Securities and Exchange Board of India
Master Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2023/31 Dated: February 16, 2023
To
All Recognized Stock Exchanges
All Registered Merchant Bankers
All Listed Entities
Other Stakeholders*
Dear Sir / Madam,
Subject: Master Circular for Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Regulations”)
1. In order to enable the stakeholders to have access to the provisions of the applicable circulars at one place, Master Circular for Takeover Regulations has been prepared.
2. With the issuance of this Master Circular, the directions/instructions contained in the circulars listed out in Annexure-V to this Master Circular, to the extent they relate to the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as “Takeover Regulations”), shall stand rescinded.
3. Notwithstanding such rescission, anything done or any action taken or purported to have been done or taken including any enquiry or investigation commenced or show cause notice issued in respect of the circulars specified in Annexure-V, shall be deemed to have been done or taken under the corresponding provisions of this Master Circular.
4. This circular is available on the website of the Securities and Exchange Board of India at www.sebi.gov.in.
Yours faithfully, Yogita Jadhav General Manager Division of Policy and Development Corporation Finance Department Phone +91-022-26449583 Email: yogitag@sebi.gov.in
* Other Stakeholders for the purpose of applicability of this master circular includes Depositories and Depository Participants, Clearing Corporations, Registrars to the Issue, Stock Brokers, Acquirers, Sellers etc. to whom specific provisions of this circular are applicable.
List of Abbreviations
| BO | Beneficial Owner |
| CC | Clearing Corporations |
| CM | Clearing Member |
| DP | Depository Participant |
| DPS | Detailed Public Announcement |
| ECS | Electronic Clearing Service |
| EPS | Earnings Per Share |
| FCD | Fully Convertible Debentures |
| FI | Financial Investor |
| FII | Foreign Institutional Investor |
| FVCI | Foreign Venture Capital Investors |
| GAAP | Generally Accepted Accounting Principles |
| IFSC | Indian Financial System Code |
| INR | Indian Rupee |
| ISIN | International Securities Identification Number |
| LOF | Letter of Offer |
| MF | Mutual Fund |
| NBFC | Non-Banking Financial Company |
| NOC | No-Objection Certificate |
| PA | Public Announcement |
| PAC | Persons Acting in Concert |
| PAN | Permanent Account Number |
| PCD | Partially Convertible Debentures |
| RBI | Reserve Bank of India |
| RTA | Registrar to an Issue |
| SCRR | Securities Contracts (Regulation) Rules 1957 |
| SDD | System Driven Disclosures |
| SE | Stock Exchange |
| SEBI | Securities and Exchange Board of India |
| SPA | Share Purchase Agreement |
| SSA | Share Subscription Agreement |
| STA | Share Transfer Agent |
| TC | Target Company |
| VCF | Venture Capital Fund |
Chapter 1: Format of documents for activities pertaining to Open Offers1
1. Takeover Regulations provides acquirer to make an open offer to the public shareholders in case there is substantial acquisition of shares or voting rights, directly or indirectly, or when there is change in control of a target company.
2. In such cases, it is essential that fair and accurate disclosures of all material information is made by persons responsible to shareholders of a target company to enable them to take informed decisions.
3. Accordingly, Takeover Regulations mandates following documents to be filed by an acquirer through manager to an open offer for necessary information to the shareholders-
i. Public Announcement as provided under sub-regulation (2) of Regulation 12;
ii. Detailed Public Statement as provided under sub-regulation (3) of Regulation 14;
iii. Letter of Offer as provided under sub-regulation (1) of Regulation 16;
iv. Pre-offer announcement as provided under sub-regulation (7) of Regulation 18;
v. Post-offer announcement as provided under sub-regulation (12) of Regulation 18;
vi. Recommendation on the offer by the committee of independent directors of the Target Company as provided under sub-regulation (7) of Regulation 26;
vii. Post-offer report as provided under sub-regulation (7) of Regulation 27.
4. In this regard, the updated formats for the aforementioned activities have been specified and listed in Annexure-I of this master circular.
