SEBI notifies Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2017, effective 14th August, 2017

SEBI notifies Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2017, effective 14th August, 2017

August 29, 2017 Corporate 0

The Securities and Exchange Board of India (“SEBI”) has recently notified the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2017 (“Amendment Regulations”) to amend the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Principal Regulations”).

The Amendment Regulations are effective from 14th August, 2017.

Key Highlights of the Amendment Regulation:

Principal RegulationsAmendment RegulationsImplications
Did not existInsertion of new provision:

Rule 10(1) (da)

Acquisition pursuant to a resolution plan approved under section 31 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016).

The Amendment Regulations has inserted sub-clause (da) after sub-clause (d) under Regulation 10 of the Principal Regulations. Regulation 10 deals with the General exemptions clause, where a list of acquisitions is exempted from the obligation of making an open offer.

The present amendment exempts acquisition which is covered under the resolution plan approved under Section 31 of the Insolvency and Bankruptcy Code, 2016 (“Approval of resolution plan”).

Regulation 10 (1) The following acquisitions shall be exempt from the obligation to make an open offer under regulation 3 and regulation 4 subject to fulfilment of the conditions stipulated therefor

(i) Conversion of debt into equity under Strategic Debt Restructuring Scheme – Acquisition of equity shares by the consortium of banks, financial institutions and other secured lenders pursuant to conversion of their debt as part of the Strategic Debt Restructuring Scheme in accordance with the guidelines specified by the Reserve Bank of India:

Provided that the conditions specified under sub regulation (5) or (6) of regulation 70 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as may be applicable, are complied with.

Regulation 10 (1) (i) is substituted as following:

(i) Acquisition of shares by the lenders pursuant to conversion of their debt as part of a debt restructuring scheme implemented in accordance with the  guidelines specified by the Reserve Bank of India:

Provided that the conditions specified under sub-regulation (5) of regulation 70 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 are complied with.

The Amendment Regulations has substituted Regulation 10 (1) (i) of the Principal Regulations in totality.

Regulation 10 (1) (i) lays down exemption on acquisition of equity shares by the consortium of banks, financial institutions and other secured lenders pursuant to conversion of their debt as part of the Strategic Debt Restructuring Scheme. The present amendment has widened the scope of exemption, and now covers acquisition of shares by the lenders pursuant to conversion of their debt as part of a debt restructuring scheme.

Did not existInsertion of new provision:

Rule 10(1) (ia)

(ia) Acquisition of shares by the person(s), by way of allotment by the target company or purchase from the lenders at the time of lenders selling their shareholding or enforcing change in ownership in favour of such person(s), pursuant to a debt restructuring scheme implemented in accordance with the guidelines specified by the Reserve Bank of India:

Provided that in respect of acquisition by persons by way of allotment by the target company, the conditions specified under sub-regulation (6) of regulation 70 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 are complied with:

Provided further that in respect of acquisition by way of purchase of shares from the lenders, the acquisition shall be exempted subject to the compliance with the following conditions:

(a) the guidelines for determining the purchase price have been specified by the Reserve Bank of India and that the purchase price has been determined in accordance with such guidelines;

(b) the purchase price shall be certified by two independent qualified valuers, and for this purpose ‘valuer’ shall be a person who is registered under section 247 of the Companies Act, 2013 and the relevant Rules framed thereunder:

Provided that till such date on which section 247 of the Companies Act, 2013 and the relevant Rules come into force, valuer shall mean an independent merchant banker registered with the Board or an independent chartered accountant in practice having a minimum experience of ten years;

(c) the specified securities so purchased shall be locked-in for a period of at least three years from the date of purchase;

(d) the lock-in of equity shares acquired pursuant to conversion of convertible securities purchased from the lenders shall be reduced to the extent the convertible securities have already been locked-in;

(e) a special resolution has been passed by shareholders of the issuer before the purchase;

(f) the issuer shall, in addition to the disclosures required under the Companies Act, 2013 or any other applicable law, disclose the following information pertaining to the proposed acquirer(s) in the explanatory statement to the notice for the general meeting proposed for passing special resolution as stipulated at clause (e) of this sub-regulation:

a. the identity including of the natural persons who are the ultimate beneficial owners of the shares proposed to be purchased and/ or who ultimately control the proposed acquirer(s);

b. the business model;

c. a statement on growth of business over the period of time;

d. summary of audited financials of previous three financial years;

e. track record in turning around companies, if any;

f. the proposed roadmap for effecting turnaround of the issuer.

(g) applicable provisions of the Companies Act, 2013 are complied with.

The Amendment Regulations has inserted sub-clause (ia) after sub-clause (i) under Regulation 10 of the Principal Regulations, which is the exemption clause.

The present amendment exempts acquisition of shares by the following, pursuant to a debt restructuring scheme:

i. by way of allotment by the target company; or

ii. purchase from the lenders at the time of lenders selling their shareholding; or

iii. enforcing change in ownership in favour of such person(s).

The amendment clarifies the following:

i. For acquisition by persons by way of allotment by the target company, the conditions specified under sub-regulation (6) of regulation 70 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 are to be adhered to.

ii. For acquisition by way of purchase of shares from the lenders, such acquisition shall be exempted subject to the compliance with the certain conditions laid down in this new provision.

   

 

Source: Securities and Exchange Board of India

About the author

Lexplosion:

0 Comments

Would you like to share your thoughts?

Your email address will not be published. Required fields are marked *

Leave a Reply