A Primer on Securities and Exchange Board of India Acquisition of Shares Regulations

Abstract

This Article provides for a broader understanding of the procedure involved in the acquisition of shares of a listed company as required under the Takeover Regulation of the Securities and Exchange Board of India (SEBI). The Article does not purport to interpret the law and the whole idea is to provide for an understanding of the issues involved while acquiring shares of an Indian listed company.

On this note, I would like the reader to take note of certain words used in the article and what is meant by such words in the Regulation:

What is meant by Takeovers & Substantial acquisition of shares?

When an acquirer takes over the control of the target company, it is termed as takeover. When an acquirer acquires substantial quantity of shares or voting rights of the Target Company, it results into substantial acquisition of shares. The term Substantial which is used in this context has been clarified subsequently.

What is a Target Company?

A Target Company is a company whose shares are listed on any stock exchange and whose shares or voting rights are acquired/being acquired or whose control is taken over/being taken over by an acquirer.

Who is an Acquirer?

An acquirer means any individual/company/any other legal entity which intends to acquire or acquires substantial quantity of shares or voting rights of target company or acquires or agrees to acquire control over the target company. It includes persons acting in concert (PAC) with the acquirer.

What is the meaning of control?

Control includes the right to appoint directly or indirectly or by virtue of agreements or in any other manner majority of directors on the Board of the target company or to control management or policy decisions affecting the target company.

Keywords: securities, shares, mergers, acqusitions, target company, change in control