CS Lohith

Important Definitions with Regard to SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011   i.e. SEBI SAST 2011 Regulations, 2011

1. Acquirer:- means any person who, directly or indirectly, acquires or agrees to acquire whether by himself, or through, or with persons acting in concert with him, shares or voting rights in, or control over a target company;

2. Acquisition:- directly or indirectly, acquiring or agreeing to acquire shares or voting rights in, or control over, a target company;

3. Target Company:- a company and includes a body corporate or corporation established under a Central legislation, State legislation or Provincial legislation for the time being in force, whose shares are listed on a stock exchange;

4. Promoter has the same meaning as in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and includes a member of the promoter group;

5. Promoter group has the same meaning as in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009

6. Persons Acting In Concert (PAC):- persons who, with a common objective or purpose of acquisition of shares or voting rights in, or exercising control over a target company, pursuant to an agreement or understanding, formal or informal, directly or indirectly co-operate for acquisition of shares or voting rights in, or exercise of control over the target company.

7. Deemed Persons Acting In Concert (PAC):-

a) A company, its holding company, subsidiary company and any company under the same management or control

b) A company its directors and any person entrusted with the management of the company

c) Directors of companies referred to in items (i) & (ii) above and associates of such directors.

d) Promoters and members of the promoter group

e) Immediate relatives

f) A mutual fund, its sponsor, trustees, trustee company and asset management company

g) A collective investment scheme and its collective investment management company, trustees and trustee company.

h) A venture capital fund and its sponsor, trustees, trustee company and asset management company

i) A foreign Institutional investor and its sub accounts

j) A merchant banker and its client, who is an acquirer

k) A portfolio manager and its client, who is an acquirer

l) Banks, financial advisors and stock brokers of the acquirer or of any company which is a holding or subsidiary of the acquirer, and where the acquirer is an individual, of the immediate relative of such individual.

m) An investment company or fund and any person who has an interest in such investment company or fund as a shareholder or unit holder having not less than 10% of the paid up share capital of the investment company or unit capital of the fund, and any other investment company or fund in which such person or his associate holders not less than 10% of the paid up share capital of that investment company or unit capital of the fund.

TYPES OF DISCLOSURES:

1) Disclosure of Acquisition and Disposal – Regulation 29

2) Continual Disclosures – Regulation 30

3) Disclosure of Encumbered Shares – Regulation 31

PERSONS WHO ARE OBLIGED TO MAKE SUCH DISCLOSURES:

Regulation 28 of SEBI (SAST) states that the following persons are obliged to make such disclosures as mentioned above:

1) Any Acquirer of the Target Company.

2) Promoter of the Target Company.

3) Persons Acting in Concert (PAC’s) of the Target Company.

1. (REGULATION 29 EVENT BASED): DISCLOSURE OF ACQUISITION AND DISPOSAL

Sl. NoParticularsDisclosure to be intimated byDisclosure intimate toTime Limit
1Reg. 29(1) Acquirer together with Persons Acting In Concert (PAC) acquires 5% or more in aggregate of the shares or voting rights of the target company (together with the existing shares or voting rights held by them)AcquirerStock Exchange(s) wherever shares are listed & Target Company at its registered officeWithin 2 working days of the receipt of intimation of allotment of shares or disposal or acquisition of shares or voting rights.
2Reg.29 (2) Any acquirer, who together with Persons Acting In Concert (PAC) with him, holds shares or voting rights entitling them to 5% or more of the shares or voting rights in a target company, shall disclose every acquisition or disposal of shares of such target company representing 2% or more of the shares or voting rights in such target company in such format as may be specified.AcquirerStock Exchange(s) wherever shares are listed & Target Company at its registered officeWithin 2 working days of the receipt of intimation of allotment of shares or disposal or acquisition of shares or voting rights.

Notes:-

1. Shares taken by way of encumbrance(pledge) shall be treated as an acquisition and shares given upon release of encumbrance (pledge) shall be treated as a disposal, and disclosures shall be made by such person accordingly in such form as may be specified

2. This regulation shall not apply to a scheduled commercial bank or public financial institution as pledgee in connection with a pledge of shares for securing indebtedness in the ordinary course of business.

2. (REGULATION 30 CONTINUATION): CONTINUAL DISCLOSURES OF AGGREGATE SHAREHOLDING

Sl. NoParticularsDisclosure to be intimated byDisclosure intimate toTime Limit
1Reg. 30(1) Every Person together with PAC holding shares or voting rights aggregating to 25% or more of the voting rights in a target companyEvery Person together with PAC as on March 31st of every yearStock Exchange(s) wherever shares are listed & Target Company at its registered officeWithin 7 working days from the end of each financial year
2Reg. 30 (2) The Promoter together with PAC holding shares or voting rights in a target company shall disclose their aggregate shareholding.Promoter together with PACStock Exchange(s) wherever shares are listed & Target Company at its registered officeWithin 7 working days from the end of each financial year

3. (REGULATION 31(1)): DISCLOSURES OF ENCUMBERED SHARES (PLEDGE OF SHARES)

Sl.NoParticularsDisclosure to be intimated byDisclosure intimate toTime Limit
1A Promoter shall disclose details of shares in such target company encumbered by him or by PAC’s with him in such form as may be specified.Promoter and PACStock Exchange(s) wherever shares are listed & Target Company at its registered officeWithin 7 working days from the creation or invocation or release of encumbrance as the case may be
2A Promoter shall disclose details of invocation of such encumbrance or release of such encumbrance of shares in such form as may be specified.PromoterStock Exchange(s) wherever shares are listed &

Target Company at its registered office

Within 7 working days from the creation or invocation or release of encumbrance as the case may be

* For computing the trigger limits for disclosure purpose the word “shares” includes convertible securities also.

4. Reg. 32 (1) Penal Provisions:

The above disclosures are mandatory under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011. In case of any non-compliance with the provisions of the regulations, SEBI has the power to impose penalties including the following:

a. directing the divestment of shares acquired;

b. directing the transfer of the shares / proceeds of a directed sale of shares to the investor protection fund;

c. directing the target company / any depository not to give effect to any transfer of shares;

d. directing the acquirer not to exercise any voting or other rights attached to shares acquired;

e. debarring person(s) from accessing the capital market or dealing in securities;

f. directing the acquirer to make an open offer at an offer price determined by SEBI in accordance with the Regulations;

g. directing the acquirer not to cause, and the target company not to effect,

h. any disposal of assets of the target company or any of its subsidiaries unless mentioned in the letter of offer; directing the acquirer to make an offer and pay interest on the offer price for having failed to make an offer or has delayed an open offer;

i. directing the acquirer not to make an open offer or enter into a transaction that would trigger an open offer, if the acquirer has failed to make payment of the open offer consideration;

j. directing the acquirer to pay interest of for delayed payment of the open offer consideration;

k. directing any person to cease and desist from exercising control acquired over any target company;

l. directing divestiture of such number of shares as would result in the shareholding of an acquirer and persons acting in concert with him being limited to the maximum permissible non-public shareholding limit or below.

Disclaimer:-(Author Name- CS Lohith).The entire contents of this document have been prepared on the basis of relevant regulations of SEBI SAST2011 and as per the information existing at the time of the preparation.  However, you may simultaneously refer SEBI SAST2011 and relevant circular and notifications issued by SEBI for better understanding of this write up. The observations of the writer are personal view and the writer do not take any responsibility of the same and this cannot be quoted before any authority without the written consent of the writer.

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