New Take over codeEffective from 22nd October 2011

INTRODUCTIONThe Securities and Exchange Board of India (SEBI) introduced the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 ("Takeover Code, 1997") to regulate the acquisition of shares and voting rights in public listed companies in India

MEANING OF TAKEOVER a transaction or a series of transactions whereby a person acquires control over the assets of a company, either directly by becoming the owner of those assets or indirectly by obtaining control of the management of the company. Where shares are closely held (i.e. by small number of persons), a takeover will generally be effected by agreement with the holders of the majority of the share capital of the company being acquired. Where the shares are held by the public generally the take over may be effected:1) by agreement between the acquirers and the controllers of the acquired company.2) by purchase of shares on the stock exchange.3) by means of a takeover bid

APPLICABILITYAPPLICABILITYdirect or indirect acquisition of shares or voting rights in or control over any target company.

PREFERENCE SHARESTakeover code 1997 excluded Preference shares from the definition of shares vide 2002 amendment.Now in amendment 2011, the same has been included any security which entitles the holder to voting rights

The Takeover Code, 2011 defines acquisition as directly or indirectly, acquiring or agreeing to acquire shares or voting rights in, or control over, a target company (Acquisition).

MAJOR CHANGES1.The point at which the open offer is triggered has been changed from the earlier 15% to 26%. 2.The size of the open offer has been increased from 20% to 25%. 3.Non-compete fees which were paid earlier to promoters is now not permitted

Difference between New take over code and old code open offer trigger above 25% Open offer size increase to 26%Creeping Acquisition 5% allowed to promoters up to 75% Scrapping of Non compete fees to promoters Open offer trigger above 15%Open offer size 20% Creeping acquisition allowed 5% for promoters holding between 15-55% Non compete fees for promoters Allowed

deemed to be acting in concert Takeover Code, 1997 included a company with any of its directors, or any person entrusted with the management of the funds of the company. Take over code 2011 widens scope to such persons as may be entrusted with the management of the company

Promoter allowed voluntary open offer up to 10% to increase holding 57 days to complete open offer

Promoter not allowed voluntary open offer

Voluntary offerA concept of voluntary offer has introduced in Take over code 2011

Advantages to investor Minorities shareholders get fair share in open offer Companies get 51% holding in the new company Promoters get voluntary open offer to increase the holding Board recommendation made compulsory for open offer Promoters would get Non compete fees NO exemption in case of acquisition from other competing acquiredChanges of control only after open offer Frequently traded shares increase from 5 % to 10 % for more realistic picture

OFFER SIZETake over code 1997 to make an open offer, to offer for a minimum of 20% of the voting capital of the Target Company as on expiration of 15 days after the closure of the public offer. Take over code 2011 an acquirer to place an offer for at least 26% of the total shares of the Target Company, as on the 10th working day from the closure of the tendering period.

OFFER PERIODThe Takeover Code, 2011 provides that the offer period starts on the date of entering into an agreement to acquire shares, voting rights in, or control over a Target Company requiring a public announcement, or the date of the public announcement, whichever is earlier and ends on the date on which the payment of consideration to shareholders who have accepted the open offer is made.

Cost increases for the corporate to take over

If the indirectly acquired target company is a predominant part of the business or entity being acquired, the takeover code would treat such indirect acquisition as a direct acquisition for all purposes.

Offer price paid would be highest among 4 prices that are as followsnegotiated price volume weighted average price over the last 52 weeks prior to the public announcement the highest price payable or paid in the last 26 weeks before the public announcement, the volume weighted average price of 60 trading days prior to the public announcement.

Thank you