SAST REGULATIONS

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SEBI TAKEOVER REGULATIONS

Transcript of SAST REGULATIONS

  • 1. SEBI (SubstantialAcquisition of Shares& Takeovers)Regulations 2011:Takeover Code

2. Group MembersShalini Devendran 37Swapnali Ghadge 47Shilpee Haldar 50Rupali Helambe 51Priyanka Kadam 66Jenneey Rajani 129Neha Thakur 1672MET MMS SEBI SAST Regulations 2011 10/14/2014 3. Contents Takeover & Types Background of SEBI takeover code Objectives of the Takeover Regulations Definitions Trigger Events to Give Open Offer -Mandatory Offer -Voluntary Offer Offer size Offer Prize Non Compete Fee Mode of Payment Letter of Offer Escrow Account Competing offer3MET MMS SEBI SAST Regulations 2011 10/14/2014 4. Contents Payment of Consideration Open Offer Process Withdrawal of open offer Obligations of the acquirer Obligations of the target company Obligations of the merchant banker Disclosures Exemptions Penalties Case Study Diageo and United spirits Conclusion 5. Takeover Takeover is the process to purchase enough share of a company toovertake the current majority shareholder.OR Takeover implies acquisition of control of a company which is alreadyregistered through the purchase or exchange of shares.5MET MMS SEBI SAST Regulations 2011 10/14/2014 6. Acquiring control The right to appoint majority of the directors or to control themanagement or policy decisions Exercisable by a person or a person acting in concert, directly orindirectly. By virtue of their shareholding or management rights or shareholdersagreements or voting agreements or in any manner.6MET MMS SEBI SAST Regulations 2011 10/14/2014 7. Ways of Acquiring control Control could be acquired through acquisition of Shares. Acquiring Voting Rights through a power of Attorney. Acquiring control over an Investment or Holding company ,which inturns holds controlling interest in the target company. Acquiring management control through formal or informalunderstanding or agreement with the existing person in control.7MET MMS SEBI SAST Regulations 2011 10/14/2014 8. Objective of takeoverSmooth theearning To improve productivity and profitability by joint efforts . To achieve product development through acquiring firms. To effect savings in overheads and other working expenses. To diversify through acquiring companies with new product lines asNewgeographwell as new market shares. To increase market share. To achieve market development.To increase the client base through Vertical integration.8By absorbingcompetitors andset priceresultsiclocations.MET MMS SEBI SAST Regulations 2011 10/14/2014 9. Types of acquisitionAcquisitionLegal ContextBusiness Context9MET MMS SEBI SAST Regulations 2011 10/14/2014 10. Types of acquisitionLegal ContextFriendlyTakeoverHostileTakeoverBail-OutTakeover10MET MMS SEBI SAST Regulations 2011 10/14/2014 11. Types of acquisitionBusinessContextHorizontalVerticalConglomerate11MET MMS SEBI SAST Regulations 2011 10/14/2014 12. Applicability of SAST Takeover can be of a Listed or an Unlisted company In case of Takeover of an Unlisted and closely held company Companies Act, 1956 to apply. In case of Takeover of a Listed company, the following legalframework to apply:- SEBI (Substantial Acquisition of Shares and Takeover) Regulations,2011 issued by the Securities and Exchange Board of India (SEBI)- Companies Act, 1956- Listing Agreement- Securities Contracts Regulation (SCR Act)- FEMA, Competition Act 2002, Industrial Policy- Other govt. policy and procedures12MET MMS SEBI SAST Regulations 2011 10/14/2014 13. History of SEBI takeover code In 1980 Swaraj Paul's case highlighted the need for regulations incase of Takeovers. The need was felt in 1990s when the government initiated the policyof liberalization and globalization Takeovers in India were regulated by Clause 40 in the listingagreement. Takeovers in India were regulated by Clause 40 in the listingagreement. SEBI was established in 1992 as a body corporate under the SEBI Act,1992.13MET MMS SEBI SAST Regulations 2011 10/14/2014 14. History of SEBI takeover code SEBI (Substantial Acquisition of Shares and Takeover) Regulations,1994. Amended a number of times to address the changing circumstancesand needs of corporate sector. November 1995,under the chairmanship of Shri P.N.Bhagwati, formerChief Justice of India was constituted to review the said regulations. SEBI was established in 1992 as a body corporate under the SEBI Act,1992. SEBI (Substantial Acquisition of Shares and Takeover) Regulations,199714MET MMS SEBI SAST Regulations 2011 10/14/2014 15. History of SEBI takeover code Owing to several factors such as M&A activities in India as thepreferred mode of restructuring, the increasing sophistication oftakeover market, decade long regulatory experience and variousjudicial pronouncements, it was felt necessary to review the TakeoverRegulations. In September 2009, the Takeover Regulations Advisory Committee(TRAC) under the chairmanship of (Late) Sri. C. Achuthan wasconstituted by