Amendment in SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
On 11th September, 2018, the Board amended SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 with an aim to simplify the language by eliminating redundant provisions and inconsistencies, by updating the references to the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 wherever required and by resolving the practical issues faced while implementing the provisions laid down therein, making it more easy readable and understandable for the issuers as well as for the investors.
Significant amendments and its comparison from old provision along with its impact is provided as follows:
| Regulation | Old Provision | Amended Provision | Impact |
| Automatic exemption available for acquisition of shares or voting rights or control for the inter-se transfer amongst group companies. | Inter-se transfer of shares or voting rights or control amongst group companies i.e. the Target Company or, its subsidiaries, its holding, other subsidiaries of such holding company, or any other entity where such persons holds atleast 50% of the equity shares, is currently exempted from the requirement to make an open offer under the provisions of the Regulation. However, the term ‘company’ shall means a company incorporated under the provisions of this Act or any other previous company law and does not specifically covers any other form of entity which is in the group whether Indian or Foreign. For claiming exemption by other group entities, whether Indian or Foreign, a separate exemption application has to be sought from the Board. |
Inserted an explanation to this exemption whereby it provided to include a body corporate, whether Indian or Foreign in the definition of a ‘company’. | The number of application seeking exemption would reduce by this amendment and automatic exemption can be availed on acquisition of shares or voting rights or control over the Target Company by group entities. |
| Timing for upward revision to the offer price | The upward revision was allowed only uptil three working days prior to the opening of tendering period under open offer or competing offer. | The time period has been increased by additional two working days which means that upward revision is allowed only uptil one working day prior to the opening of tendering period under open offer or competing offer. | Additional two working days has been provided to revise the offer price. |
| Interest bearing Escrow account | In the present scenario, Acquirer does not earns any interest on the funds submitted in Escrow account during the open offer period. | Amendment has been made whereby the escrow accounts may be maintained on interest bearing basis, hereinafter. | This amendment would enable to lower the cost involved during the offer. |
| Offer size in Voluntary Open Offer | The offer size for the voluntary open offer shall be for atleast 10 percent to the total shares of the Target Company. | It has been amended and clarified that the offer size shall be for atleast 10 percent of the voting rights of the Target Company. | More clarity has been provided in the Regulation. |
| Timing for calculation of trading status of the scrips of the Target Company | The trading status of the shares of the Target Company was to be calculated as on the date on which the open offer is made. | The trading status of the shares of the Target Company shall be calculated as on the date on which open offer is required to be made. | In the cases of delayed open offer, calculation of trading status was done on two dates, one when the offer was required to be made and other when the offer was actually made, creating ambiguity in calculation of the offer price, which has been clarified now. |
| Despatch of Letter of offer through electronic mode | Presently, the letter of offer has to be despatch either by ordinary post or registered post and there is no route to despatch the letter of offer through electronic mode. | Allowed the despatch of letter of offer through electronic mode in parlance with the provisions of Companies Act, 2013. On receipt of request from any specific shareholder, physical copy shall be provided and the disclosure with respect to mode of despatch has to be specified in the Letter of offer itself. | This is in consistency with the provisions of Companies Act, 2013 and would reduce the cost by ensuring timely delivery of the Letter of offer. |
| Timeframe to make disclosure on disposal of shares or voting rights exceeding two percent | No timeframe was specifically provided to file disclosure in case of disposal of shares. | Inserted the timeframe to make disclosure within two working days for the change exceeding two percent of the voting rights in cases of disposal of shares. | Clarified the ambiguity, making it parallel with the timeline provided to make disclosure in case of acquisition or allotment of shares. |
| Delisting Offer through Takeover Open Offer | Acquirer while making a Public Announcement for the Target Company has to declare his intention to delist the Company in the detailed public statement. | Board clarified that this intention has to be clearly stated in the detailed public statement and any subsequent declaration would not serve the purpose. | Acquirer needs to be vigilant and decisive enough while making an open offer to state whether he would intend to delist the Target Company or not. If not disclosed in the detailed public statement, then further opportunity to make delisting offer through Takeover offer would not be available. |
The Board also specifically prohibited a ‘fugitive economic offender’ who is declared as a fugitive economic offender under section 12 of the Fugitive Economic Offenders Act, 2018, to make an open offer or competing offer to acquire substantial shares or voting rights or control over the Target Company either directly or indirectly.
Transition phase for FDI filings
After collating the data of foreign investment made in India through Entity Master Form, Reserve Bank of India (RBI) has initiated the next phase of streamlining the online reporting process of foreign investments in India. With effect from September 01, 2018, RBI has introduced a new filing mechanism i.e. Single Master Form (SMF), which seeks to incorporate online reporting of 5 different forms i.e. FCGPR, FCTRS, LLP-I, LLP-2 & CN (Convertible Notes) under a common platform. Apart from these, reporting related to ESOP, Downstream Investment (DI), Depository Receipt Return (DRR) and Infrastructure Investment (InVi) will also be made available on the aforesaid platform at a later stage. Until now online reporting in Form FCGPR, FCTRS was done on eBiz portal and that of DI on the portal of FIFP. Further, reporting of ESOP and DRR are being done physically.
With the aforesaid initiative, RBI has not only dispensed with physical reporting in connection with foreign investment but it has also created a single and common platform for undertaking all related filings, which is certainly a welcome step and will lead to ease of filings.
With the introduction of FCGPR and FCTRS on SMF, all the pending Form FCGPR and FCTRS at eBiz portal shall have to be settled by AD Banks before September 20, 2018 or by the entities within a week of resubmission required, as the case may be.