The Securities and Exchange Board of India (SEBI) has issued a notification on 26 March 2013 amending the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011 (Takeover Regulations). This update aims to capture the key highlights of the said amendments.


A new Regulation 13 (2A) has been inserted in the Takeover Regulations. This provides that in case of a public announcement, referred to in Regulation 3 and Regulation 4 of the Takeover Regulations, for a proposed acquisition of shares or voting rights in or control over the target company through a combination of (i) an agreement and any one or more modes of acquisition referred to in Regulation 13(2); or (ii) otherwise through any one or more modes of acquisition referred to in Regulation 13(2), would be required to be made on the date of the first of such acquisitions. This means that the acquirer cannot wait for making a public announcement till the open offer trigger is actually crossed in a series of successive acquisitions. Further, the acquirer is tasked with having to disclose the details of proposal to make all subsequent acquisitions in such public announcement.

For example, if an acquirer proposes to acquire 40% equity shareholding in the target company through 3 stages, i.e. 10%, 16% and 14% and in that sequence, then the public announcement on the entire sequence of acquisition would be required to be made on making of the first acquisition of 10%. However, the aforesaid would only apply if the acquirer has proposal for multiple acquisitions at the first instance. If, however, shares are acquired below the trigger point for public announcement under the Takeover Regulations and further shares are later acquired without the later acquisition being part of the original proposal, then in such case the public announcement would be triggered only when the open offer trigger under the Takeover Regulations is crossed.


Regulation 13(2)(g) of the Takeover Regulations, which provides for public announcement in case of preferential issue of shares, has been amended. It is now provided that the public announcement in such a case would be made on the date when the board of directors of the target company authorizes such resolution. The erstwhile requirement was that public announcement would be made on date of passing of special resolution approving the preferential issue.

Further, an amendment has also been made to Regulation 23 which provides for withdrawal of open offer in certain circumstances. Regulation 23(1)(c) has been amended by adding a proviso which provides that in case the acquisition through preferential issue is not successful, the open offer would still not be withdrawn.

Though chances are slim, technically, these amendments may prove to be very onerous for an acquirer when the shareholders so not approve a proposed preferential issue of shares under Section 81(1A) of the Companies Act 1956. Further, these amendments would also affect the pricing in case of an open offer since the minimum offer price under the Takeover Regulations is calculated with reference to the date of public announcement.


A new Regulation 22 (2A) has been inserted providing that where the acquisition is proposed through preferential issue or through stock market settlement process other than bulk/block deals, the acquirer can acquire such shares while the open offer is in process. However, such shares would need to be kept in an escrow account and the acquirer would not be permitted exercise voting rights on such shares. The shares in the escrow account may, however, be released after 21 working days of the public announcement if the acquirer deposits 100% of the open offer amount assuming full acceptance as provided in Regulation 22 (2).


Regulation 29(2) of the Takeover Regulations has also been amended by the said notification. In addition to the requisite disclosure of change in shareholding or voting rights exceeding 2% in the target company by persons acting in concert already holding 5% or more shareholding or voting rights, the amendment requires disclosure to be made even in case of a change in the shareholding or voting rights of the acquirer falling below 5% in the target company. This amendment just clarifies the position on disclosure by the acquirer in case of sale of shareholding in the target company.


Regulation 10(3) of the Takeover Regulations has been amended now providing that where there is an increase in voting rights of a shareholder in a target company triggering an open offer in case of buyback of shares, such shareholder shall be exempt from the obligation to make an open offer provided such shareholder reduces his shareholding such that its voting rights fall below the threshold referred to in Regulation 3(1) within ninety days from the date of closure of said buyback offer by the target company. Prior to this amendment, the reference date of reducing the shareholding was ninety days from ‘on which the voting rights would increase’.

Similarly, Regulation 13(2)(h) has been amended which now provides that the public announcement pursuant to an increase in voting rights consequential to a buyback not qualifying for exemption under Regulation 10, would be made not later than the ninetieth day from the date of closure of the said buyback offer by the target company. Prior to this amendment, the reference date of making such public announcement was ninety days from ‘on which the voting rights would increase beyond the relevant threshold stipulated in Regulation 3’.


The changes relating to disclosures and reference date in buyback of shares by the target company are only clarificatory in nature. However, the changes brought by SEBI in terms of timing of making a public announcement in case of successive and connected acquisitions of shares or voting rights in the target company as well as those concerning timing of public announcement as well as withdrawal of open offer in case of acquisition by way of preferential issue are quite significant.