SEBI . In June 2010, the Committee came out with the TRAC Reportproposing some sweeping changes .15MET MMS SEBI SAST Regulations 2011 10/14/2014 16. History of SEBI takeover code SAST Regulations, 2011 come into force with effect from October 22,2011 In 2013 SAST Regulations again get amended and now we have newSAST Regulation 2013. The main purpose for the new takeover code 2013 is to preventhostile takeovers and at the same time, provide some moreopportunities of exit to innocent shareholders who don't wish to beassociated with a particular acquirer.16MET MMS SEBI SAST Regulations 2011 10/14/2014 17. Listing Agreement 40(A) Listing Agreement 40(A) : Minimum level of Public shareholding. The issuer company agrees to comply with the requirements specifiedin Rule 19(2) and Rule 19A of the Securities Contracts (Regulation)Rules, 1957. Where the issuer company is required to achieve the m minimum level of public shareholding specified in Rule 19(2)(b)and/or Rule 19A of the Securities Contracts (Regulation) Rules, 1957. Issuer company shall adopt any of the following methods to raise thepublic shareholding to the required level :-issuance of shares to public through prospectus-offer for sale of shares held by promoters to public throughprospectus.-sale of shares held by promoters through the secondarymarket.17MET MMS SEBI SAST Regulations 2011 10/14/2014 18. Listing Agreement 40(B) Listing Agreement 40(B) : Take Over Offer it is a condition for continued listing that whenever the take-overoffer is made or there is any change in the control of the managementof the company the person who secures the control of themanagement of the company and the company whose shares havebeen acquired shall comply with the relevant provisions of the SEBI(Substantial Acquisition of Shares and Take-Overs) Regulations, 2011.18MET MMS SEBI SAST Regulations 2011 10/14/2014 19. Need of SEBI takeover code To provide a transparent legal framework. To protect the interests of investors. To provide each shareholder an opportunity to exit his investment inthe target company. To ensure that fair and accurate disclosure of all material informationis made. To regulate and provide for fair and effective competition amongacquirers. The process of acquisition and mergers shall be completed in a timebound manner.19MET MMS SEBI SAST Regulations 2011 10/14/2014 20. 6 chaptersChapter IPreliminary-Reg 1: Shorttitle,commencement& applicability-Reg 2:DefinitionsChapter IISubstantialacquisition ofshares, votingrights or control-Reg 3:Substantialacquisition ofshares or votingrights-Reg 4:Acquisition ofcontrol-Reg 5: Indirectacquisition ofshares or control-Reg 6:Voluntary offer-Reg 7: Offersize-Reg 8: Offerprice-Reg 9: Mode ofPayment-Reg 10:Generalexemptions-Reg 11:Exemptions by theBoardChapter IIIOpen offerprocess-Reg 12: Manager toOpen Offer-Reg 13: Timing-Reg 14: Publication-Reg 15: Contents-Reg 16: Filing of letterof offer with the Board-Reg 17: Provision ofEscrow-Reg 18: OtherProcedures-Reg 19: Conditionaloffer-Reg 20: Competingoffers-Reg 21: Payment ofConsideration-Reg 22: Completion ofAcquisition-Reg 23: Withdrawal ofOpen offerChapter IVOther Obligations-Reg 24:Directors of theTarget company-Reg 25:Obligations ofthe acquirer-Reg 26:Obligations ofthe targetcompany-Reg 27:Obligations ofthe Manager tothe Open offerChapter VDisclosures ofshareholding andcontrol-Reg 28:Disclosurerelatedprovisions-Reg 29:Disclosure ofacquisition anddisposal-Reg 30:ContinualDisclosures-Reg 31:Disclosure ofencumberedsharesChapter VIMiscellaneous-Reg 32:Power to issueDirections-Reg 33:Power toremovedifficulties-Reg 34:Amendment tootherregulations-Reg 35:Repeal andSavings10/14/201420 21. DEFINITIONS21MET MMS SEBI SAST Regulations 2011 10/14/2014 22. Reg.2(1)(a)AcquirerAcquirer means:any person who, directly or indirectly,acquires or agrees to acquire whetherby himself, or through, or with personsacting in concert with him, shares orvoting rights in, or control over a targetcompany.22MET MMS SEBI SAST Regulations 2011 10/14/2014 23. Reg.2(1)(q)Person acting in concert Defined in two parts:1) persons who has common objective of acquisition of sharesor exercising control over a target company, an agreement orunderstanding (formal or informal), co-operate directly orindirectly, for acquisition of shares or voting rights in, orexercise of control over the target company2) lists out categories of person or entities that could bepresumed to be acting in concert.- a company, its holding company, subsidiary company and anycompany under the same management or control- a company, its directors, and any person entrusted with themanagement of the company- a mutual fund, its sponsor, trustees, trustee company, andasset management company23MET MMS SEBI SAST Regulations 2011 10/14/2014 24. Control includes righttoReg.2(1)(e)ControlExercisable By virtue of Appoint majority ofdirectors Control the management Control policy decisions By a person individually By PACs Directly or Indirectly Shareholding Manageme