Shishir Vayttaden
SEBI’s Takeover Regulations

As corporate attorneys in India know well, SEBI’s Takeover Regulations are the single most important legislation for M&A lawyers advising on the acquisition of listed companies in India. Unfortunately – in crucial respects – it also happens to be one of the most complicated. In several areas, neither the letter of the regulations nor judicial pronouncements are available to fill crucial gaps. Conflicting (and frequently unknown) orders of SEBI and SAT further complicate matters for the practitioner. Until this publication, there was no work that wove the jurisprudence of SEBI, SAT and court orders with the rich source of industry practice found in published public announcements and the practical insights of practitioners.

This provision-by-provision commentary on the Takeover Regulations can safely claim to be the most exhaustive work on its subject. Apart from its scrupulous analysis of more than 400 decided cases, it also draws extensively on published market practice, SEBI’s guidance notes and the author’s formidable experience in listed company M&A. The book will serve as a useful tool for Indian and foreign law firms, in-house legal cells of listed Indian companies, investment banks, practicing company secretaries, chartered accountants, law schools and business schools.

The Securities and Exchange Board of India (Substantial Acquisition of
Shares and Takeovers) Regulations, 1997 ...................................................................I
Background to the SEBI Takeover Regulation ......................................................
II
Chapter I: Preliminary ...................................................................................................... 1
Regulation 1: Short Title and Commencement ................................................... 1
Regulation (1)(1) ........................................................................................................... 1
Regulation (1)(2) ........................................................................................................... 2
Regulation 2: Definitions ........................................................................................... 3
The lead-in phrase of regulation 2(1) .......................................................... 6
Regulation 2(1)(a) ............................................................................................. 7
Regulation 2(1)(b) ............................................................................................ 8
Indirect acquisitions generally ........................................................... 9
Indirect acquisitions and pro-rating ................................................. 9
Indirect acquisitions and control ...................................................... 10
Indirect acquisitions and derivative interests ................................. 11
Indirect acquisitions and the Bhagwati Committee’s
two-fold test ............................................................................................
12
PACs in Regn 2(1)(b) .......................................................................... 13
‘Passive’ Acquisitions? .......................................................................... 14
Acquisitions and ‘intent’ ..................................................................... 15
Agreement to acquire shares or control ........................................... 16
Regulation 2(1)(c) ............................................................................................. 19
De facto control ..................................................................................... 20
De facto control in targets with dispersed shareholders ............. 21
Control’ and the target’s board .......................................................... 21
Veto rights ............................................................................................... 21
Positive and negative rights: the first dichotomy .......................... 22
Participative and protective rights: the second dichotomy ........ 23
SEBI and SAT on veto rights ........................................................... 24
Lenders and veto rights ....................................................................... 25
Explanation (i) ....................................................................................... 27
The proviso to Explanation (i) ........................................................... 28
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Explanation (ii) ...................................................................................... 29
Regulation 2(1)(cc) ........................................................................................... 30
Regulation 2(1)(d) ............................................................................................ 31
Investigations under section 11C ..................................................... 31
Regulation 2(1)(e)(1) ....................................................................................... 32
Common themes in the four elements of concert ....................... 33
Element one: common objective ...................................................... 34
Element two: substantial acquisition of shares or control .......... 36
‘substantial acquisition’ for the purpose of ‘concert’ .................... 37
Element three: cooperation by acquiring shares ........................... 38
The ‘source of funds’ doctrine ............................................................ 39
Element four: agreement ..................................................................... 41
Evidence of concert .............................................................................. 41
Regulation 2(1)(e)(2) ....................................................................................... 43
Regulation 2(1)(e)(2)(i): ‘under the same management’ ............ 44
Regulation 2(1)(e)(2)(ii) ..................................................................... 46
Regulation 2(1)(e)(2)(iii) .................................................................... 46
Regulation 2(1)(e)(2)(iv) ..................................................................... 46
Regulation 2(1)(e)(2)(v) ...................................................................... 47
Regulation 2(1)(e)(2)(vi) ..................................................................... 48
Regulation 2(1)(e)(2)(vii) ................................................................... 49
Regulation 2(1)(e)(2)(viii) .................................................................. 50
