Takeover Code: A brand new image

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The Securities Exchange Board of India has ratified substantial amendments to the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (Takeover Code), approving the majority of recommendations made by the Takeover Regulations Advisory Committee (TRAC).

The following list outlines important amendments discussed in the SEBI board meeting on 28 July:

  1. The trigger point for a mandatory open offer has been raised from 15% to 25% of the voting rights in the target company.
  2. The provision which allowed payment of a non-compete fee up to 25% of the offer price to the exiting promoters of the target company in addition to the offer price has been deleted.
  3. In case of multiple competing bidders, the successful bidder can acquire the shares held by the non-successful bidder(s) after the offer period without having to make another open offer, at the same price that was offered by the non-successful bidder(s).
  4. Acquirers are permitted to make voluntary offers to shareholders of the target company subject to fulfilment of certain prescribed conditions.
  5. In line with the takeover regulations in other jurisdictions, it is now mandatory to have a recommendation from the board of the target company on the offer made by an acquirer.
  6. The minimum size of the mandatory open offer has increased from 20% to 26% of the voting capital.

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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.

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