Anti-Acquirer and Pro-Shareholder? An Analysis of the SEBI (Substantial Acquisition of Shares And Takeovers) Regulations, 2011
Karan Talwar & Nivedita Saksena
Volume 5 Issue 1 (2012)
In September 2011, the Securities and Exchange Board of India (‘SEBI’) notified an overhaul of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, by introducing the 2011 Regulations. The changes introduced in the new regulations are based substantially on the recommendations of a committee that it had set up to review the working of the 1997 Regulations. Three fundamental changes have been introduced by the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. First, the level of share ownership or voting rights, which triggers the application of the Takeover Regulations has been increased from 15% of the shareholding to 25%. Once this level is reached, an acquirer now has to make a minimum open offer of 26% of the shareholding of the company, which is an increase from the 20% that was stipulated previously. The third major change introduced has been the compulsory inclusion of non-com- pete fees (fees paid by the acquirers to promoter shareholders, so that they do not start a competing business after the takeover of their company) in the offer price per share. This paper analyses the effect of these amendments to the Takeover Code on the acquirers and shareholders of target companies. The paper seeks to provide a reasoned assessment of the effect of these amendments on the Indian capital market.