Reviewing the Ambit of ‘Control’ Apropos to the Objective of ‘Mandatory Bids’: An Analysis under the Takeover Regulations
Volume 11 Issue 2 (2018)
The advisory committees and the capital market regulator in India have every so often tried to arrive at a definition of control that will allow them to fittingly mandate the release of takeover bids on acquisition of control over a company. Bearing in mind that merely a quantitative test to determine control may be easy to circumvent, the regulator has adopted the use of a qualitative test, along with the quantitative test, to determine the acquirers who may said to be in control of the company. However, this approach towards the interpretation of control has raised many issues, with the adjudicators failing to conclusively determine what constitutes control. This has subsequently led to the regulator necessitating or exempting the investors from coming out with an open offer in an incoherent way, injuring the interests of the investors or the minority shareholders, respectively. In light of this unsettled approach with respect to control and mandatory takeover bids under the takeover regulations, I decipher the actual purpose behind mandatory takeover bids to suggest what shall in fact result in a change of control that the minority shareholders had not assented to originally. Keeping in mind this change of control that mandates a takeover bid, I shall then attempt to show what actually constitutes control over a company, and why, partial equity ownerships below the numerical threshold may at times constitute control even if any additional right may only be reactive. Concurrently, I critique the approach taken by the advisory committees in suggesting the numerical threshold for triggering an open offer. I conclude by suggesting a germane approach with respect to the interpretation of control and the release of takeover bids, hypothesising an increased numerical threshold.