Acquisition Pursuant to a Scheme of Arrangement
Regulation 10 of SEBI (SAST) Regulations, 2011 (SEBI Takeover Code) provides the provisions relating to automatic exemption to the acquirer from complying with the provisions of regulation 3 and 4 of the SEBI Takeover Code requiring Open Offer be made to the shareholders of the Target Company subject to the compliance of the conditions as prescribed thereunder. An analysis of the provision relating to exemption available in case of increase in voting rights pursuant to a scheme of arrangement as contained in regulation 10(1)(d) is detailed below:
Regulation 10 (1) (d) (ii)
“Acquisition Pursuant to a scheme of arrangement involving the target company as a transferor company or as a transferee company, or reconstruction of the target company, including amalgamation, merger or demerger, pursuant to an order of a court or a competent authority under any law or regulation, Indian or foreign;”
The takeover offer is not triggered in case of acquisition of shares pursuant to any arrangement as per the provisions of the Companies Act & in accordance with the foreign law, if any applicable involving the Target Company as transferor or as transferee company. The regulation specifically mentions amalgamation, merger & demerger. Therefore, if any of the acquirer acquires shares or voting rights pursuant to a scheme of amalgamation beyond the threshold limit prescribed then the acquirer is allowed to go beyond the prescribed limit without takeover offer.
Regulation 10 (1) (d) (iii)
“Acquisition Pursuant to a scheme of arrangement not directly involving the target company as a transferor company or as a transferee company, or reconstruction not involving the target company’s undertaking, including amalgamation, merger or demerger, pursuant to an order of a court or a competent authority under any law or regulation, Indian or foreign, subject to-
- (A) the component of cash and cash equivalents in the consideration paid being less than twenty-five per cent of the consideration paid under the scheme; and
- (B) where after implementation of the scheme of arrangement, persons directly or indirectly holding at least thirty-three per cent of the voting rights in the combined entity are the same as the persons who held the entire voting rights before the implementation of the scheme.
Acquisition of voting rights beyond the threshold pursuant to scheme of arrangement not involving the Target Company would also be exempt from the requirement of Open Offer provided that following conditions are complied with:
- Component of Cash and Cash Equivalent < 25% of total consideration paid under the scheme.
- The persons who are holding 100% voting rights of the Transferee before the implementation of the scheme should directly or indirectly hold atleast 33% of voting rights in the Transferee (Combined entity after the Merger) after the implementation of the scheme.
Compliances for availing the exemption
Scheme of Arrangement involving Target Company
|
Scheme of Arrangement not involving Target Company
|
Regulation 10(6) – Any acquirer seeking exemption shall file a report with the stock exchanges not later than four working days from the date of acquisition.
|
Regulation 10(6) – Any acquirer seeking exemption shall file a report with the stock exchanges not later than four working days from the date of acquisition.
|
Regulation 10(7) - The Acquirer shall filea report to SEBI within 21 working daysof the date of acquisition along with supporting documents to the Board giving all details in respect of acquisitions and fee of Rs 1, 50,000. |
Source:Takeover Panorama january 2015 by www.takeovercode.com
Comments