Chapter 2: Format of disclosure documents/reports2
1. Disclosures are fairly critical and important component of the legal regime governing substantial acquisition of shares and takeovers.
2. The intent behind the disclosures is to ensure that investing public is not deprived of vital information. Further, full disclosure of information material to investors’ decisions is the most important means for ensuring investor protection. Investors are, thereby, better able to assess the potential risks and rewards of their investments and, thus, to protect their own interests.
3. Accordingly, Takeover Regulations have specified the following reports / disclosures to be filed under various provisions contained therein-
i. Format under sub-regulation (5) of Regulation 10 with respect to intimation to Stock Exchanges in respect of acquisition under Regulation 10;
ii. Format under sub-regulation (6) of Regulation 10 with respect to report to be submitted to Stock Exchanges in respect of any acquisition made in reliance upon exemption provided for under Regulation 10;
iii. Format under sub-regulation (7) of Regulation 10 with respect to report to be submitted to SEBI in respect of any acquisition made in reliance upon exemption provided for under Regulation 10;
iv. Format under sub-regulation (6) of Regulation 18 with respect to disclosure to Stock Exchanges about acquisitions made by the acquirer / PAC during the Offer Period;
v. Format under sub-regulation (1) and (2) of Regulation 29 with respect to disclosures for acquisition and disposal of shares;
vi. Format under sub-regulation (1) and (2) of Regulation 31 with respect to disclosure of encumbered shares and details of any invocation / release of such encumbrances to the Stock Exchanges and the Target Company.
4. In this regard, the updated formats for the aforementioned disclosure requirements have been specified and listed in Annexure-II of this master circular.
Chapter 3: Automation of disclosure requirements pursuant to introduction of System Driven
Disclosures3
1. With the intent of ease of doing business, SEBI in consultation with the market infrastructure institutions had decided to automate the process of filing of disclosures as prescribed under Regulations 29 and 31 of the Takeover Regulations at stock exchange(s) level for the companies which are listed on nationwide stock exchanges. Under SDD, relevant disclosures shall be disseminated by the Stock Exchanges based on aggregation of data received from the Depositories, without human intervention.
2. Thus, disclosures for the transactions undertaken in the depository system under Regulation 29 and Regulation 31 of the Takeover Regulations* shall not require manual filing except for the following transactions: –
i. Triggering of disclosure requirement due to acquisition or disposal of the shares, as the case may be, by the acquirer together with persons acting in concert (PACs)
ii. Triggering of disclosure requirement in case the shares are held in physical form by the acquirer and/or PACs.
iii. Listed companies who have not provided PAN of promoter(s) including member(s) of the promoter group to the designated depository or companies which have not appointed any depository as their designated depository.
Disclosure of encumbered shares -Capturing ultimate lender**
3. Further, in order to streamline capturing and dissemination of the information related to “encumbrances”, it has been decided that-
i. All types of encumbrances as defined under Regulation 28(3) of the Takeover Regulations shall necessarily be recorded in the depository system.
ii. The depositories shall capture details of the ultimate lender along with name of the trustee acting on behalf of such ultimate lender such as banks, NBFCs, etc. In case of issuance of debentures, name of the debenture issuer shall be captured in the depository system.
iii. The depositories shall capture the reasons for encumbrances in the depository system.
4. For the purpose of dissemination of this information-
i. The depositories shall provide information to the stock exchanges for the transactions recorded in the depository system.
ii. The stock exchanges shall consolidate the information received from both the depositories and disseminate the same on their websites as per the formats specified by SEBI.
iii. The stock exchanges shall also devise an appropriate mechanism for dissemination of disclosures under SDD in a simple readable pdf format.
iv. Reconciliation of data shall be conducted by listed companies, stock exchanges and depositories at least once in a quarter or immediately whenever any discrepancy is noticed.
5. The aforesaid requirement has come into effect from July 1, 2022.
Chapter 4: Procedure for tendering of shares and settlement through stock exchange4
1. The Takeover Regulations facilitates tendering of shares by the shareholders and settlement of the same, through the stock exchange mechanism.
