ACQUISITION OF COMPANIES – CS Professional
When an acquirer and person acting in concern acquire 25% of voting right in a company then acquirer have to issue a public announcement and detailed public statement for at least 26% of voting rights and have to send a public announcement to the stock exchange on the same day. Within 5 days of issuing a public announcement, they will have to issue a detailed public statement in 3 to 4 newspaper.
Following are the steps to be taken while acquiring a company:-
- Within 5 working days of issuing a detailed public statement in a newspaper, acquirer and merchant banker have to file a letter of offer to S.E.B.I.
- The acquirer shall file PA to S.E.B.I and to the target
- The acquirer shall file a copy of the DPS to SEBI, TARGET COMPANY, and stock exchange.
- Board of director of the target company shall constitute “a committee of independent director” and such committee shall give its recommendation and shall be published in the newspaper 2 working days before the opening of tendering period.
- E.B.I. may give its comments on the draft letter of offer (LOO) as expeditiously as possible but not later than 15 working days of receipt of the draft letter of offer.
- The acquirer shall dispatch a final letter of offer to all shareholder of the company within 7 days of ending of 15 days period.
- E.B.I. can also for any additional information from the acquirer and in that case, the period of issuance of comments shall be extended to the 5th day from the receipt of a satisfactory reply to the clarification.
- Also within 15 working days of issuing a detailed public statement, acquirer and promoter too can make a competing offer.
- After the ending of 15 days and within 14 working days upward revision of bid can be given by both the parties who have bid initially.
- After the ending of 14days, there will be no upward revision allowed for 3 days.
- The tendering period shall start not later than 12 working days of receipt of comments from S.E.B.I and shall remain open for 10 working days.
- Within 10 days of the closing of tendering period acquirer shall make payment to a concerned member of the target
- E.B.I. may grant a suitable extension of time on showing sufficient reason.
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What will be the mode of payment?
- In cash
- By issue, exchange or transfer of listed shares in the equity share capital of acquirer
- Convertible debt securities
- Listed secured debt instruments
- Combination of the above methods
Provision for the Escrow Account
- For 1st 500 crores, the amount kept in an escrow account will be 25% of consideration will be kept in an escrow account and will be locked.
- For the next 500 crores, 10% of the balance amount will be put in an escrow
- If the offer bid increases the amount in escrow should also
- Cash should be deposited in a schedule bank account.
- The amount in escrow can be kept as a cash and bank guarantee.
- Manager shall not release the escrow account until the expiry of 30 days from the completion of payment.
After the completion of the offer and after the 15 days of tendering period manager to the offer shall file a report to SEBI.
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