takeover code

SEBI has vide an amendment to the SEBI (Substantial Acquisition of Shares & Takeovers) Regulations 2011 or Takeover Code carried out the following amendments.

Rule 17 of the regulations pertains to creating an escrow account by the acquirer not later than two days prior to date of making a detailed public statement on the open offer. He is required to create an escrow account and deposit therein an amount equal to 25% of the consideration upto Rs.500 crores and 10% of the balance consideration above Rs.500 crores. However where open offer is made conditional upon minimum level of acceptance, 100% of the consideration payable under the minimum level of acceptance or 50% of the open offer, whichever is higher, should be deposited in the escrow account.

SEBI has now made another proviso wherein in case of indirect acquisition where public announcement has been made u/r 13(2)(e) of the Takeover regulations, an amount equal to 100% of consideration payable shall be deposited in the escrow account.

Rule 17(3) further provides that the amount in the escrow account can be in the form of cash or bank guarantee issued in favour of the manager to the offer by any scheduled commercial bank or deposit of frequently traded and freely transferable equity shares or other freely transferable securities with appropriate margin.

However the amendment does not allow escrow account to be in the form of freely transferable securities in the case of indirect acquisition u/r 13(2)(e).

Further new clause has been inserted in rule 18 as sub rule 11A which provides that where the acquirer is unable to make the payment to the shareholders who have accepted the open offer within the prescribed period, then he shall pay interest to all such shareholders whose shares have been accepted in the open offer at the rate of 10% p.a. Of course, the acquirer can give valid reasons for the delay and the Board may then give a decision whether to accept it or not and whether to waive the interest payable or not.

SEBI circular can be found here

https://www.sebi.gov.in/legal/regulations/jul-2020/securities-and-exchange-board-of-india-substantial-acquisition-of-shares-and-takeovers-third-amendment-regulations-2020_46990.html

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