Regulation 2(1)(e)(2)(ix) ..................................................................... 51
Regulation 2(1)(e)(2)(x) ...................................................................... 51
Regulation 2(1)(f ) ............................................................................................. 52
‘Memorandum of Understanding’ ................................................... 53
Regulation 2(1)(g) ............................................................................................ 54
Regulation 2(1)(h) ............................................................................................ 55
‘Offer Document’ ................................................................................. 55
‘Promoter by designation’ ................................................................... 55
Directors and professionals as promoters ....................................... 56
The explanation to regulation 2(1)(h) ............................................. 57
Regulation 2(1)(i) ............................................................................................. 58
Regulation 2(1)(ia) ........................................................................................... 61
PSU v. Government Company ......................................................... 62
Regulation 2(1)(j) ............................................................................................. 63
Excluding ‘acquirers’ ............................................................................. 63
Regulation 2(1)(k) ............................................................................................ 64
Shares and voting rights ...................................................................... 65
Partly paid shares ................................................................................... 67
Partly paid shares in the Takeover Regulations ............................. 68
Shares and the freezing of voting rights .......................................... 68
Regulation 2(1)(l) ............................................................................................. 69
Regulation 2(1)(m) ........................................................................................... 70
Detailed Contents
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Detailed Contents
Regulation 2(1)(n) ............................................................................................ 71
Regulation 2(1)(o) ............................................................................................ 71
Regulation 2(1)(p) ............................................................................................ 71
Regulation 2(2) .................................................................................................. 71
Regulation 3: Applicability of the regulations ....................................................... 72
The lead-in phrase of regulation 3(1) .......................................................... 77
Regulation 3(1)(a) ............................................................................................. 78
Regulation 3(1)(b) ............................................................................................ 79
Renunciations ........................................................................................ 81
Regulation 3(1)(d) ............................................................................................ 82
Regulation 3(1)(e) ............................................................................................. 82
Regulation 3(1)(e)(i) ............................................................................ 82
Inter connected undertaking and the inadequacy of the
MRTP definition of a ‘Group’ ...............................................
84
Regulation 3(1)(e)(ii) ........................................................................... 86
Regulation 3(1)(e)(iii) .......................................................................... 87
Qualifying Indian promoters ................................................. 87
Foreign collaboration ............................................................... 88
The proviso to regulation 3(1)(e)(iii) ............................................... 89
Explanation to regulation 3(1)(e)(iii) .............................................. 91
Regulation 3(1)e (iv) ............................................................................ 93
Explanation (1) .......................................................................... 94
The date of the public announcement ................................ 95
Explanation (i) and indirect acquisition ............................. 95
Explanation (2) .......................................................................... 95
Regulation 3(1)(f ) ............................................................................................. 97
Regulation 3(1)(f )(i) ............................................................................ 97
Pool accounts ............................................................................. 97
Running accounts ..................................................................... 98
Regulation 3(1)(f )(ii) ........................................................................... 99
Guidelines for market makers ................................................ 99
Regulation 3(1)(f )(iii) .......................................................................... 100
Regulation 3(1)(f )(iv) .......................................................................... 101
Pledge of demat shares ............................................................. 101
Regn. 3(1)(f )(iv) in the context of physical shares ........... 102
Regulation 3(1)(f )(v) ........................................................................... 103
Regulation 3(1)(f )(vi) .......................................................................... 103
Regulation 3(1)(ff) ............................................................................................ 104
Regulation 3(1)(g) ............................................................................................ 105
Regulation 3(1)(h) ............................................................................................ 105
Regulation 3(1)(i) ............................................................................................. 106
Successors or assignees ............................................................. 107
Regulation 3(1)(ia) ........................................................................................... 107
Regulation 3(1)(j) ............................................................................................. 108
