Broadly speaking: RESTRUCTURING AND TAKEOVERS IN INDIA
Nov. 19, 2020 • Suryasikha Ray
Profile of the Author: Akshat Dahate is student of ILS law college, Pune pursuing B.A.LL.B (Hons.). His areas of interest are corporate and commercial law.
WHAT IS TAKEOVER?
A takeover falls under an inorganic corporate restructuring where a company acquires control over another operating company. The call here is the management pattern of a company moulds it’s rooted and changes its hands. The term ‘control’ stands under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Code 2011”) and the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and Company act 2013as inter alia the holding or control pointing the management policies, appointment of the directors in a company and affirmative voting rights.
There are three most certain kinds of takeover prevalent in the corporate sector in order is a friendly takeover in which the operation of takeover by a company to another is with the consent of the board of the management of the target company. Second in order is hostile takeover here the consideration of consent of the board of management of the target company is not involved even if the board of the following target company rejects the offer, the flow of taking control is continued in circumstances. Inline is the bailout takeover, here the weak target company is bailed out or relief provided by a strong company.
DIFFERENCE BETWEEN TAKEOVER, MERGER AND ACQUISITIONS:
Mergers or amalgamation are tuneful in nature, both the companies indulge activities and merge accordingly. In contrast, the takeover holds and entities remain two distinct companies, also mark able the assets and liabilities are not proportioned.
In case of pointing differences between takeover and acquisition, acquisition holds association of purchase of shares of a target company and voting ability but when it comes to the takeover the objective is to control the target company by acquiring shares.
Takeover and acquisitions witnessed significant changes when SEBI formulated Takeover code in 2011. The need for enforcement of takeover code was to host or govern companies taking advantage and persisting this trend, to protect or safeguard the interest of shareholders at large. The code was brought in to confine the complex nature of the process and to create transparency as well as fairness in accordance with equal window of opportunities. LPG – LIBÉRALISATION PRIVATISATION GLOBALISATION representation played a vital role in development of cross border and Indian economic activities.
REGULATOR FOR TAKEOVER & ACQUISITIONS IN INDIA:
The regulators in stands are companies act and the major Act which governs corporate activities is the Securities and Exchange Board of India Act, 1992. Under section 395 of the companies act 1956 puts regulating power for takeover and acquisitions pointing unlisted companies governed by the following act. Similar provisions have been given under section 235 and 236 of the Companies Act 2013. In the line of listed companies the regulating or governing law in manner is the SAST Regulations, The main regulation which applies to the acquisition or takeover transaction of public companies is the SEBI (Substantial Acquisition of Shares and Takeovers) Regulation 2011. The certain set applicable regulations for takeovers and acquisitions in India includes The Indian Companies Act, The SEBI Regulations 2011, The SCRA Act 1957 and The Listing agreement.
IMPORTANT PROVISIONS
SEBI (Substantial Acquisition of Shares and Takeover Code) Regulations 2011:
SEBI is an authority which has given to us an immensely comprehensive set of regulations which governs all forms of take over activities in India therein all kinds of takeover have to necessarily follow through with the procedure given under SEBI Takeover code. This particular code mainly propagates or involves the acquisitions of shares in a substantial proportion pointing to control over a target company. It meticulously is applicable to acquisition by a company. The acquisition by a company can be in the form of shares, voting rights or control. The holding acquisition of shares conceivable either direct or indirect acquisitions.
SEBI Takeover code in addition gives to us an extensive process which is called as ‘Open offer process’. The particular code instructs this process for direct as well as indirect acquisition of shares, voting rights or control if such acquisitions triggers the threshold point prescribed under the Takeover code. The threshold point is invested under regulation number three of the Takeover code, Regulation 3 gives to us the concept of substantial acquisition of shares, voting and control. Thus every acquisition of shares is not a takeover only substantial acquisition of shares is considered a takeover and if it is so whenever there a case arising of substantial acquisition of shares then the acquirer company has to comply with provisions stated under regulation 3 of the Takeover code which requires the acquirer company to follow an open offer process with public announcement to be made when acquisition exceeding more than 25 percent in a financial year. If an acquirer has to acquire additional shares which entitles him to exercise more than five percent of voting rights in a financial year then again company is entitle or required to make public announcement of an open offer, following this we obtain the concept of creeping acquisition where the code allows a acquirer to add shares up five percent and no necessity to go along with open offer process also pointing the threshold which is 25 percentage.
Under Regulation 6 of this particular code gives us an option to make a voluntary offer under the Takeover code 2011, to those shareholders who already hold at least 25 percent or more but less than 75 percent of the shares or voting rights of that company, to further consolidate their existing shareholding in the company. And the minimum offer size stated is 10 percent.
General exemption from making an open offer should follow acquisition pursuant to SARFAESI Act and others in relations, and cash paid less than 25 percent of the considerable equivalent cash. Lastly a person holding not less than fifty per cent of the equity shares of such company. The regulations also provide for withdrawal of open offers and also stated auto-delisting is not allowed in accordance with the regulations adding to note non-compete fees are removed.
The process ends with the expiry of the offer period is extinct and by opening of an escrow account with consideration. The ‘Demat Escrow Account’ after the commencement period of twenty one days should issue a public statement of acquisition. The time period for the acquirer to obtain is twenty six with extension in hands.
CONCLUSION:
This is the reflection of the takeover code and understanding in a confined manner. The code and takeover in general holds an active market relevance and Indian economy. The code developed its roots from others existing propaganda and Laws acting to confine the complex nature and break the irrational in order.
FAQs:
Q. The first initial attempt of a takeover in India?
A. In India to make a hostile takeover was done by Swaraj Paul when he made efforts to takeover Escorts Ltd. And DCM Ltd. in 1980s.
Q. Some famous takeover pointing kinds of takeover?
A. friendly takeover – Dabour acquiring Balsara
Hostile takeover – HP taking over company
Bailout takeover – Bank of America Merrill lynch.
Q. Offer price is stated under regulation?
A. Regulation 8.
REFERENCES:
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