SEBI (SAST) Regulation, 2011 Presented by Nitesh Bhati

Terminology

• SAST - Substantial Acquisition of Shares and Takeover

• Takeover

• Acquisition

• Control – 2(e)

• Target Company

• Acquirer

• Persons acting in concert – Reg. 2(q)

Disclosures on acquisition or disposal of shares – Reg. 28

Disclosure of holding of shares/convertibles toStock Exchange and Target Company

• If crosses 5% of shares or Voting rights

• If holds >5%, disclose sale/purchase of >=2%

Annual Disclosure

Disclosure about holding to Stock Exchange and Target Company within seven working days from end of financial year

• By every person holding 25 % shares

• Promoter(s) of company

Disclosure of encumbered shares

• Disclosure by promoter to Stock Exchange and Target Company

– On creation of encumbrance

– On release of encumbrance

– On invocation of encumbrance

Open offer

• What is open offer?

– Offer to buy out shares of shareholders.

– Made by acquirer who is taking control or acquiring substantial stake

• Why open offer?

Shareholders need an exit opportunity at fair terms

• If there is a change in control ( promoters)

• If there is substantial increase in shareholding of a share holder.

Mandatory Open Offer -Trigger points

SEBI (SAST) Regulation, 2011

Acquisition of 25% or more shares or voting rights (Initial trigger- Reg 3(1))

Acquisition of more than 5% p.a. by shareholders holding more than 25% shares(Subsequent trigger-Reg 3(2))

Change in control as a trigger point

Voluntary open offer

Eligibility of making voluntary offer:

• The acquirer(s) is a promoter

• Holding is between 25% to Maximum permissible non-public shareholding (75%/90%)

• The acquirer has not acquired shares of the TC in the preceding 52 weeks

• Shall not be entitled to acquired any shares of the TC for a period of 6 month after completion of the open offer except pursuant to another voluntary open offer

Offer Size

Number of shares to be acquired from public:

• Mandatory offer : Minimum 26% of the share capital

If post offer holding >maximum permissible non public shareholding (MPNPS), acquirers to undertake to bring it back within 1 year.

• Voluntary offers- Minimum 10% of the share capital

Size shall not be such so as to cross MPNPS.

Offer Price

Offer price shall be the highest of:

• Highest negotiated price

• Volume weighted average price paid or

payable for acquisitions by acquirer during

last 52 weeks

• Highest price paid or payable for

acquisitions by acquirer during last 26

weeks

• Volume weighted average market price for

period of sixty trading days

• Not frequently traded shares – price

determined based on fundamental of

company

Offer process

• Public Announcement (PA) on the date of agreement to acquire.

• Detailed Public Statement (DPS) with 5 working days of PA

• Draft Letter of offer to SEBI within 5 working days of DPS

• SEBI to give comments within 15 working days

• Dispatch of letter of offer within 7 wkg days of SEBI’s letter.

• Offer to open within 10 wkg days from SEBI’s letter.

• Offer to remain open for 10 working days

• Payment to be made within 10 wkg days from closure of offer.

• Underlying acquisition to be completed within 26 weeks from date of payment.

Exempted transactions – Reg. 10

• Inter-se transfer amongst

– Immediate relatives

– Promoters

– Companies under same control

– Persons acting in concert for not less than 3 yrs

• Acquisition in ordinary course of business

• Acquisition pursuant to Scheme

• Pursuant to Corporate Debt Restructuring Scheme

• Pursuant to Buy Back subject to some conditions.

• Pursuant to rights issue subject to some conditions.

• Acquisition of shares by promoters from VCFs/ State Level Financial institutions pursuant to an angreement

Exemptions by Board

• SEBI may grant exemption for transactions not covered under “exempted transactions.

• SEBI may take help of panel of experts.

• SEBI to pass a reasoned order.

Thank you