2. However, in case an acquirer or any person acting in concert with the acquirer who proposes to acquire shares under the offer is not eligible to acquire shares through stock exchange due to operation of any other law, such offers would follow the existing “tender offer method”.
3. In case of competing offers under Regulation 20, in order to have a playing field, in the event one of the acquirers is ineligible to acquire shares through stock exchange mechanism, then all acquirers shall follow the existing “tender offer method”.
Acquisition Window
1. The facility for acquisition of shares through Stock Exchange mechanism pursuant to offer is available on the Stock Exchanges having nationwide trading terminals in the form of a separate window (the “Acquisition Window”).
2. The Acquirer or company may choose to use the Acquisition Window provided by more than one Stock Exchange having nationwide trading terminal and, in that case, one of the exchanges shall be chosen as the “Designated Stock Exchange”(DSE).
3. The Recognized Stock Exchanges having nationwide trading terminals shall also facilitate acquirers to provide the platform in case of companies exclusively listed on Recognized Regional Stock Exchanges.
4. In case of competing offers under Regulation 20 of the Takeover Regulations, each acquirer will apply for and use separate Acquisition Windows during the tendering period. If one acquirer chooses to use acquisition window of one Stock Exchange having nationwide trading terminal, it would not be mandatory for the other acquirer to choose the same Stock Exchange.
5. The acquirer/ company shall appoint a stock broker registered with the Board for the offer. Such broker may also undertake transactions on behalf of sellers.
Placing of orders and basis of acceptance
1. At the beginning of the tendering period, the order for buying the required number of shares shall be placed by acquirer/ company through his stock broker.
2. During the tendering period, the order for selling the shares will be placed by eligible sellers through their respective stock brokers during normal trading hours of the secondary market.
3. Depositories shall provide information to clearing corporation about the shareholder on whose behalf the member has placed sell order. This information shall include investor PAN, beneficiary account details and bank details including IFSC code.
4. The cumulative quantity tendered shall be made available online to the market throughout the trading session at specific intervals by Stock Exchange providing acquisition window during the tendering period on the basis of shares transferred to clearing corporation using early pay-in mechanism.
Changes in respect of Intra Depository – Tender Offer Instructions (within Depository)
5. The lien shall be marked in the depository system by the Depositories in the Beneficial Owner’s Demat Account for the shares offered in tender offers.
6. Details of shares marked as lien in clients’ demat account shall be provided by respective Depositories to Clearing Corporations (CC).
7. Details in respect of shareholder’s entitlement for tender offer process shall be provided to Clearing Corporations by Issuer / Registrar to an Issue and Share Transfer Agent (RTA) handling respective tender offer.
8. Clearing Corporation will cancel excess blocked securities and securities shall become free balance in shareholder’s account.
9. On settlement date, all blocked shares mentioned in accepted bid shall be transferred to Clearing Corporations.
Changes in respect of Inter Depository Tender Offer (IDT) instructions
10. In case of Client BO account is held with one Depository and CM pool and CC account are held with other Depository, shares shall be blocked in shareholder’s BO account at source Depository, during the tendering period.
11. IDT instruction shall be initiated by shareholder at source Depository to CM pool/ CC account at target Depository. Source Depository shall block the shareholder’s securities (i.e. transfers from free balance to blocked balance) and sends IDT message to target Depository for confirming creation of lien.
12. Details of shares blocked in shareholder’s demat account shall be provided by target Depository to CCs.
13. Clearing Corporation shall cancel excess blocked securities in target Depository. Source Depository shall not be able to release lien without a release of IDT message from target Depository. Further, release of IDT message shall be sent by target Depository either based on cancellation request received from CCs or automatically generated after matching with Bid accepted detail as received from CCs / Issuer / RTAs.
14. Post receiving the IDT message from target Depository, source Depository shall release excess quantity from shareholder’s block balance to free balance. The CC, if any, shall be processed by source Depository and any increase in quantity or substitute ISIN shall be communicated to target depository in IDT message.