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Regulation 3(1)(j)(i) ............................................................................. 108
Regulation 3(1)(j)(ii) ............................................................................ 110
Regulation 3(1)(ja) ........................................................................................... 114
Regulation 3(1)(k) ............................................................................................ 114
Regulation 3(1)(ka) .......................................................................................... 115
Regulation 3(1)(l) ............................................................................................. 117
Regulation 3(1A) ........................................................................................................... 119
Regulation 3(2) .............................................................................................................. 119
Regulation 3(3) .............................................................................................................. 122
Regulation 3(4) .............................................................................................................. 124
Regulation 3(5) .............................................................................................................. 125
Regulation 4: The Takeover Panel ............................................................................ 126
Regulation 4(1) .............................................................................................................. 127
Regulation 4(2) .............................................................................................................. 127
Favourable facts ................................................................................................. 129
Unfavourable facts ............................................................................................ 131
Regulation 4(3) .............................................................................................................. 132
Regulation 4(4) .............................................................................................................. 132
Regulation 4(5) .............................................................................................................. 133
Regulation 4(6) .............................................................................................................. 133
Regulation 4(7) .............................................................................................................. 135
Regulation 5: Power of the Board to grant exemption ....................................... 135
Chapter II: Disclosures of Shareholding and Control in a Listed Company 137
Regulation 6: Transitional Provisions ...................................................................... 137
Regulation 6(1) .............................................................................................................. 137
Regulation 6(2) .............................................................................................................. 139
Regulation 6(3) .............................................................................................................. 140
Regulation 6(4) .............................................................................................................. 141
Regulation 7: Acquisition of 5% and more shares of a company .................... 141
Regulation 7(1) .............................................................................................................. 142
Regulation 7(1A) ........................................................................................................... 145
Explanation to Clauses (1) and (1A) ........................................................... 146
Regulation 7(2) .............................................................................................................. 147
Regulation 7(2A) ........................................................................................................... 149
Regulation 7(3) .............................................................................................................. 149
Regulation 8: Continual disclosure .......................................................................... 150
Regulation 8(1) .............................................................................................................. 150
Regulation 8(2) .............................................................................................................. 151
Regulation 8(3) .............................................................................................................. 152
Regulation 8(4) .............................................................................................................. 153
Regulation 8A: Disclosure of pledged shares ......................................................... 153
Regulation 8A(1) ........................................................................................................... 154
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Pledge ................................................................................................................... 155
Pledge of dematerialized shares ..................................................................... 155
Regulation 8A(2) ........................................................................................................... 157
Regulation 8A(3) ........................................................................................................... 158
Explanation I ...................................................................................................... 159
Explanation II .................................................................................................... 159
Explanation III .................................................................................................. 159
Regulation 8A(4) ........................................................................................................... 160
Regulation 9 ................................................................................................................... 160
Chapter III: . Substantial Acquisition of Shares or Voting Rights in and
Acquisition of Control Over a Listed Company ..........................
161
Regulation 10: Acquisition of fifteen percent or more of the shares or
voting rights of any company ....................................................................................
