Exemption from open offer
As per the notification dated December 22, 2017, the Securities and Exchange Board of India (hereinafter referred to as the ‘Board’) by virtue of Regulation 11(1) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as the ‘SAST Regulations’), has given power to the Board to grant exemption from the obligation to make an open offer for acquiring shares. The reasons shall be recorded in writing for granting such exemption by the board along with any conditions if imposed.
Further, as per Regulation 11(3) of SAST Regulations, the target company shall file an application with the Board, supported by a duly sworn affidavit, giving details of the proposed acquisition and the grounds on which the exemption has been sought.
Power of SEBI to formulate regulations
In exercise of the powers conferred by Section 30 of the Act, SEBI has framed the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as “the SAST Regulations 2011”).
Takeover and substantial acquisition
The Takeovers & Substantial acquisition of shares is when an “acquirer” takes over control of the “Target Company”, it is termed as Takeover. When an acquirer acquires “substantial quantity of shares or voting rights” of the Target Company, it results into substantial acquisition of shares.
Acquisition and Target Company
Acquirer means any person who, whether by himself, or through, or with persons acting in concert with him, directly or indirectly, acquires or agrees to acquire shares or voting rights in, or control over a target company. An acquirer can be a natural person, a corporate entity or any other legal entity. The company / body corporate or corporation whose equity shares are listed in a stock Exchange and in which a change of shareholding or control is proposed by an acquirer, is referred to as the ‘Target Company’.
In order to ensure uniformity of disclosures in such applications, it has been decided to provide a standard format for filing of application with SEBI for exemption.
Grounds for exemption
(a) the target company is a company in respect of which the Central Government or State Government or any other regulatory authority has superseded the board of directors of the target company and has appointed new directors under any law for the time being in force, if,—
(i) Such board of directors has formulated a plan which provides for transparent, open, and competitive process for acquisition of shares or voting rights in, or control over the target company to secure the smooth and continued operation of the target company in the interests of all stakeholders of the target company and such plan does not further the interests of any particular acquirer.
(ii) The conditions and requirements of the competitive process are reasonable and fair;
(iii) the process adopted by the board of directors of the target company provides for details including the time when the open offer for acquiring shares would be made, completed and the manner in which the change in control would be effected; and
(b) Exemption from strict compliance with one or more of such provisions is in public interest, the interests of investors in securities and the securities market.