15. Post completion of tendering period and receiving the requisite details viz., demat account details and accepted bid quantity in respect of receiving entitlement details of securities of tender offer from clearing corporation, source depository shall debit the securities as per the communication/message received from target Depository to the extent of accepted bid quantity from shareholder’s blocked balance and credit it to clearing corporation settlement account in target Depository on settlement date.
16. All extra quantity of shares which are not a part of accepted bid data provided by Clearing Corporations shall be reversed by source depository based on the communication/message received from target Depository from the shareholders blocked balance and shall be credited in the free balance of respective demat accounts.
17. Depositories in coordination with stock exchanges and Clearing Corporations shall make necessary changes in their system and ensure timely updation of the processes, as and when required.
Finalisation of basis of acceptance
1. In case of offer under the Takeover Regulations, the Merchant Banker to the offer shall finalize the basis of acceptance of the shares depending upon the level of acceptances received in the offer.
Execution of trades and settlement
1. Acquirer will transfer the funds pertaining to the offer to clearing corporation’s bank account. Clearing Corporation will then settle the trades by making direct funds payout to shareholders. If shareholders bank account details are not available or if the funds transfer instruction is rejected by RBI/bank, due to any issue then such funds will be transferred to the seller broker’s settlement account for onward transfer to shareholder.
2. The seller broker would then issue contract note for the shares accepted in the offer.
Tendering of Locked in-shares
1. For shares which are locked-in, the selling shareholder can tender the shares through off-market.
Disclosures
1. Additional disclosures required in Detailed Public Statement, Letter of Offer for Takeover Regulations:
a. Name and address of the stock broker appointed by the Acquirer/Company;
b. Name of the Recognised Stock Exchanges with nationwide trading terminals where the Acquisition Window shall be available including the name of the Designated Stock Exchange.
c. Methodology for placement of orders, acceptances and settlement of shares held in dematerialised form and physical form.
d. Details of the special account opened with Clearing Corporation.
Chapter 5: Online Filing System for submission of documents under the Takeover Regulations5
1. In order to facilitate ease of operations and convenience in terms of submission of relevant documents with SEBI including public announcement, detailed public statement, draft letter of offer, letter of offer, etc., all Merchant Bankers are advised to file the same through online mode only through SEBI Intermediary Portal at https://siportal.sebi.gov.in.
2. Link for SEBI Intermediary Portal is also available on SEBI website sebi.gov.in. In case of any queries and clarifications, users may refer to the manual provided in the portal or contact the Portal Helpline at +9122-26449364 or email at portalhelp@sebi.gov.in.
Chapter 6: Payment of Fees6
1. Payment of fees in connection with filings made with SEBI is mandated to be made through Payment Gateway made available at SEBI Intermediary Portal.
2. However, with regard to fee for informal guidance, fee for applications pertaining to non-applicability of the Takeover Regulations under regulation 10(7) and exemption application under regulation 11; Merchant Bankers, Companies and other market intermediaries, as applicable, are advised to make payment of fees as per below mentioned Bank details-
| Name
of the |
IFSC Code | Beneficiary Name | Type of Fees | Account Number |
| ICICI Bank | ICIC0000106 | Securities andExchangeBoard of India |
Informal Guidance Fee (CFD) | SEBIRCCFDINFMGUIDFEE |
| Non- Applicability Takeover Regulations | SEBIRCCFDNAPPFEE | |||
| Exemption under Takeover Regulations | SEBIRCCFDSASTEXEMFEE |
3. The user manual on the options available at the SEBI Intermediary Portal is available at https://siportal.sebi.gov.in/intermediary/index.html.
4. In case of any technical issues or queries, users may refer to the manual provided in the portal or contact the Portal Helpline at +9122-26449364 or email at portalhelp@sebi.gov.in.
Chapter 7: Tendering by shareholders holding securities in physical form7
1. Shareholders holding securities in physical form are also allowed to tender shares in open offers. However, such tendering shall be as per the provisions of the Takeover Regulations.