161
Partly paid shares in the denominator ......................................................... 162
15% is a precise threshold .............................................................................. 163
Regulations 10 and 11 mutually exclusive ................................................. 163
‘If any’ .................................................................................................................. 164
‘Unless’ ................................................................................................................. 164
‘Partly paid shares in the open offer’ ............................................................ 164
‘Unless such person makes a PA’ ................................................................... 165
Regulation 11: Consolidation of holdings ............................................................. 166
Regulation 11(1) ........................................................................................................... 168
Swedish Match ................................................................................................... 169
‘Concert’ in Regulation 11 ............................................................................. 170
Preferential allotments ..................................................................................... 171
Financial year in Regulation 11 .................................................................... 172
The 55% milestone ........................................................................................... 173
Gross basis or net basis .................................................................................... 173
Regulation 11(2) ........................................................................................................... 173
The evolution of regulation 11(2) ................................................................ 174
The three phases ................................................................................................ 175
The first proviso to regulation 11(2) ............................................................ 176
The second proviso to regulation 11(2) ...................................................... 178
Block window .................................................................................................... 179
Bulk deals ............................................................................................................ 180
Regulation 11(2A) ........................................................................................................ 181
Regulation 11(3) ........................................................................................................... 183
Explanation to regulations 10 and 11 ......................................................... 183
Definition of ‘control’ for indirect acquisition .......................................... 185
Acquisition of a derivative interest ............................................................... 186
Detailed Contents
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Regulation 12: Acquisition of control over a company ...................................... 186
‘…, and acquires such shares’ ........................................................................ 188
The first proviso ................................................................................................. 189
Veto rights and ‘control’ under regulation 12 ........................................... 191
Regulation 13: Appointment of a merchant banker ........................................... 193
Regulation 14: Timing of the public announcement of offer ........................... 195
Regulation 14(1) ........................................................................................................... 195
‘Agreement decision’ ......................................................................................... 196
Timing of the open offer in preferential allotments ................................ 198
Regulation 14(2) ........................................................................................................... 199
GDRs or ADRs ................................................................................................. 200
Regulation 14(3) ........................................................................................................... 202
Regulation 14(4) ........................................................................................................... 203
Regulation 15: Public announcement of offer ...................................................... 203
Regulation 15(1) ........................................................................................................... 204
Regulation 15(2) ........................................................................................................... 205
Regulation 15(3) ........................................................................................................... 206
Regulation 15(4) ........................................................................................................... 206
Regulation 16: Contents of the public announcement of offer ....................... 207
The lead- in phrase of Regulation 16 ........................................................... 208
Regulation 16(1)(i) ........................................................................................... 208
Regulation 16(1)(ii) .......................................................................................... 209
Regulation 16(1)(iii) ........................................................................................ 209
Regulation 16(1)(iv) ......................................................................................... 209
Regulation 16(1)(v) .......................................................................................... 210
Regulation 16(1)(vi) ......................................................................................... 210
Regulation 16(1)(via) ....................................................................................... 210
Regulation 16(1)(vii) ....................................................................................... 211
Regulation 16(1)(viii) ...................................................................................... 211
Regulation 16(1)(ix) ......................................................................................... 211
Regulation 16(1)(ixa) ....................................................................................... 213
Regulation 16(1)(x) .......................................................................................... 213
Regulation 16(1)(xi) ......................................................................................... 213
Regulation 16(1)(xii) ....................................................................................... 213
Regulation 16(1)(xiii) ...................................................................................... 213
Regulation 16(1)(xiv) ....................................................................................... 213
Regulation 16(1)(xv) ........................................................................................ 214
Regulation 16(1)(xvi) ....................................................................................... 214
Regulation 16(1)(xvii) ..................................................................................... 215
Regulation 16(1)(xviii) .................................................................................... 215
Regulation 16(1)(xix) ....................................................................................... 215
Regulation 17: Brochures, Advertising Material, etc. ......................................... 215
Regulation 18: Submission of letter of offer to the board. ................................ 216
Regulation 18(1) ........................................................................................................... 217
Detailed Contents
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Regulation 18(2) ........................................................................................................... 217
Regulation 18(3) ........................................................................................................... 218
Regulation 19: Specified date .................................................................................... 219
Regulation 20: Offer Price .......................................................................................... 220
