Acquisition, delisting and minority squeeze-out

There are certain considerations an overseas company (the acquirer) should take into account when structuring the acquisition of an Indian listed company (the target), followed by delisting and a potential minority squeeze-out. This discussion assumes that the target is engaged in activities under the “automatic route” and that the acquisition does not require the approval of the Reserve Bank of India or the government.

The acquisition of a listed company in India is not a straightforward process. Depending on certain thresholds, the acquirer will need to make a public offer for the acquisition of at least 20% of the issued share capital of the target under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, as amended (the takeover code). In practical terms, it may not be possible to acquire the entire issued share capital of the target.

Regulation 10 of the takeover code provides that no acquirer (alone or with others acting in concert) shall acquire shares or voting rights in a company that entitle it to 15% or more of the voting rights, unless such acquirer makes a public announcement to acquire shares in accordance with the takeover code. Regulation 12 of the takeover code also states that even if an entity acquires less than 15% of the shares, the takeover code may be triggered if the entity acquires “control” of the company (irrespective of whether there has been any acquisition of shares or voting rights).