Sep 08, 2017
Acquisition of ‘control’ under the SEBI (Substantial Acquisition
of Shares and Takeovers) Regulations, 2011
Ascertaining acquisition of
‘control’ under the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011 (“Takeover Regulations”) requires consideration of facts and
circumstances of each case. This results in a multitude of opinions. In view of
the same, it was decided by the Board, in its meeting held on March 12, 2016, to
explore adoption of bright-line tests for acquisition of ‘control’ under the Takeover
In this regard, a
discussion paper was issued on March 14, 2016 seeking public comments on
certain proposals contained therein.
A number of comments from
various stakeholders including industry bodies, intermediaries, advocates and
investors were received. A mixed response has been received wherein no
particular option has garnered overwhelming support amongst the stakeholders. SEBI
also had the benefit of the views of the Ministry of Corporate Affairs and the
Reserve Bank of India in this regard.
The Ministry of Corporate
Affairs and few other stakeholders have opined that changing the current
definition of ‘control’ may reduce the regulatory scope and may be prone to
abuse and that the current definition of ‘control’ may not be changed and it
would be more appropriate to take decisions on a case-to-case basis.
It is also noted that the
Justice Bhagwati Committee which was constituted in the year 1995 to review the
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1994, had recommended
a broad definition of control and opined that it should be left to SEBI to
decide whether there has been an acquisition of control on the basis of facts
of each case. The Takeover Regulations Advisory Committee (TRAC), in its report
dated July 19, 2010 also reiterated the view of Justice Bhagwati Committee.
It is felt that any
change or dilution in the definition of control would have far reaching
consequences since a similar definition of 'control' is used in the Companies
Act, 2013 and other laws.
relevant issues have been examined intensively and in view of the aforesaid comments
received and considering the current regulatory environment, it has been
decided to continue with the practice of ascertaining acquisition of ‘control’
as per the extant definition in the Takeover Regulations.