Regulation 20(1) ........................................................................................................... 224
Regulation 20(2) ........................................................................................................... 225
Regulation 20(3) ........................................................................................................... 227
Regulation 20(4) ........................................................................................................... 228
‘Price paid’ ........................................................................................................... 230
Regulation 20(5) ........................................................................................................... 231
Regulation 20(6) ........................................................................................................... 233
Regulation 20(7) ........................................................................................................... 233
Acquisitions during the offer period ............................................................ 235
Acquisitions in the last seven days of the offer .......................................... 236
‘Offer price stated in the letter of offer’ ...................................................... 236
Open offers under regulation 11(2A) .......................................................... 237
Regulation 20(8) ........................................................................................................... 237
‘What should not exceed twenty-five percent of the offer price?’ ........ 237
The justiciability of non-compete fees ......................................................... 239
Regulation 20(9) ........................................................................................................... 240
Regulation 20(10) ......................................................................................................... 241
Regulation 20(11) ......................................................................................................... 242
Discounting for rights, bonus or dividend ................................................. 242
Discounting for bonus ..................................................................................... 243
Discounting for dividend ................................................................................ 243
Preferential allotments and firm allotments ............................................... 244
Explanation (iii) ................................................................................................. 246
Regulation 20(12) ......................................................................................................... 246
Regulation 20A: Acquisition price under creeping acquisition ........................ 247
Regulation 20A(1) ........................................................................................................ 247
Regulation 20A(2) ........................................................................................................ 247
Negotiated deals ................................................................................................ 248
Regulation 21: Minimum number of shares to be acquired ............................. 249
Regulation 21(1) ........................................................................................................... 250
Regulation 21(2) ........................................................................................................... 251
Public shareholding .......................................................................................... 251
Minimum public shareholding ..................................................................... 252
Regulation 21(3) ........................................................................................................... 253
Regulation 21(4) ........................................................................................................... 254
Regulation 21(5) ........................................................................................................... 255
Conversion during the offer period ............................................................. 256
Regulation 21(6) ........................................................................................................... 257
Regulation 21A(1): Offer conditional upon level of acceptance ...................... 258
Regulation 22: General obligations of the acquirer ............................................. 260
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Regulation 22(1) ........................................................................................................... 263
Regulation 22(2) ........................................................................................................... 264
Equality of exit opportunity ........................................................................... 264
ADRs/GDRs shares .......................................................................................... 265
Regulation 22(4) ........................................................................................................... 265
Regulation 22(5) ........................................................................................................... 267
Regulation 22(5A) ........................................................................................................ 267
Regulation 22(6) ........................................................................................................... 268
Acquirer foreign body corporate ................................................................... 269
Regulation 22(7) ........................................................................................................... 269
Changing the target’s management during the offer period .................. 270
Assuming board control under the second proviso .................................. 273
When does the escrow account have to be funded with 100%? .......... 273
Regulation 22(8) ........................................................................................................... 274
Forfeiture of escrow account .......................................................................... 274
Regulation 22(9) ........................................................................................................... 276
Regulation 22(10) ......................................................................................................... 276
Regulation 22(11) ......................................................................................................... 277
Regulation 22(12) ......................................................................................................... 278
Delay in statutory approvals ........................................................................... 278
Regulation 22(13) ......................................................................................................... 279
FEMA 20 ............................................................................................................ 281
Regulation 22(14) ......................................................................................................... 283
Regulation 22(15) ......................................................................................................... 284
SEBI’s power to debar ...................................................................................... 285
Conflict with Regulation 14 .......................................................................... 285
Regulation 22(16) ......................................................................................................... 286
Regulating the acquirers contract ................................................................. 286
Regulation 22(17) ......................................................................................................... 287
‘…in terms of regulation 20(7)…’ ............................................................... 288
Regulation 22(18) ......................................................................................................... 289
Regulation 22(19) ......................................................................................................... 289
Regulation 23: General obligations of the board of directors of
the target company ..........................................................................
