid for a maximum period of 20 days

ank at least 1% of the total

i)- Deposit of approved securities (Marketable securities) + Margin Money with the

illing his obligation by the acquirer and further incase any deficit on realization of such securities, the Merchant Banker shall be liable

able}

**{To be noted thcomponents not in c

Where P

i)- Cash deposited with a scheduled co

amount in favor of Merchant Banker}

ii)- Bank guarantee in favor of merchant ba

after the closure of offer and shall also deposit with bconsideration payable.}

iimerchant banker Or{In such case the acquirer shall simultaneously issue a power of attorney in favor of

Merchant Banker empowering the Merchant Banker to sell off the underlyingsecurities in case of failure in fulf

to make good any such deficit and shall also deposit with bank at least 1% of thetotal consideration pay

at in such case the escrow account can be maintained only in either of the aboveombinations thereof}

ublic Offer is subject to minimum level of acceptance

The Escrow account shall consist of:

scheduled commercial banki)- Cash deposited with a

Forfei ount & its distribution

The amo in t the Board:

on-fulfillment of his obligations by the acquirer (shall be forfeited either infull or part)

ion 20(3)(may be forfeited)

t the amount in Escrow Acc

unt he escrow account shall/may be forfeited by

a. In case nb. In case of failure to obtain the approval of shareholders under regulat

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After fo ting,Banker for dist the following manner after deduction of expenses, if any, of themerchan nker

- 1/3 of the amount to thetarget company

rate basis among the shareholders who have accepted theoffer.

rfei the entire amount in the Escrow Account shall be forward to the Merchantribution in

t ba and the registrar of the offer:

i)ii)- 1/3 of the amount to theInvestor Protection and Education Fund established by the Board

iii)- 1/3 of the amount to be distributed onpro-

Releasing/Refund of the Amount in Normal Escrow Account

In case where such Escrow account consists Cash

Where consideration payable is in cashi)- not exceeding 90% of the cash deposit, for transfer to the Special Escrow Account under

ii)- the balance 10% on completion of all obligations. Or

iii)- Upon withdrawal of offer

s / other secured

regulation 29, within 7 days from the date of closure of offer and

Where consideration payable is in share

instruments

Or

- Upon completion

In case where such Escrow account consists Bank Guarantee /Marke er consideration is payable in cash orh res

i)- 1% Cash deposit under regulation 28(10) shall be released upon completion of all obligations.

i)- Upon withdrawal of offer,

ii) of all obligation and certification by Merchant Banker

table securities eiths a etc.

Specia

l Escrow Account & Payment of Consideration-Regulation-29

Amount to be deposited in Special Escrow Account

here the consideration payable is in cash, the Acquirer shall open a Special Escrow Account with Banker to thed h

hetire sum due and payable to the shareholders as consideration for acceptances, received and accepted in terms of

e regula

WOffer registered with the Board within 7 days from the date of closure of the offer an shall deposit therein sucamount as would, together with 90% of the amount lying in the Normal Escrow Account, if any, make up ten

thes tions.

The unclaimed amount, if any, lying in such account for a period of 3years from the date of deposit thereof, shall betransferred to the Investor Education & Protection fund maintained by the Stock Exchange of the TargetCompany.

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Regul Offer Priceation-20

r to acquiThe offe re shares under regulation 10, 11 or 12 shall be made at a price not lower than the pricedetermin per sub regulations (4) & (5).

i. In cash Or

Or

iii. by issuing, exchange and/or transfer (in case acquirer is an unlistedacquirer & have a min. A grade rating from a credit rating from a credit rating agency registered with

The Shasecured inacquirer h ny clas ares in cash either under any agreement or in the open market or by any other

case where the consideration is payable in securities and issuance of which requires approval of shareholders the

ed as

The Acquirer can pay price either:

ii. In shares other than preference shares either by issuing, exchange and/or transfer (In case acquirer is alisted company)

In secured instruments either

the Board) Or

iv. In combinations thereof.

{ reholders shall be provided an option to accept payment either in cash or by exchange of shares or otherstruments in case where during the immediately 12 months from the date of public announcement theas acquired a s of sh

manner.}

In

acquirer shall obtain such approval within 7 days from the date of closure of offer and if he fails the entireconsideration shall be paid in cash.

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Ankit A arwal, ACS, LLB, M.Com