With the stock market plummeting and stocks of even fundamentally strong blue chip companies sinking, the Securities and Exchange Board of India (SEBI) has relaxed the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, (the takeover code) to extend the creeping acquisition limit from 55% to 75% in listed companies. This revision is intended to facilitate promoter consolidation and boost investor confidence within such companies.
In its press release No. 239, dated 27 October, SEBI has proposed to make two significant amendments to the takeover code.
The first amendment permits consolidations of up to 5% per year through creeping acquisitions for individuals with a shareholding of 55% and above. For those holding below 75%, such consolidation will be subject to the condition that the acquisition is via an open market purchase in the normal segment. However, no consolidation via bulk, block, a negotiated deal or a preferential allotment will be permitted.
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm that provides legal and tax counselling. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