291
Regulation 23(1) ........................................................................................................... 291
Regulating defences against hostile open offers ........................................ 293
The inadequacy of regulation 23(1) ............................................................. 294
Transactions before the public announcement ......................................... 295
Ordinary resolution .......................................................................................... 295
Regulation 23(2) ........................................................................................................... 296
Registrars and share transfer agents .............................................................. 296
Acquirer’s access to information .................................................................... 297
Insider trading regulations .............................................................................. 297
Regulation 23(3) ........................................................................................................... 297
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What constitutes ‘interest’ .............................................................................. 298
No obligations of target company ................................................................ 300
Regulation 23(4) ........................................................................................................... 301
Regulation 23(5) ........................................................................................................... 303
Regulation 23(6) ........................................................................................................... 304
Regulation 23(7) ........................................................................................................... 304
Regulation 23(8) ........................................................................................................... 305
Regulation 24: General obligations of the merchant banker ............................ 306
Merchant bankers’ code of conduct ............................................................. 307
Regulation 24(1) ........................................................................................................... 308
The funds sufficiency certificate .................................................................... 309
Clause (b) ............................................................................................................ 310
Clause (c) ............................................................................................................. 310
Clause (d) ............................................................................................................ 310
Clause (e) ............................................................................................................. 311
Regulation 24(2) ........................................................................................................... 311
Regulation 24(3) ........................................................................................................... 312
Regulation 24(4) ........................................................................................................... 313
Regulation 24(5) ........................................................................................................... 313
Regulation 24(5A) ........................................................................................................ 314
Regulation 24(6) ........................................................................................................... 314
Regulation 24(7) ........................................................................................................... 315
Post offer public announcement ................................................................... 316
Regulation 25: Competitive bid ............................................................................... 316
Regulation 25(1) ........................................................................................................... 318
Regulation 25(2) ........................................................................................................... 319
Auctioning of targets ........................................................................................ 319
Outer time limit ................................................................................................ 319
Regulation 25(2A) ........................................................................................................ 320
Regulation 25(2B) ........................................................................................................ 321
Regulation 25(3) ........................................................................................................... 322
All subsequent acquirers match the first acquirer ..................................... 322
Regulation 25(4) ........................................................................................................... 323
‘Revisions’ ............................................................................................................ 324
Regulation 25(5) ........................................................................................................... 325
Regulation 25(6) ........................................................................................................... 325
Regulation 25(7) ........................................................................................................... 326
Regulation 26: Upward Revision of Offer ............................................................. 327
Regulation 27: Withdrawal of offer ......................................................................... 328
Regulation 27(1) ........................................................................................................... 329
Clause (a): Competitive offer ......................................................................... 329
Clause (b): Statutory approvals refused ....................................................... 329
Clause (c): Acquirer dies ................................................................................. 330
Clause (d): SEBI permits withdrawal .......................................................... 330
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Regulation 27(2) ........................................................................................................... 332
Regulation 28: Provision of escrow .......................................................................... 333
Regulation 28(1) ........................................................................................................... 335
Regulation 28(2) ........................................................................................................... 336
Regulation 28(3) ........................................................................................................... 337
Regulation 28(4) ........................................................................................................... 338
Interest on cash escrow .................................................................................... 339
Escrow agreements ............................................................................................ 339
Bank guarantees ................................................................................................. 339
Acceptable securities ......................................................................................... 339
Regulation 28(5) ........................................................................................................... 340
Regulation 28(6) ........................................................................................................... 340
Regulation 28(7) ........................................................................................................... 341
Regulation 28(8) ........................................................................................................... 341
Regulation 28(9) ........................................................................................................... 342
Regulation 28(10) ......................................................................................................... 342
Regulation 28(11) ......................................................................................................... 343
Regulation 28(11A) ...................................................................................................... 343
Regulation 28(12) ......................................................................................................... 344
Clause (a) ............................................................................................................. 345
Clause (b) ............................................................................................................ 345
Clause (c) ............................................................................................................. 345
Clause (d) ............................................................................................................ 346
Clause (e) ............................................................................................................. 346
Regulation 28(13) ......................................................................................................... 346
Regulation 29: Payment of consideration .............................................................. 346
Regulation 29(1) ........................................................................................................... 347
Regulation 29(2) ........................................................................................................... 348
The different purposes of the two funds ..................................................... 349
Electronic settlement ........................................................................................ 350
Regulation 29(3) ........................................................................................................... 351
Regulation 29A: Relaxation from the strict compliance of provisions of
Chapter III in certain cases. .......................................................................................
