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PUBLIC SHAREHOLDING - PROPOSED AMENDMENTS TO SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997

It has been decided to harmonise the level of public shareholding for continuous listing as contained in Clause 40A of the Listing Agreement and vis-à-vis other regulation / guideline such as the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and SEBI (Delisting of Securities) Guidelines, 2003.

As a step in this direction, a draft amendment to SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 {Regulations} has been prepared. The text of the same is given in the Annexure.

The proposed amendments have been made to provide for the following:

  • Revised definition of public shareholding and promoter.
  • Minimum size of Open Offer to be made under the Regulations.
  • Cases where procedure under SEBI (Delisting of Securities) Guidelines, 2003 needs to be followed.
  • Reduction in the upper limit of shareholding from 75% to 51% for availing creeping acquisition limit of 5%.

Interested persons and entities may send their comments on the draft amendments to the e-mail address : ruchic@sebi.gov.in or by fax (022) 22829520 or by post to the General Manager, Corporation Finance Department, Division of Corporate Restructuring, Securities and Exchange Board of India, Mittal Court, B Wing, 224 Nariman Point, Mumbai 400 021, before 21st January, 2004.

 

ANNEXURE

PROPOSED AMEDNMENTS TO SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997

in the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 -

    1. in regulation 2, in sub-regulation (1),
      1. for clause (h) the following shall be substituted, namely:-

 

"(h) "promoter", unless otherwise specified, means-

    1. any person or persons who are directly or indirectly in control of the company; or
    2. any person or persons named as "promoters" in the offer document or in the shareholding pattern disclosed by the Company under the provisions of the Listing Agreement, whichever is later;

and includes,

    1. where such person is an individual,

    1. his spouse , parents, brothers, sisters or children;
    2. any company in which 26% or more of the equity share capital is held by him or by the persons mentioned in sub-clause (i) or any firm or Hindu Undivided Family in which he or any of the persons mentioned in sub-clause (i) is a partner or member;
    3. any company in which a company specified in sub-clause (ii) above, holds more than 50% of the equity share capital;
    4. any firm in which the aggregate of his holding and the holdings of the persons mentioned in sub-clause (i) is more than 50% .

    1. where such person is a body corporate,

 

    1. a subsidiary or holding company of that body corporate;
    2. any company in which the said body corporate holds 26% or more of the equity share capital;
    3. any company which holds 26% or more of the equity share capital of the said body corporate;
    4. any company in which a group of persons holds 26% or more of the equity share capital and that group of persons also holds 26% or more of the equity share capital in such body corporate;
    5. any other body corporate under the same management as the said body corporate within the meaning of sub-section (1B) of section 370 of the Companies Act, 1956;

Explanation I: A Financial Institution, Scheduled Commercial Banks, Foreign Institutional Investors and Mutual funds shall not be deemed to be a promoter merely by virtue of its shareholding.

Explanation II: A Financial Institution, Scheduled Commercial Bank or Foreign Institutional Investor shall be deemed to be a promoter of its subsidiary and of the mutual funds sponsored by it."

 

 

(b) for clause (j), the following shall be substituted, namely -

"(j) "public shareholding" means shareholding held by persons other than promoters."

(ii) in regulation 3, in sub-regulation (1),

(a) in clause (e), in sub-clause (iii), after the proviso, the following Explanation shall be inserted, namely - :

"Explanation: For the purpose of the exemption under sub-clause (iii) the term "promoters" means -

(i) the person or persons who are in control of the company, directly or indirectly, whether as a shareholder, director or otherwise; or

(ii) person or persons named as promoters in any document of offer of securities to the public or existing shareholders,

and includes,

(a) where the promoter is an individual, -

(1) a relative of the promoter within the meaning of section 6 of the Companies Act, 1956 (1 of 1956);

(2) any firm or company, directly or indirectly, controlled by the promoter or a relative of the promoter or a firm or Hindu undivided family in which the promoter or his relative is a partner or a coparcener or a combination thereof:

Provided that, in case of a partnership firm, the share of the promoter or his relative, as the case may be, in such firm should not be less than 50%.";

 

(b) where the promoter is a body corporate,-

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

(2) any firm or company, directly or indirectly, controlled by the promoter of that body corporate or by his relative or a firm or Hindu undivided family in which the promoter or his relative is a partner or coparcener or a combination thereof:

Provided that, in case of a partnership firm, the share of such promoter or his relative, as the case may be, in such firm should not be less than 50%."

(b) after clause (k), the following shall be inserted, namely

"(ka) acquisition of shares in terms of Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003."

 

(iii) in regulation 11,

(a) in sub-regulation (1), for the figure and words "75 per cent." the words and figure "fifty one per cent.(51%)" shall be substituted;

(b) in sub-regulation (2), for the figure and words "75 per cent." the words and figure "fifty one per cent.(51%)" shall be substituted

(c) after sub-regulation (2), the following sub-regulation shall be inserted, namely -

"(2A) Notwithstanding anything contained in these regulations, an acquirer, who seeks to acquire shares or voting rights so as to reduce the public shareholding to a level below the limit specified in the Listing Agreement with the stock exchange for the purpose of listing on continuous basis, may acquire such shares or voting rights, only in terms of the Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003 as amended from time to time."

iv. in regulation 21,

(a). in sub-regulation (1), the following proviso shall be inserted, namely

"Provided that where any public offer is made in pursuance of sub-regulation (2) of regulation 11, such public offer shall be for such percentage of voting capital of the target company that the acquisition does not result in the public shareholding in such company being reduced to a level below the limit specified in the Listing Agreement with the stock exchange for the purpose of listing on continuous basis."

(b) after sub-regulation (1), the following sub-regulation shall be inserted, namely

"(2) Where an acquirer who has acquired more than 55% shares or voting rights in the target company and pursuant to such acquisition is under obligation to make the public offer under regulation 10 or sub-regulation (1) of regulation 11 and such offer results in public shareholding being reduced to a level below the limit specified in the Listing Agreement with the stock exchange for the purpose of listing on continuous basis, the acquirer shall;

(i) where the acquisition is in terms of an agreement, acquire only such number of shares under the agreement so as to maintain minimum public shareholding;

(ii) where the acquisition by a mode other than agreement, undertake to raise the level of public shareholding to the levels specified for continuous listing in terms of the listing conditions specified in the Listing Agreement with the stock exchange, within a period of 6 months from the date of closure of the public offer, by

(i) issue of new shares by the company in compliance with the provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000; or

(ii) disinvestment through an offer for sale in compliance with the provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000, of such number of shares held by him so as to satisfy the listing requirements; or

(iii) sale of his holdings through the secondary market in a transparent manner."

(c) for sub-regulation (3), the following shall be substituted, namely

"(3) If consequent to the public offer made in pursuance of indirect acquisition of control under regulation 12, the public shareholding falls to a level below the limit specified for the purpose of listing on continuous basis in terms of the Listing Agreement with the stock exchange, the acquirer shall either,

(a) make an offer to buy the outstanding shares remaining with the shareholders in accordance with the Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003 as amended from time to time, within a period of 6 months from the date of closure of the public offer; or

(b) undertake to raise the level of public shareholding to the levels specified for continuous listing in terms of the listing conditions specified in the Listing Agreement with the stock exchange, within a period of 6 months from the date of closure of the public offer, by

(i) issue of new shares by the company in compliance with the provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000; or

(ii) disinvestment through an offer for sale in compliance with the provisions of the Companies Act, 1956 and the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000, of such number of shares held by him so as to satisfy the listing requirements; or

(iii) sale of his holdings through the secondary market in a transparent manner. "