Basic Concepts of SEBI Takeover Code

Basic Concepts of SEBI Takeover Code

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Basic Concepts of SEBI Takeover Code

1. Acquirer:

Acquirer means any person who acquires or is interested in acquiring (i.) the shares, or (ii) voting rights, or (iii) control of the target company.

The acquirer may be a natural person or an artificial person i.e. may be an individual, a foreign company, an Indian company, listed company, or unlisted company.

2. Persons Acting In Concert (PAC)

PAC is the persons who join hands with the acquirer to acquire the shares or voting rights or control of the target company.

3. Target Company

Target company means Listed Indian Company (or a Listed Indian body corporate or corporation established under a Central legislation, State legislation or Provincial legislation) whose shares/voting rights/control is being acquired by the acquirer or PAC.

Note: SEBI Takeover Code applies ONLY IF the target company is Listed Indian Company or a Listed Indian body corporate or corporation established under a Central legislation, State legislation or Provincial legislation.

4. Disclosure Levels

Whenever acquirer along with PAC acquires 5% or more shares in the target company, the acquirer shall compulsorily inform the Board of Directors of the concerned Target Company and the concerned Stock Exchange where Target Company is listed, within maximum 2 working days of such acquisition.

This disclosure is like an alarm bell to the promoters of the target company that an outsider has acquired a significant stake in their company. It’s an indication that the promoters should increase their stake in their own company to prevent the company from a hostile takeover.

Further, any acquirer along with PAC who has acquired 5% shares in the target company, SHALL DISCLOSE every acquisition or disposal of shares of such target company representing more than 2% of the shares or voting rights in such target company.

5. Trigger Point

If the acquirer and PAC agree to acquire 25% or more voting rights of the target company, then they shall make “Public Announcement (PA)” to the concerned stock exchange on the same day, and the Stock Exchange shall immediately disseminate (gives) such information to the public through is a website.

Thereafter, within maximum 5 working days of such PA, acquirer and PAC shall compulsorily make “Detailed Public Announcement (DPS)” in 3-4 newspapers to acquire minimum 26% of a total number of shares of the target company.

Trigger Point acts as a HURDLE for the acquirer in acquiring shares beyond 24.99% level.

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