SEBI clarifies rules for creeping acquisitions

On 26 August the Securities and Exchange Board of India (SEBI) issued informal guidance to Gulf Oil Corporation under the SEBI (Informal Guidance) Scheme, 2003.

Gulf Oil Corporation (the target) is an Indian-listed company. Gulf Oil International (Mauritius) Inc (GOIMI) is its promoter, holding 45.73% of the target. Helvetia Mauritius and Swallow Enterprises Mauritius were overseas corporate bodies (OCBs) that held 2.67% and 0.63% in the target respectively. Following the amalgamation of GOIMI and the OCBs, GOIMI’s stake in the target increased from 45.73% to 49.03%. The Registrar of Companies in Mauritius issued a certificate of amalgamation on 23 April.

SEBI held that the acquisition of a 3.3% stake in the target pursuant to the amalgamation was exempt under regulation 11(1) of the (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (the takeover code), which permits acquirers to consolidate their holdings up to 5% in a financial year without triggering the open offer obligations under regulation 11. This being so, it was held that the question of exemption under regulation 3(j)(ii) of the takeover code did not arise.

The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.