352
Common objective of regulations 29A and 4 ........................................... 353
Chapter IV: Bail-Out Takeovers ................................................................................... 355
Regulation 30: Bail out takeovers ............................................................................. 356
Regulation 30(1) ........................................................................................................... 357
Regulation 30(2) ........................................................................................................... 360
Regulation 30(3) ........................................................................................................... 361
Regulation 30(4) ........................................................................................................... 362
Regulation 30(5) ........................................................................................................... 363
Explanation: ....................................................................................................... 365
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Regulation 31: Manner of acquisition of shares ................................................... 366
Regulation 31(1) ........................................................................................................... 366
Regulation 31(2) ........................................................................................................... 367
Regulation 31(3) ........................................................................................................... 368
Regulation 32: Manner of evaluation of bids ........................................................ 369
Regulation 32(1) ........................................................................................................... 370
Regulation 32(2) ........................................................................................................... 370
Regulation 33: Person acquiring shares to make an offer .................................. 371
Assured exit to promoters ............................................................................... 372
Regulation 34: Person acquiring shares to make public announcement ....... 373
Regulation 34(1) ........................................................................................................... 374
Every acquisition triggers an offer ................................................................ 374
Regulation 34(2) ........................................................................................................... 375
Regulation 34(3) ........................................................................................................... 376
Excluding financial institutions ..................................................................... 377
Regulation 34(4) ........................................................................................................... 378
Delisting of securities ....................................................................................... 379
Regulation 34(5) ........................................................................................................... 380
Regulation 34(6) ........................................................................................................... 381
Regulation 34(7) ........................................................................................................... 382
Regulation 35: Competitive bid ............................................................................... 383
Regulation 36: Exemption from the operations of chapter III ......................... 384
Regulation 36(1) ........................................................................................................... 384
Regulation 36(2) ........................................................................................................... 386
Regulation 36(3) ........................................................................................................... 387
Regulation 37: Acquisition of shares by a state level public financial
institution ........................................................................................................................
387
Chapter V: Investigation and Action by the Board ................................................. 390
Regulation 38: Board’s right to investigate ............................................................ 390
Breadth of SEBI’s powers ................................................................................ 391
Investigation under section 11C ................................................................... 391
Regulation 39: Notice before investigation ........................................................... 394
Regulation 39(1) ........................................................................................................... 394
Regulation 39(2) ........................................................................................................... 395
Regulation 39(3) ........................................................................................................... 396
Regulation 40: Obligations on investigation by the board ................................ 396
The privilege against self incrimination ...................................................... 397
Regulation 40(1) ........................................................................................................... 398
Penalty for breach of regn. 40(1) .................................................................. 399
The privilege against self incrimination ...................................................... 400
Regulation 40(2) ........................................................................................................... 400
Regulation 40(3) ........................................................................................................... 401
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Regulation 40(4) ........................................................................................................... 401
Regulation 41: Submission of Report to the Board ............................................. 402
Time-frame for completing the investigation ........................................... 402
Regulation 42: Communication of findings ......................................................... 402
Regulation 42(1) ........................................................................................................... 403
Regulation 42(2) ........................................................................................................... 403
‘due compliance with… regulations’ ........................................................... 404
Regulation 43: Appointment of auditor ................................................................. 404
Regulation 44: Directions by the board .................................................................. 405
Regulation 44 v. Regulation 42(2) ............................................................... 406
Punitive orders under regulation 44? ........................................................... 406
Regulation 44(a) ............................................................................................................ 407
Public auction .................................................................................................... 407
Regulation 44(b) ........................................................................................................... 408
Regulation 44(c) ............................................................................................................ 409
Cancel the share… ............................................................................................ 409
Takeover Regulations and the power to cancel share .............................. 410
Chapter II and void acquisitions .................................................................. 411
Chapter III and void acquisition .................................................................. 412
Cancelling an allotment .................................................................................. 413
Regulation 44(d) ........................................................................................................... 414
Regulation 44(e) ............................................................................................................ 415
Dealing in securities’ ........................................................................................ 416
Punitive v. Preventive ....................................................................................... 417
Regulation 44(f ) ............................................................................................................ 417
Regulation 44(g) ........................................................................................................... 418
Regulation 44(h) ........................................................................................................... 419
Regulation 44(i) ............................................................................................................ 420
Eligibility to receive interest ........................................................................... 421
Time for which interest accrues .................................................................... 422
Regulation 44A: Manner of service of summons and notices issued
by the board ....................................................................................