Chapter 8: Exemption Application for cases involving Trust as Acquirer8
1. SEBI receives a number of applications pertaining to transfer of shares from promoters to Trusts which are referred to the panel of experts (Takeover Panel) as per Regulation 11(5) of the Takeover Regulations. Based on the recommendations of the Takeover Panel, SEBI had passed orders granting / not granting exemption to the applicants. In such cases, grant of exemption were considered if the following conditions were met by the applicants, expressly in trust deed:
i The Trust is in substance, only a mirror image of the promoters’ holdings and consequently, there is no change of ownership or control of the shares or voting rights in the target company.
ii Only individual promoters or their immediate relatives or lineal descendants are Trustees and beneficiaries;
iii The beneficial interest of the beneficiaries of the trust has not been and will not in the future, be transferred, assigned or encumbered in any manner including by way of pledge/mortgage;
iv In case of dissolution of the Trust, the assets will be distributed only to the beneficiaries of the trust or to their legal heirs;
v The Trustees will not be entitled to transfer or delegate any of their powers to any person other than one or more of themselves.
2. In addition, the following undertakings were part of the trust deed:
vi Any change in the trustees / beneficiaries and any change in ownership or control of shares or voting rights held by Trust shall be disclosed within 2 days to the concerned stock exchanges with a copy endorsed to SEBI for its record;
vii As far as the provisions of the Securities and Exchange Board of India Act, 1992 (herein after referred to as “SEBI Act”) and the regulations framed thereunder are concerned the ownership or control of shares or voting rights will be treated as vesting not only with the Trustees but also indirectly with the beneficiaries;
viii The liabilities and obligations of individual transferors under the SEBI Act and the regulations framed thereunder will not change or get diluted due to transfers to the Trust.
ix The Trust shall confirm, on an annual basis, that it is in compliance with the exemption order passed by SEBI. The said confirmation shall be furnished to the company which it shall disclose prominently as a note to the shareholding pattern filed for the quarter ending March 31 each year, under regulation 31 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015;
x The Trust shall get its compliance status certified from an independent auditor annually and furnish the certificate to the Stock Exchanges for public disclosure with a copy endorsed to SEBI for its records.
3. Further, exemptions were granted when the following conditions were complied:
xi The proposed acquisition is in accordance with the provisions of the Companies Act, 2013 and other applicable laws;
xii The transferors are disclosed as promoters in the shareholding pattern filed with the Stock Exchanges for a period of at least 3 years prior to transfer (except for holding on account of inheritance);
xiii There is no layering in terms of trustees / beneficiaries in case of Trusts;
xiv The Trust deed agreement does not contain any limitation of liability of the trustees / beneficiaries in relation to the provisions of the SEBI Act and all regulations framed thereunder.
4. The Takeover Panel and SEBI will continue to scrutinize exemption application based on the above conditions. It is further clarified that while the above conditions / undertaking are broad and general in nature, compliance with the above conditions does not guarantee automatic exemption from open offer and all applications will be considered by the Takeover Panel and SEBI on a case to case basis. However, the processing time of applications where the above conditions are compiled could be significantly faster.
Chapter 9: Standard Format of Application under Regulation 11(1) of the Takeover
Regulations9
1. In order to ensure uniformity of disclosures in exemption applications under Regulation 11(1), a standard format for filing of application as specified under Regulation 11(3) has been provided.
2. The instructions and details in this regard are given at Annexure-III of this master circular.
Chapter 10: Publication of Investor Charter and Disclosure of Complaints by Merchant
Bankers on their Websites10
Publication of Investors Charter
1. All the registered Merchant Bankers are advised to disclose on their website, Investor Charter for Substantial Acquisitions of Shares and Takeovers, as provided at Annexure-IV to this master circular.
Disclosure of Investor Complaints
2. Additionally, in order to bring about transparency in the Investor Grievance Redressal Mechanism, it has also been decided that all the registered Merchant Bankers shall disclose on their respective websites, the data on complaints received against them or against issues dealt by them and redressal thereof, on each of the aforesaid categories separately as well as collectively, latest by 7th of succeeding month.
