Will easier M&A for stressed companies cause any stress?

By Yogesh Chande, Shardul Amarchand Mangaldas & Co
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With a view to facilitate turnaround of listed companies in distress and for the benefit of their shareholders and lenders, the Securities and Exchange Board of India (SEBI) on 14 August approved amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, and to open offer obligations under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulations).

Yogesh ChandePartnerShardul Amarchand Mangaldas & Co
Yogesh Chande
Shardul Amarchand Mangaldas & Co

The relaxations which were available to lenders undertaking restructuring of listed companies in distress through the strategic debt restructuring (SDR) scheme, in terms of the Reserve Bank of India (RBI) guidelines, have now been extended to new investors acquiring shares in distressed companies under restructuring schemes undertaken in accordance with RBI guidelines subject to certain conditions. These relaxations have also been made available to the lenders under other such restructuring schemes.

In this context, it is pertinent to refer to separate informal guidance issued by SEBI in April 2012 to two applicants (IDBI Trusteeship and IL&FS Trust Company) as regards a provision of the Takeover Regulations which exempts the acquisition of shares in the ordinary course of business, but only by banks and public financial institutions (PFIs) as pledgees, from an obligation to make an open offer. The applicants had asked SEBI whether this provision also exempted them from making an open offer if they, in their capacity as trustee or agent, invoked the pledge for the benefit of banks and PFIs.

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Yogesh Chande is a partner at Shardul Amarchand Mangaldas & Co. The views and opinions expressed are solely those of the author and do not necessarily reflect the official view or position of the firm.


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