423
Regulation 45: Penalties for non-compliance ....................................................... 423
Regulation 45(1) ........................................................................................................... 424
Regulation 45(2) ........................................................................................................... 425
Regulation 45(3) ........................................................................................................... 425
Regulation 45(4) ........................................................................................................... 426
SEBI (Intermediaries) Regulations, 2008 ................................................... 427
Regulation 45(5) ........................................................................................................... 428
The lead-in phrase of Regulation 45(6) .................................................................. 429
(a) criminal prosecution under section 24 of the Act ............................. 429
Criminal liability for corporate violations of the Takeover
Regulations ........................................................................................
430
(b) monetary penalties under section 15H of the Act ............................ 431
Detailed Contents
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Delayed public announcements ................................................... 432
Amount of penalty ........................................................................... 433
(c) directions under the provisions of section 11B of the Act ............... 434
Power to issue directions’ ............................................................... 434
(d) directions under section 11(4) of the Act ............................................ 435
(e) cease and desist order in proceedings under
section 11D of the Act .....................................................................................
437
(f ) adjudication proceedings under section 15HB of the Act .............. 437
Regulation 46: Appeal to the Central Government ............................................ 439
Appeal to the Securities Appellate Tribunal ............................................... 439
Locus standi ......................................................................................................... 440
Order .................................................................................................................... 442
Review .................................................................................................................. 443
Consent orders ................................................................................................... 445
The procedure before SAT .............................................................................. 446
Regulation 47: Repeal and Savings .......................................................................... 449
General Clauses Act, 1897 ............................................................................. 450
Detailed Contents
Annexures
Annex. I. Formats under Takeover Regulations ................................. 455
Annex. II. The Securities and Exchange Board of India Act, 1992...... 502
Annex. III. Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulation, 1994...... 533
Annex. IV. Justice PN. Bhagwati Committee Report on Takeovers
(Date 18-1-1997) ............................................................. 547
Annex. V. Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997.... 589
Annex. VI. Report of the Reconvened Committee on Substantial
Acquisitions of Shares and Takeovers Under the
Chairmanship of Justice P. N. Bhagwati............................. 617
Annex. VII. Format of Public Announcement....................................... 653
Annex. VIII. Standard Letter of Offer for an Open Offer in Terms of the
SEBI (Substantial Acquisition of Shares And Takeovers)
Regulations, 1997 and Subsequent Amendments
Thereof.............................................................................. 659
Annex. IX. Report on ‘Reduction in cost involved in the open
offers’-SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997............................................. 685
Annex. X. Report of the Internal Group on SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997.... 688
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Annex. XI. .Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997....... 694
Annex. XII. Securities and Exchange Board of India (Investor Protection
and Education Fund) Regulations, 2009............................. 740
Annex. XIII. Securities and Exchange Board of India (Delisting of Equity
Shares) Regulations, 2009................................................. 745
Annex. XIV. Issue of Foreign Currency Convertible Bonds and Ordinary
Shares (Through Depository Receipt Mechanism) Scheme,
1993..................................................................................... 761
Annex. XV. Standard Listing Agreement Form with Schedule of Listing
Fees....................................................................................... 775
Annex. XVI. Securities and Exchange Board of India (Issue of Capital and
Disclosure Requirements) Regulations, 2009........................ 865
Annex. XVII. Securities Appellate Tribunal (Procedure) Rules, 2000 1070
Annex. XVIII. Format of Post-offer Public Announcement.......................... 1079
Annex. XIX. SEBI Takeover—FAQ........................................................... 1081
Index .............................................................................................................. 1092